First Things First

This is based on my years of consulting with startup nonprofits. The same questions always seem to arise, and it generally means revenue, what it really means that people do not understand what they are signing up to do. Here is the gist - "I have my nonprofit started and I've received my 501(c)(3). How do I get started? How do I raise funds? How do I get grants?" 

All these people have learned an important lesson - A nonprofit is a business model, it is not a business plan. Starting a nonprofit and receiving tax exemption does not guarantee success, funding or clients. A nonprofit does not start having income simply because it is a nonprofit. A nonprofit is a small business with additional operations regulations. A small business is a business, and businesses require work.  

You've decided to start a nonprofit. Let's ask some questions. 

First question - Why? 

Big Red Flag: If you are starting a nonprofit based on anything your friends told you, consider the source. Do they manage a nonprofit? Have they started a nonprofit? Do they work for a nonprofit? If no to any of these, ignore them. They know not of which they speak.

If you are starting a nonprofit so you can pay yourself a salary, do a budget and determine where the funds will be found. Determine what percentage of the overall funds will be consumed by your salary. Your salary is overhead. If overhead is over about 20% of the organization's revenue,  you may find it difficult to raise funds. So, if you are running a nonprofit that distributes $5,000 worth of goods in a year, it is probably not worth an $80,000 annual salary.  

If you are starting a nonprofit to teach your life lessons to the masses, why not write a book? Sell the book. You don't need a nonprofit to do so. If nobody buys the book, you don't have to close a nonprofit that serves no clients. 

If you are starting a nonprofit to get grants, stop. Nonprofits do not get grants. They apply for grants. Grants are not a guarantee and they are not free money. Grants fund specific operations within a nonprofit. if you do not have programs defined and budgeted, you probably are not ready to apply for grants.  

If you are considering converting your for-profit to a nonprofit, stop. It is virtually impossible to do so. If you need grants to run a for-profit, you do not need to become a nonprofit, you need to fix your business plan and your income streams. 

Second question - What? 

Big Red Flag: Is your mission important or is it important to you? Many nonprofits are started based on personal experience and many of those personal experiences do not scale. If you talk to your friends and acquaintances about your mission and most seem uninterested, maybe you are the only one who cares about the cause or maybe the cause just isn't that important. If you can't get people you know excited about the idea, how will you excite strangers to fund the mission?  

Consider the Big Three.  What services will your nonprofit provide? Big Red Flags: Are you re-inventing an organization that exists already? Are you providing a service that local, State or Federal government provides? What are you going to provide that is unique? If nothing, why not volunteer at the existing nonprofit instead of going through all the work of creating a clone? 

Third question - Who? 

Big Red Flag: Do you have your target audience defined? 

Who are your clients? How many are there? Where are they? Who else is assisting them? What assistance will you provide? How long do you expect each client will remain in your program?   

Fourth question - How? 

Big Red Flag: You have no idea what it costs to do what you want to do. 

What will it cost to operate your programs? Create two budgets - one for startup costs and one for ongoing costs (monthly expenses.) Think about how the organization will raise money. Look at similar operations (read their Forms 990.) How are they doing? Where do they raise their funds? Where do they spend their funds? 

Fifth question - Where?

Big Red Flag: How easily can your clients get to your location? (Real-life example: If you want to teach older people how to use the Internet, it probably does not make sense to do this online. If they could get online, they don't need your services.) 

Big Red Flag: You need a $500,000 building in order to get started. 

 Where will you do business? How easily can your clients get to your location? How easily can you get to your location? Assume that you will have to be hands-on for almost all missions of any value. A nonprofit does not just put up a website and let the money roll in. (Ask any GoFundMe owner how effective that truly is.)