Passion and altruism are the underlying motivators for most nonprofits, but these two elements alone are not enough to make a new organization succeed. Starting a nonprofit is similar to any other business. Still, there are additional challenges faced by founders who wish to establish a long-lasting, impactful charity with the potential for growth.
A charitable (501(c)(3) nonprofit requires financial sustainability like any for-profit business, but unlike other businesses, money is not the sole motivator for its existence. Although it is founded by certain people, nonprofits don’t have any particular owner or belong to anyone. They are tax-exempt and belong to the public, but they still require professional management and income to thrive.
Read on to uncover some of the most common mistakes nonprofit startups make and how to avoid them.
Lack of Business Planning
Many founders are so inspired by their cause that they fail to consider all of the business logistics involved in establishing a charitable organization. Nonprofits are required to register with the government and need to develop a business plan before opening. Consider startup costs, donation drives, marketing and products or services that might be needed or even sold.
It’s advised for any potential startup to conduct a “needs assessment” for their nonprofit. Is this idea original, or can it achieve something in a new way? Is the organization providing valuable and in-demand services to a vulnerable population, or are its opportunities to assist and serve relatively limited?
Just as traditional businesses need a target market, so does a nonprofit. Research and planning will give an organization the best chance of making an impact and staying afloat.
No Financial Planning
Nonprofits need donations, but that is only the tip of the iceberg. There are incorporation fees to pay to the state and tax-exempt application fees. Some charitable startups receive foundation grants, but these are not handouts anyone can apply for and acquire.
A nonprofit needs a surplus of money from the start to give it the best chance of running its first successful fundraising campaign. The costs of services will vary greatly; from graphic design and web development to advertising and labor fees. Operating a nonprofit is time-consuming, and if someone intends to make it their full-time job, they must consider where their source of income will come from and how it will be factored into the organization’s budget.
Not Organizing a Board
A nonprofit board is the governing body of a charity. The board organizes all of the activities and efforts of the organization, and they run on a democratic system that involves pitching ideas and voting.
Board members are community or industry leaders who wield enough influence to benefit the organization. Typically, members pay an annual fee for their position on the board, but startups may consider offering them for free during the first year. The board does not handle the day-to-day operations of the startup but rather guides the organization toward achieving its mission.
Without a good board, startups will often lack the vision and structure necessary to thrive. Starting a charity is not simple, but research is the best way for any impassioned soul to bring their dream to life.