In recent years, more and more people have become interested in working for, supporting, or even starting nonprofits.
If you have a strong passion for a cause and want to turn it into your life’s work, here are some things to consider before you try to start a nonprofit organization.
Let’s start by defining the concept. Some entrepreneurs think their companies might qualify as nonprofits because they aren’t making a profit. That’s not the way it works. Unlike a for-profit business (whose goal is to make a profit), the goal of a nonprofit organization is to support a cause. All of the organization’s income from grants, donations, membership dues or product sales, is put back into the nonprofit to help it grow.
There are many kinds of nonprofits, according to the IRS—27 different types, to be specific. These can range from childcare facilities to teachers’ retirement fund associations. However, the organizations most of us think of when we hear the word nonprofit are 501(c) (3) organizations. Generally, these are either charities or private foundations.
Federal, state and even local governments generally consider nonprofit organizations to be tax-exempt. In order to get this status, however, you must incorporate as a nonprofit organization first. This requires filing regular documentation to keep your nonprofit in compliance.
Nonprofit organizations don’t have owners. Instead, they are overseen by a board of directors responsible for making sure the nonprofit acts in accordance with its mission, spends its money wisely, and abides by regulations regarding nonprofits. Board members sometimes run the nonprofit’s day-to-day operations, too.
Ask yourself a few questions before you start a nonprofit:
- Is your nonprofit necessary? If another organization already exists to support the same cause, your nonprofit may struggle to gain brand awareness. (Besides, the goal of a nonprofit is to support your cause, not to “beat” other nonprofits.) Sometimes, you can do more good by supporting an existing nonprofit than by starting your own.
- Do you have the passion necessary for running a nonprofit? Starting and growing a nonprofit organization requires a lot of energy. Can you not only maintain a passion for your mission, but also inspire that same passion in your board members, employees, volunteers and donors?
- Where will my funding come from? You can apply for grants, seek money from donors, or sell memberships or products (or a combination of the two) to raise money. If your nonprofit supports wildlife preservation, for instance, you could solicit people to join for $50 a year, sell mugs or tote bags, or offer them as incentives to encourage donations.
- Do I have the necessary management skills? Nonprofits cannot distribute their profits to the founder, but they can pay their employees salaries (including the founder). But typically, nonprofit salaries are relatively low, so it requires top-notch management skills to attract and keep qualified employees, and to recruit, manage and motivate unpaid volunteers.
Get started on your nonprofit
If you’re ready to start a nonprofit, begin with a mission statement and a business plan. (Yes, you need one.) Search for business planning tools for nonprofits online.
You can learn more about nonprofits and find resources for getting started at these sites:
Of course, your SCORE mentor can also help you plan for a successful nonprofit.
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Funded, in part, through a Cooperative Agreement with the U.S. Small Business Administration. All opinions, and/or recommendations expressed herein are those of the author(s) and do not necessarily reflect the views of the SBA.