So You Want to
Start a Nonprofit?

According to GivingUSA, there were 1.2 million registered nonprofit organizations in the United States last year. This is a 4% increase over 2008.

Despite the poor economy and drop in charitable giving, there seems to be no lack of individuals who believe that they can solve a problem or provide a service through the nonprofit sector.

While these current or future leaders possess a great deal of passion or commitment to their causes, some have unrealistic expectations of what it takes to launch a nonprofit and sustain it over time.

In our experience, we’ve found that there are some fundamentals you need before starting a nonprofit organization:

• An entrepreneurial spirit. If one of your big considerations is the brand of cappuccino machine you want to buy for the office, then leading a new organization may not be the right vocation for you. The best executives are passionate, dedicated, innovative, independent and sales-oriented. With this skillset, they are able to inspire others with their vision, and lead a team to fulfill the organization’s mission.
• Seed money for 12-18 months. Line up cash or pledges that will allow you to operate for a year or more. Otherwise, you’ll spend all your time raising money to pay salaries and rent and no time carrying out the mission of the organization.
• A competent and committed board. Talk to nonprofit executives about their challenges and the conversation often turns to the board of directors. Somehow, nonprofit boards never seem to meet the expectations of fundraisers. The ideal board should take its governance role seriously, be a bridge to the outside community and help secure the resources you need. That means you may want to look beyond close friends and family members to serve with you.
• A business plan. A nonprofit is a business. It has income, expenses, assets, products or services, and it may have personnel and office space. Take the time to write a thoughtful plan that takes all aspects of the business into account, including identifying your target markets and how you will reach them.
• A fundraising plan with a budget. Most new nonprofit executives forget to include fundraising expenses in their projections. A start-up organization may spend as much as 30% of its revenue on initial development costs, especially if it is doing direct mail prospecting. Strategize as to how you will raise the money you need to operate. Also, be prepared to do the fundraising yourself. Nonprofit leaders generally spend 50-80% of their time raising money.
• Sound legal, financial and management advice. Congress continues to find ways to regulate the nonprofit sector and you need to know how to comply with all the legal and financial requirements. Fortunately, there are many resources available to help you navigate this area. Talk to other executives to get names of attorneys and CPAs. Two good, informative books are: Managing a Nonprofit Organization in the Twenty-First Century by Thomas Wolf and Starting and Managing a Nonprofit Organization: A Legal Guide by Bruce Hopkins.
• An understanding about what makes nonprofits effective. Learn from the best and most successful nonprofits. In Forces for Good: The Six Practices of High-Impact Nonprofits, the authors identify the actions that have made some nonprofits great.