The number of nonprofit formations has been on the rise. More and more diseases are discovered, more people are going hungry, more abused victims step forward; the needs of the world are growing. Fortunately the desire to help is also growing. Unfortunately though, many of the nonprofits that start out for a good cause don’t start out on the right foot, and thus don’t make it long enough to fulfill any of its intended purposes. There are some common mistakes that cause a lot of nonprofits to fall before they really even get started.
You are operating a business: Having a passion for your cause is important, but it’s not quite enough. Your nonprofit is also a business, just a different kind of business, and you need to approach it as such. It is wise to have at least as much money coming in as going out in order to even survive, much less succeed in your quest. Don’t launch your start-up on passion alone, a well-thought-out plan is essential.
It may even serve you well to start out by teaming up with an existing organization. Another nonprofit can serve as your financial sponsor until you become registered. This can also help bring you into the nonprofit game with someone “showing you the ropes” instead of jumping in blindly.
Qualification: You definitely want to make sure that your organization will actually qualify to be a nonprofit. There are certain requirements that you will have to abide by and having a mission to help a cause isn’t enough. Make sure you do your research to see which classification you will fall under and what the parameters are for keeping your determined status.
State and federal regulations: In order to protect donors from fraud and ensure that nonprofits are serving the public for good, the organizations are heavily regulated by both the states and the federal government. Registration requirements, solicitation licenses, tax form filing, corporate filing…..make sure you know what is required of you before you start asking for and accepting money. Just because you’re a nonprofit and you mean well doesn’t mean you are safe from serious penalties.
Records and risk management: Like with any business, good record keeping is essential. Nonprofits have reporting requirements that are specific to their exemption class. If you start off by keeping good records you are less likely to run into problems later on. Manage your risk by establishing safe procedures and good insurance. This is where it may come in handy to seek the advice of a veteran nonprofit that can give you some pointers on where to begin.
Plans for fundraising: Fundraising obviously comes with the territory if you are planning to be a nonprofit. However, even for the most seasoned of organization leaders, fundraising can be extremely complex. Don’t be fooled enough into thinking a rummage sale or car wash is going to fund your organization. There are many fundraising consultants out there that can take on the headache of planning and managing everything from direct mail to auctions to planned events and golf tournaments. But you want to make sure you do your research on them as well. Not all of them are out to just do good work. Remember, they are businesses too and they seek to make money. Again, having a seasoned organization at hand to give you some pointers may prove to be helpful in spotting the good from the bad.
The board and your success: Ultimately, your board is one of the most important factors that will determine the success or failure of your organization. You board is what will keep you on track with your mission and help secure the funds you need to accomplish your goals. You should focus on selecting board members that are able to provide expertise in all of these areas and also have a passion for what your organization is all about.
If you have more questions about starting a nonprofit they may be answered here: FAQs About Starting a Nonprofit, which also provides many links to other valuable resources for starting nonprofits.
(Compiled from 7 Tips for Starting a Nonprofit, Joanne Fritz)
