So you want to start a nonprofit?
Starting a nonprofit is easy.
Running a nonprofit is hard.
I’m sure you're full of inspiration and the project you envision could really make a big difference for so many.
And ... just by reading this blog I know you're asking good questions instead of jumping right into the deep end. That's exactly what you need right now: careful discernment.
Running a new nonprofit can be extremely difficult even for people who have decades of experience leading them.
There is no pot of gold at the end of the rainbow
Despite urban legends to the contrary, money does not come easily to start up nonprofits. Fundraising represents a constant challenge even for well-established organizations.
Yes, grantmakers exist who absolutely welcome applications from anyone. But what you don’t see is that for every grant they give out, they receive dozens (if not hundreds) of applications. The applications most likely to get funded also have an established relationship between the applicant and a key person at the grantmaking organization. So I wouldn’t count on getting any funding from any grantmakers during your first few years unless you have an influential person inside the organization actively encouraging you to start a nonprofit and apply for funding.
Is there a need? Does funding exist?
It’s easy to get excited about a compelling vision. Family and friends may give us encouragement, but they typically do not have enough information to objectively confirm that a need exists. By digging deeper, you can potentially save yourself time and heartbreak. Questions like these will help:
Are you sure no other organization in your area does anything like what you’re planning? Hint: Have you done thorough research to confirm this?
Are you sure a real need exists? Hint: When you talk to professionals who work in this area regularly, do they enthusiastically encourage you to start this organization?
Will donors fund it? Hint: When you talk to grantors, do they enthusiastically encourage you to start this organization?
Once you have a yes to all three questions, please proceed.
Are you ready?
If you’ve never run a successful business or held a leadership position in a nonprofit, then before you start a nonprofit I recommend you do a few other things first.
This is going to be similar to what I would tell a friend who tells me they’re going to climb Mount Everest but they’ve never ever gone hiking, or camping, or spent time in the snow before. The goal of climbing Mount Everest is great, but if they go there without the physical preparation and right gear, the most likely outcome is an unhappy one.
How might you know that you’re ready to found a nonprofit? If you can answer yes to these three questions, then you likely have the experience and support to succeed as a nonprofit founder:
I have 3+ years experience as a nonprofit employee
I have 3+ years experience leading an organization with an annual budget above $250,000
I have donor commitments to cover the first year of expenses
If you can’t say yes to all of these yet, then I strongly encourage you to start building the experience in questions 1 and 2, ideally working within an organization that has strong alignment with the kind of nonprofit you aspire to eventually found. As you work on questions 1 and 2, that should also allow you to build the credibility, network, and experience to give a confident “yes” to question 3.
Double check: do you want to lead or want to directly serve?
Being a leader/founder and directly serving are two very different roles. Both are good and needed, but different people will excel in each one.
Founding and leading a nonprofit, even a small one, will require a significant time investment in activities that do not directly contribute to your mission. That typically includes:
Fundraising
Bookkeeping
Lots of paperwork and record-keeping
Organizing your board of directors
Building and maintaining a website
Reports to the government and funders
And much more
Do you excel at administrative tasks and fundraising? Are they at least okay? Or are they the sorts of things you tend to put off?
Remember, the more the organization grows and the more successful it becomes, the more that your time will get consumed by these sorts of tasks, leaving less time to participate directly in bringing the mission to life.
Many nonprofit founders learn, after hundreds of hours of frustration, that their heart really wants to directly serve rather than find the bulk of their time consumed by administrative tasks or fundraising. The more that you understand what your heart wants, the more likely you are to land on the right path.
Pro tip #1: Fiscal sponsorship
Instead of trying to do it all yourself from day 1, a fiscal sponsor can let you get started without getting a 501(c)3 and with a much lighter administrative workload. That way, your first year or two might feel more like drinking from only half of a firehose instead of trying to do it all!
How might this work?
In a fiscal sponsorship arrangement, you would get to “piggyback” on an established 501(c)3. Your activities could focus more on programs and fundraising while your fiscal sponsor takes care of bookkeeping, government reporting, and some other responsibilities. A quick internet search will help you find more specific information about how fiscal sponsorships work.
Where can you find a fiscal sponsor?
Unless you’re in a fairly remote area, there’s a pretty good chance that you can find an established nonprofit with a mission that’s aligned with what you want to do. So why not build a relationship with them and see if they’ll take your project under their wing for a while?
Remember: houses of worship are nonprofits too! If you belong to a mosque, church, synagogue, or other faith community, that could be the perfect place to incubate your project for a few years while you learn the ropes.
Pro tip #2: Have you considered a social enterprise instead?
The 501(c) structures date back to 1954 and, like many American institutions, show their age and obsolescence. Society, particularly the marginalized, would benefit from a serious overhaul of the system.
In the meantime, I see an increasing number of people channeling their desire to do good in the world into social enterprises instead. In fact, I've started two myself!
A social enterprise is basically a business with a “double bottom line:” profit plus positive community impact. By organizing as a business you can potentially reduce your paperwork burden and eliminate the time investment a board of directors requires.
Note: An LLC or S Corp also have their limitations, especially with regards to certain causes and certain funding sources, but they also have many advantages relative to 501(c)s. Be certain to weigh the pros and cons carefully.
Additional Resources
Your Thriving Nonprofit. This is a big Facebook group of 30,000+ people. It’s a good place to find answer to many basic nonprofit founder questions. Before posting your question, please use the search function. Chances are someone else has already posted about the same thing in the past 6-12 months.
Readiness Checklist – Susan Smith’s checklist to determine if you’re ready to start a nonprofit.
Ginny Waller’s advice on alternatives to starting a new nonprofit.
Nonprofit Courses - A directory of (mostly) free articles and classes aimed at nonprofits.
Lean Startup - Instead of a full-fledged business plan, this blog post by Suzanne Smith can help you test your ideas while investing a fraction of the time and money it would take to jump right in with both feet.
Legal Zoom. To set up your nonprofit as an independent entity, and you don't want to do the paperwork yourself, then the fast, cheap, and easy way to do it is Legal Zoom.
Professional Advisor. If you want a paid professional advisor to guide you as you incorporate and get set up, check out Consultants 4 Good. They have the world’s largest directory of nonprofit consultants, including specialists in nonprofit startups.