Starting a nonprofit organization isn’t too different from starting a new business. There are best practices, mistakes to avoid, and ways to improve the chance that you’re one of the few nonprofits that survives and prospers, rather than one of the many that fail.
Before we get into the legal and financial realities of running a nonprofit organization, I want to break down the fundamentals of why nonprofits exist and how to ensure that yours prospers amidst so much competition.
Every nonprofit solves a problem that people care about.
It’s easy to get lost in the romantic notion that your organization must exist to right some wrong or help a group of people that sorely needs assistance. I want you to take a second and turn off the emotion-centric side of your brain and turn on the rational side.
Every nonprofit exists for two reasons. First, it solves a problem or services a need among a particular target audience. Your overall success will be determined by the degree to which you generate results with your efforts and improve the lives of this community or group of people. It’s very important that you nail down how you’ll identify these metrics so that you can show your donors that you’re having a genuine impact.
For example, let’s say you want to help educate people in third-world countries. That’s a very broad goal. While that might be your end mission, how can you narrow that goal in the short term? For starters, let’s pick one country, say, El Salvador. Now, which demographic are you looking to educate? Youth? Single mothers? Rural families? What subjects will you teach to them and by what means. Are they going to learn how to write better English from a Spanish textbook, or learn better farming practices from an on-site mentor?
Specificity is power. The more specific that you can be about your target market, the easier it will be to come up with metrics that you can track. These are statistics and numbers that you’ll be able to show to potential donors to convince them that their hard-earned money can make an impact in the lives of these individuals.
The second reason that a nonprofit exists is because it solves a problem that people care about. Wait…what? Did I actually just say that? Yes, I did. Not everyone cares about every problem in the world. The degree to which people care about solving a problem will influence the amount of funding that you can get, the quality of people who will work for you, and the overall success of your nonprofit, as defined by the improvement of your key metrics.
There are many reasons that potential donors might care about a problem. Likely, it has affected their life in some way or they empathize with the particular group of people for a key reason. But, caring extends beyond donors. Not everyone who cares about your problem is going to give money to your cause. However, they may engage in other activities like helping you push legislation forward, share messages on social media, and help rally more members to your cause.
If no one cares about the problem that you’re trying to remedy with your nonprofit, then it’s going to be a big uphill climb. You’re going to have to convince the world that they should care.
To be quite honest, I’d recommend exploring other ways to tackle the problem rather than trying to launch a full-scale awareness campaign, which would take a lot of money and time. I would focus on a smaller subset of the problem or on a cause that your donors do care about that relates to the cause you actually want to tackle. This will help you build some street cred so your organization is strong enough to take on the major problem when you’re ready. You’ll then have enough resources to spread awareness about it.
I’ve put together a new GUIDE that’s packed with science-backed nonprofit fundraising methods, resources, strategies, and killer marketing methods.
You should check it out if you want to get more donations and you want to fast-track the entire process.
Nonprofit startup checklist
Let’s drill down some of the components that you’re going to need to master when you’re starting a new nonprofit organization. I hope that this will serve as a go-to checklist that you can reference at a later date. I’ll also be mentioning some of the resources that you can use to make the entire setup process easier.
1. Website: Many of the nonprofits that I’ve worked with have struggled on the technical front. I want to make it easy for you to set up your website, gather email addresses, and have a strong online presence. No matter what anyone says, people will judge you by the design or appearance of your website. It will affect how much they trust you and how seriously they take you. Here are a few different options for setting up your website.
WordPress + Bluehost Hosting
WordPress is one of the easiest ways to set up a new website because of the myriad of free professional-looking themes and various plugins to expand the functionality of your site. Most people think of blogs when they hear about WordPress, but it runs many company websites, ecommerce sites, and more.
SquareSpace
SquareSpace is probably the best alternative to WordPress if you don’t want to host your own website. I like SquareSpace because of the beautifully designed templates that you can choose from. They also have good analytics and an intuitive user interface. The only downside about SquareSpace is that if at some point in the future you want to host your own website, you’d have to migrate all that data off their servers.
Wix
Wix is an alternative to SquareSpace with great templates and functionality that you can implement to set up an attractive website for your organization. It’s pretty easy-to-use and straight forward. Again, this is a good solution if you’re new to the web and don’t want to host your own website, but it’s not so great if you want to host your own content in the long run.
You can use any of the above three to set up your professional website. The only other thing I’ll say is that it’s crucial that you obtain your own domain name. Once you set up your website, you must collect email addresses from your visitors. This will help you communicate with your core audience and direct traffic to your campaign once you launch. Here are a few tools to help you set up an email list.
MailChimp
MailChimp is a email service that lets you collect email addresses, create email lists, send out campaigns, and track their results. You can see who opened your emails and how many people clicked your links. It’s an amazing tool for reaching out to your audience via email, which is still the highest converting source of donations online. At the time of writing, it’s free up until 2,000 subscribers.
Aweber
Aweber is a great alternative to MailChimp that also allows you to build, track, and communicate with an email list. I can’t underscore how important it is that you start to collect an email list of your donors. You’ll thank me later. It’s an extremely powerful way to get everyone to take action at a specific date and time. At the time of writing, you can start a 30 day free trial.
2. Social Media: Did I just hear a collective groan? Haha! Soo many of my readers and podcast listeners have told me that they don’t even know where to begin with social media. Before you try to skip past this section, let me say one thing to you.
It’s 100% okay if you don’t use social media for your personal life, but you’re 100% a fool if you don’t use it for your nonprofit. There. I said it!
Social media is free traffic to your website and awareness for your organization. It’s one of the best tools out there to connect with donors and share your message with the world. But, even I will admit that it can be time consuming.
