Monday, November 26, 2007

Start Up Non Profit? Need Seed Money? Starting Fundraising? Here's help...Part 1 of 2

Getting a non profit off the ground is tough. I know that you don't have any money.

If you aren't sure what a start up non profit is, read "Life Cycle of an Exempt Organization" on the IRS website.

These are three pieces of good free advice...consider each. The sooner that your organization is on its feet, the sooner you will have cash flow, organizational growth, and success.

__ While you and your colleagues started the organization and have been, without fail, doing important work in your community - a non profit organization is a legal entity. The IRS sees it as such for tax purposes (your group does not have to collect taxes - receives tax free dollars -because you're doing work for the community). I urge you to also see it as its own stand alone entity SEPARATE FROM YOU. If you look at the non profit you've created as 'your good work' or 'the good work you and your friends do' - you'll miss that there are non profit management, operations, and organizational growth needs that even "your" organization must fulfill. You may even fail to follow through on required fiscal or legal practices or reporting because you think (and operate as if) you and your friends are running a club. A club is an informal organization without the official benefit of tax free dollars, so it does not need to follow through with specific non profit best practices and laws. A non profit must comply with federal, state, city, and county legal code. Here's what is really critical about my point: if you and your friends see the organization as "yours'" then it leaves little room for donors, volunteers, potential and board members , etc. to feel a part of the growth, goals, work, and mission. My advice? Get out of the way of "your" organization's achieving success. You and it are separate. It will go on, in time to have its own life with or without you. You have helped to form it but allow others to help it succeed. You've cut your organization's throat when you alienate potential constituents. Is this you? Work with and listen to others who come to help with experience, concern, and interest.

__ If the founder of the organization is working for the non profit as the executive director, and the culture in the organization becomes such that the founder will have that position, indefinitely, then being able to hold the executive director accountable for their achievements (or lack of them) is really critical. What is best for the nonprofit (any nonprofit) is whatever is best for the beneficiaries of the nonprofit (who benefits from the mission of the organization? What do they need? Is it being provided to them such that they are getting what they need, easily?). The focus for any nonprofit's leadership should be the work of the organization, and what is best for the non profit's beneficiaries. I know that a founder finds a non profit, without a doubt, out of their passion for the issue that the organization serves. If, though, the executive director does not understand that they are an employee of the nonprofit, in the eyes of the law, (as the nonprofit is a legal entity so all employees are to follow employment law, and all employers (the nonprofit) must follow employment/employer law);the risk (which jeopardizes the non profit's credibility and reputation) is that the executive director is not being held accountable to do the job (per the non profit's executive director's job description), because how can the founder that is the permanent executive director be properly overseen by his or her board and held accountable? The risk of losing one's job is very real whether the founder that is the permanent executive director admits that to themselves or not. The law requires board members to run the organization in the best interest of the organization - not in the best interest of the founder and their wishes. For instance, maybe the founder/permanent executive director is not achieving job benchmarks, set each year, that the executive director should meet. If an executive director is understood to be permanent, how is this lax behavior in the best interest of the nonprofit, its beneficiaries, or the mission statement? How can leaders on the board properly lead? In other words, if a founder takes the executive director position but plans to indefinitely be the executive director - how does the organization's leadership oversees the executive director; is the board a passive or active leading board; and how is the executive director truly and really held accountable to the beneficiaries of the non profit's mission work and accountable to the stakeholders in the non profit (e.g. donors, volunteers, community partners, etc.)? The risk is that a culture may get established, internally, in the organization where the executive director controls everything (even the board which is actually legally required to oversee him/her) so the culture, internally, becomes one focused on the executive director (founder, in this case) and their wishes or intentions rather than about the board (as a collective) deciding through proposals, discussions, and votes what is best for the nonprofit. How, if a founder/permanent executive director controls even the board, is the vision that the organization sets for its mission work focused on the beneficiaries? It is a tough place when a nonprofit protects a founder's position as a permanent executive director - something that may stem from the founder feeling a sense of entitlement. The focus must switch to be on what are the results of the organization's programs and services (services outcomes); on being successful and current as an organization; the community's needs should be the focus. Let's truly be honest. Sometimes a founder/executive director is not, eventually, or at some point in time the best candidate, anymore, to run the organization to its full potential to benefit the community. If the organization has gone along with the 'founder/permanent executive director' the agency's leadership has designed itself to re-actively 'protect' an executive director into an indefinite position - it's missing the point that the non profit is a public trust, as the federal and state governments have provided it with official non profit designation; which is why nonprofits have the ability to raise tax free dollars. How well a nonprofit operates, is led, and is operating at its full potential are about the community - not the founder. All boards must do what is best for the organization and if an executive director has an 'indefinite' position, there is a risk, over time, that protectionism for him/her will become an operations norm, within the agency - how could it be avoided? Yet, actually, the non profit is its own separate, individual, legal entity. It should be seen as an entity that is set up to succeed on its own two feet; to have a long life separate of any group people or single person. No one is entitled or permanently attached to it, once it receives its official non profit designation from the IRS.

