This article is part of our “Business Startup Guide” – a curated list of our articles that will get you up and running in no time!
Starting a nonprofit is one of the most rewarding ways a person can spend their time— and it also requires thorough planning and solid dedication.
It’s exhilarating to imagine all that you’ll accomplish when you’re up and running, but there are a number of essential steps you’ll need to take to get you there. When you first have that great idea for an organization that could really make a difference, you are likely full of enthusiasm and energy— and it’s key to channel that energy into practical action, so you can move full steam ahead in the direction of making your vision a reality.
Step 1: Conduct a Needs Analysis
The process of researching your intended focus is referred to as a “Needs Analysis” by the nonprofit world.
Think deeply about how much research you’ve put into your prospective project. Are you sure your community or cause would be best served by the organization you plan on starting? Many people who are thinking of starting nonprofits may not have considered that there are over 965,000 in the U.S. alone.
Look into what else exists in your chosen field. Is someone else already covering that ground? What will make your organization stand out enough to secure donations, members, and funding? There may be an organization in your area already providing a similar service and thus, competition for donations and membership. On the other hand, there may be an organization nearby that is overwhelmed trying to meet the needs of its community, that would welcome more cooks in the kitchen—maybe even offering you advice or a partnership opportunity.
Step 2: Think Like An Entrepreneur
Just as in a for-profit business, a nonprofit will need three to five years to begin delivering results.
One of the most important questions to ask yourself as you prepare to start your nonprofit is: Am I ready? Have you reflected inwardly about whether you are prepared to do what it takes to manage and helm this endeavor? Someone has to be there not only to ensure that the organization is fulfilling its stated mission, but that the day-to-day operations of the employees and offices are running smoothly, and sticking to the budget.
Lorrie Lynn King, founder of the international women’s health nonprofit 50 Cents. Period., says that, “in fact, you are starting a small business. Non-profit administration and programming require business acumen, financial planning, strategic planning, and people management skills—sometimes all at once.”
King also notes that, just as in a for-profit business, a nonprofit will need three to five years to begin delivering results. Things like administrative and financial stability, measurable outcomes, and media recognition take time and effort to build. Nonprofits require entrepreneurship just like traditional businesses do. Cultivating the traits of a successful entrepreneur will help get you there.
Step 3: Know Your Base
Every organization has to keep the lights on, and nonprofits are no exception. Your organization will require a minimum amount of money just for operations on a regular basis, not to speak of special projects or unforeseen growth or expenses.
Typically, nonprofits rely largely on donations for this money, and having a committed donor base is going to be essential to your organization. Ask yourself if you really know whether there is financial and community support for your proposed nonprofit. Who is the person that becomes a member of your organization, or that donates their money? Developing a user persona can be a helpful tool here.
A key factor will be branding and marketing. Part of instilling confidence in your organization will come from choosing a good name and logo. You’ll also need to consider how you’ll reach your donors and explain the importance of your message. How will social media, websites, videos, etc., all play a role and come together to give potential donors or members an understanding of what makes your organization great, and worthy of their money?
Annie Rogaski, founder of the Silicon Valley nonprofit The Club, has some words of advice on branding your new venture. From her experience, it takes time to get it right. “It took us about 3 months of meeting regularly, brainstorming names, to decide on our name (which stands for Connect Lead Unite Build) and to have the logo designed,” she recalls.
How will social media, websites, and videos come together to give potential donors or members an understanding of what makes your organization worthy of their money?
Rogaski says developing a name and logo that you are happy with is time well spent because of the pride it instills when promoting your organization. You want to be able to hand someone your card or refer them to your website with confidence that they will like what they see.
Of course, a strong social media presence is essential to gaining media recognition. “I cannot stress the power of networking and social media enough,” King says, noting that her active Twitter feed has landed her interviews with CNN and her local NPR station. She also makes good use of her business cards: “I never leave home without a stack of my cards, even if I’m just in yoga pants and running to the store.”
Step 4: Make it Official
In the United States, nonprofits have to meet regulations and requirements at both the state and federal levels. While there are 29 different categories of 501(c) organizations, the most commonly created is a 501(c)(3) organization, which is defined by the IRS as “charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, or preventing cruelty to children or animals.”
The majority of nonprofit organizations in the U.S. will fall under the category of a 501(c)(3) organization, which makes them exempt from federal income taxes. (It is important to note that employees of these organizations are still required to pay income taxes.)
It’s best to get a jump on filing for tax exemption early, as this process can take up to a year.
“There is a way to get expedited review, if there is an urgent need that your nonprofit fills,” Rogaski says. “Don’t feel limited by the particular categories they identify—if you can communicate to the IRS the urgency for your nonprofit, you may be pleasantly surprised by the response.”
In addition to filing for tax exemption, you will need to register or reserve the intended name of your organization, and file articles of incorporation as a nonprofit. The specifics of this process will vary from state to state. Every state has a State Charitable Official from the national association that you can contact for more detailed information about what you will need to prepare.
It’s always a good idea to retain the services of a lawyer familiar with the nonprofit creation process, too. Knowledgeable advisors will be invaluable as you prepare your filings at both the state and federal levels.
Step 5: Start Planning
You are now an official nonprofit organization—congratulations! What’s next? You’ll be rolling up your sleeves and getting to work for your community or cause, that much is certain, but you’ll also need sufficient funding and a thoughtfully crafted business plan to keep the doors open.
“It is absolutely crucial to have 3-year plans for both the program and administrative sides to your organization, with measurable outcomes,” King says.
One of your first steps should be choosing your board of directors. Every U.S. state requires that a nonprofit forms a board of directors, who assume governing responsibilities and liability for the organization. For most states, a single person is considered the minimum requirement for a board, but in some states as many as three people are necessary.
You’ll also need to assemble your business plan. Business planning is just as important for a nonprofit as it is for a traditional business. You need to know: Who is your core management team and what is their compensation? What are you budgetary needs, and your benchmarks to reach for funding, donations, and membership?
“It is absolutely crucial to have 3-year plans for both the program and administrative sides to your organization, with measurable outcomes,” King says. “Know where you want to go, then create the map for getting there and make adjustments along the way.”
There are key questions to map out as you start your organization, and you’ll need a business plan ready to show potential major donors and board members.
A Nonprofit Plan Outline
A nonprofit business plan will include many of the same sections of a standard business plan:
Include a mission statement. You will want to have a written overview of what your vision is for your organization.
Are you making a life-changing product at little to no cost for a population in need? Are you providing an essential service to your community?
This is where knowing your base comes in. Include how you will conduct outreach, and who your competitors are.
Who is going to be involved, what are their duties, and what do they bring to the table? Rogaski offers this tip: “Form a strong board that works well together but brings different perspectives and creates an environment that encourages discussion of those different viewpoints, to arrive at the best decision.”
This is essential to any organization that’s seeking funding, but also incredibly useful internally for keeping track of what you have so far and where you plan to go. King advises: “Start a funding and a savings reserve for your organization the minute donations start rolling in. Create a system of paper trails and transparency.” Money management skills are just as important in a nonprofit as they are in a for-profit business.
As you get the ball rolling on your new nonprofit, it can be helpful to check out completed nonprofit business plan examples for reference while you build your own.
Your nonprofit business plan will act as your guide, allowing you to make strong decisions with measurable outcomes. Business planning is one of the foremost tools for achieving a successful nonprofit.