That’s why I’m going to share two different tools that you can use to automate the entire process. These will make it so much easier to manage your various social media profiles and track their results.
Just so we’re clear, I’m talking about accounts on Facebook, Twitter, Instagram, YouTube, and LinkedIn. Depending on the mission of your organization, you might explore others like SnapChat, Pinterest, and Reddit.
Buffer
Buffer allows you to manage your Twitter, Facebook, LinkedIn, and other social profiles. You can use the service to schedule posts to go out in the future so that you don’t have to worry about sharing social media posts next week. These posts can go out at a specific time every day or at a time that you designate. You can also track the activity on your posts, including traffic, reach, and engagement. There is a free plan at the time of writing.
Hootsuite
Hootsuite is another tool that lets you schedule social media and helps take the burden off consistently pushing out awesome and engaging content. At the time of writing, on the free plan, you can connect up to 3 social media profiles and get basic analytics and reporting for how your social media posts are doing (clicks, shares, etc).
3. Funding: We’ve already talked a lot about getting funding for your nonprofit on this blog but, I also wanted to highlight some of the other avenues out there like writing grants, soliciting big donors, and hosting offline fundraising events.
Nonprofit Fundraising 101 by Darian Rodriguez Heyman is a good introduction to raising money for your nonprofit and has a received a lot of praise from Amazon readers.
Fundraising For Dummies by John Mutz and Katherine Murray is another Amazon book that gives you a basic overview of the nonprofit fundraising world. While online giving is certainly the future, it’s still important to examine traditional fundraising techniques and ways to build relationships with donors.
4. Legal Classification: Many nonprofits will organize as a corporate entity to give liability protection to the officers and directors. After filing the Articles of Incorporation, nonprofits then obtain 501(c)(3) status, meaning that they are exempt from federal taxes. Some states will also allow these organizations to be exempt from sales, corporate, and property tax.
In exchange for receiving these benefits, there are restrictions placed on the activities of the nonprofit. You’ll also have ongoing compliance duties. You must apply to the IRS for recognition by filing Form 1023 (or Form 1023-EZ). Lastly, 40 states and the District of Columbia require nonprofits to register with the Department of Charities before soliciting any donations from the public.
I highly recommend checking out this webpage which breaks down the state-by-state filing requirements for incorporating a nonprofit.
5. Financial realities: The Nonprofit Finance Fund’s annual survey asks nonprofits in the US about their financial health. Of the 4,749 respondents in 2015, 24% ended 2014 with an operating deficit and only 29% broke even. In fact, of the 1,091 respondents who had a budget deficit, 18% of respondents experienced a deficit of greater than 10%.
I want to give you a clear picture of the financial structure of the majority of nonprofits out there. Unfortunately, of 4,439 respondents, 53% have 3 months or less of cash on hand. Can you imagine the stress that you’d feel in this situation? As you might guess, according to the in-depth survey, the great challenge of most nonprofits out there is long-term financial stability.
There is one other bit of parting wisdom that I’d like to leave you with to splash some cold water in your face before you go about putting in all the hard work to start a nonprofit. Even if you are lucky enough to secure government funding, you won’t always receive government payments on time.
Only 52% of respondents to the survey by NFF stated that federal payments were received on schedule. 41% reported that state payments were received on time. 45% indicated that local payments were received on time. In all of these cases, the main way that nonprofits managed this deficit was by using reserves or a line of credit.
Clearly, the financial realities are tough. Changing the world is tough. The good news is that between 40-50% of nonprofits have consistently reported that they could not meet demand for services and programs in their area. This means that there is a lot of opportunity to help out in-need demographics.
Before you take the leap and start your nonprofit, take a second to read through the 2015 State of the Nonprofit Sector survey. You’ll thank me that you did.
6. Organizational Structure: Arguably, this is the most boring part of setting up a nonprofit, but it’s also the most important. Your leadership team can make the difference between success and failure. When you invite members to become a part of your board, you’ll instantly have access to their social networks, which is a powerful asset!
Your board of directors is responsible for the vision and mission of your nonprofit. They are separate from your management team, which carries out the day-to-day operations of the nonprofit. Ultimately, they’ll help keep your organization on track and accountable to its goals.
There are many ideas about how the board should operate, but in general, you’ll need to assign roles for the Treasurer, Secretary, and President. Any individual can become a board member, however, it’s important that they realize they have a legal duty of care and duty of loyalty towards the organization. They could be sued for not adhering to these responsibilities.
Rather than seeing the organizational structure, rules, and guidelines as a “hurdle you must go through” to set up a nonprofit, I’d see them as an asset. At the end of the process of recruiting and signing on board members, you’ll have a team of diverse backgrounds, interests, and who each have a different network that they can use to get more donors for your organization.
Strong relationships with your board members will pay dividends in the future. As long as you make sure that each member is passionate, committed, and value-producing, the board will serve as a competitive advantage to your nonprofit that will improve its chances of long-term survival.
I’ve put together a new GUIDE that’s packed with science-backed nonprofit fundraising methods, resources, strategies, and killer marketing methods.
You should check it out if you want to get more donations and you want to fast-track the entire process.
Should you start a nonprofit?
Only you can answer this question. You’re now aware of just how difficult it is to launch a new nonprofit organization. It’s going to be like climbing a steep mountain. But, the good thing is that you’re not alone.
You can always shoot me an email or hit me up on Twitter to ask questions or discuss topics! If you’re truly passionate, willing to work hard, and completely determined, then I think that starting a nonprofit is an amazing challenge and will give you life changing insights!
