I have a lot of experience in nonprofits. In my 36 years of life, I’ve volunteered over 10,000 hours and been employed over 13,000 in church and para-church organizations. Ten years ago I graduated from the University of Washington with a minor degree and a certificate in Nonprofit Administration (which I actually thought I wouldn’t use until I retired from Costco, but that’s another story). Hands down, the most common question I get from people who hear about what I do is, “What does it take to start a nonprofit?”
An email from a friend-of-a-friend recently arrived in my box with this very question. This man asked me the question because he is burdened with doing something that has a greater purpose than just making money. I am a little leery about anyone who wants to do something because it is the opposite of what they’re currently doing, but I took the time to answer his question, and I let him know that I would have a more complete answer in my blog. Here it is.
The U.S. doesn’t need another nonprofit (writes the guy who’s started three, and is currently working for a start-up). There are currently 1.6 million 501 (c) (3) organizations in the U.S. This does not account for all of the unregistered community organizations and churches. We have nearly every niche filled, in most cases, multiple times.
Everyone wants to live in their passions and values. I believe the best way to do this is to find an existing organization that matches the purpose you seek to serve, even if you merely volunteer to do so. Clothing banks, homeless ministry and all kinds of community service can typically be facilitated through a church or community organization. If you exhaust all possible opportunities to piggy back or serve within a current nonprofit, then consider my advice below.
If you’re new to nonprofits, you can take a crash-course in the 3rd Sector by watching this short video.
Starting a nonprofit requires more paperwork, collaboration and back-end office work than most people would think. It is idyllic to think that you can spend 90%, 80% or even 50% of your time doing the program you seek to serve. Running the operations is an incredible task, especially during the start-up process. Here is a checklist of things to do to start a nonprofit in the U.S.
You should budget at least $3000 to pay for your filing fees and legal fees. The IRS form 1023 alone costs $850 for most nonprofits. You will also need Directors’ and Officers’ insurance (D & O insurance) to protect the board and officers from personal liability. This can run anywhere from $1000 to several thousand dollars, depending on the amount of liability coverage you desire.
Nonprofits are businesses that are set up to receive donations and avoid paying certain taxes. It takes a business plan, including financial plan and/or proforma. Most nonprofits depend heavily on philanthropy. The difficulty in funding a nonprofit, especially a new nonprofit, is always underestimated. This is something I drive home with anyone who asks the question about starting a nonprofit. I have had several occasions to explain to people that their pyramid model fundraiser of “1000 people who give one hundred dollars” doesn’t work. People give to people. More accurately, people give to friends, then to experts, then to organizations. Peer-to-peer fundraising is the best form of engaging someone’s passions. The ability to develop a case statement and use your case to raise capital is both an incredible privilege and a daunting task.
I heard once that the higher a case is identified within the Maslow’s Hierarchy of Needs, the more difficult it is to fund. This seems very logical to me.
A side note, I actually met a nonprofit executive who told me that she was frequently over-funded. They had to find creative ways to use the money they were given, and they rarely solicited funds from the community they served. If you’re curious, send me an email at email@example.com and will share what type of organization this is.
There are a lot of great resources for people who are starting nonprofits, and I never want to be the Eeyore that stops someone from accomplishing their calling or purpose. The world is a much better place because of the nonprofits that allow people an avenue for service. If you must start a new organization, do your homework. Cover your relationships in prayer. Intently seek the Lord’s purpose to be lived through your ministry. Get sound counsel and know that it will take a much greater effort than most people could ever imagine.