__ I know, and anyone who understands what your non profit does, understands that you care deeply about the cause that you're working for. I don't know you, as you read this, and yet I know it to be true. Honestly. True as it is, though - you can not only focus on and only work on your organization's programs. A nonprofit is a business that must have cash flow. If you want to create a non profit that can sustain its mission statement's goal YOU MUST give some time to learning modern best practices in non profit administration, board operations, fundraising, etc.; AND set time aside every week to complete necessary operations tasks. You can not only work on programs, weekly, and expect any difficulties your organization currently has (such as cash flow) to get better. Some of the best resources in the non profit sector have been hand picked, by me, and included in the Amazon Store, to the right on this web page.  These books were selected because they are standards in the professional nonprofit sector.  Read down the titles and then click on a couple other topics on their left navigation bar. For grassroots and start up organizations, be sure to check on Kim Klein's Chardon Press offerings at the bottom of the left navigation.  If you can't afford purchasing any of these books, be sure, then, to check for them in your local public library.  Getting informed is an investment in your organization's future and its ability to grow what it provides to the community.

__ Yes, you really and truly must fundraise and regularly. If you pull a board together but don't require that they have non profit management, fundraising, legal, or other important relevant skills amongst the board members - then you have a board without experience or knowledge. If you don't know how to account for money or donations that you receive, but have the best intention in the world - who cares?! You're not conducting your non profit's operations professionally (or legally)! You must learn what the non profit that you're working for requires, legally, operationally, strategically, and otherwise. Really. If you do not actively fundraise each business day, you'll look for 'quick solution' money options as reserves dry up, and there are none. If there were good, safe, honest quick financial solutions - you would've heard about it. If your organization has needs, creates bills that need to be paid, needs to help more in your cause, and could do more - then you need cash flow. The only way that your organization is going to both operate soundly and have a future (growth) is if you learn how to formulate organizational goals, learn how to plan for them, learn how to budget for these goals - and learn how but also actually raise money for both needs your org has now, and for growth, and goals. Yes, you must learn these things - again, they're an investment in the organization.

Understand that professional non profit best practices is about the organization, its welfare, its growth, and its potential. Not one bit of modern non profit operations is about you or any one person's ego or entitlement.

As I said above, I know that you do not have any money right now and need it. In my next post, "Start Up Non Profit? Need Seed Money? Starting Fundraising? Here's help...Part 2 of 2" I explain how you can raise tax free dollars before you have your legal tax exempt status.

23 comments:

Anonymous said...

Appreciate not only your information but your DIRECT approach -- thanks for a dose of reality.

Terry D. Kester
Executive Director
Staunton Theater Festival

Arlene M. Spencer said...

Terry,
Thank you so much for your kind comment and I'm glad to help. Good luck in your important work for the community!
Arlene

Anonymous said...

Hello,

We are starting up a new church and working on applying for our 501c3 status. We would like to do work with transitioning prisoners & their family back into a productive society. Do you know if there are any grant money available to help us?

Arlene M. Spencer said...

Dear Anon,
Hello, thanks for reading, and for posting your question.

Congrats on getting your church up and underway. There is definitely grant money out there for reintroducing, training, supporting/counseling, etc. released prisoners.

Read my post, "Some Free Resources..." to learn where to look for grant information and how to begin seeking grants. It's available at: http://thegrantplant.blogspot.com/2008/07/some-free-resources.html

In that post be sure to read tip numbers: 1, 3, 5, 6, 7, 9, and 10. Also look over the Archives section (on the lefthand side of this blog) and see the various topics that we've posted on, in this blog. (The 'tags' come up if you click on any archive and they're indices for the topics that we've written about, here). There is a lot of beginners info in this blog (e.g. 'how do I', 'where do I find', etc.)

Good luck in your important work for the community!

Best, Arlene

Arlene M. Spencer said...

Dear Anon,
Hello, thanks for reading, and for posting your question.

Congrats on getting your church up and underway. There is definitely grant money out there for reintroducing, training, supporting/counseling, etc. released prisoners.

Read my post, "Some Free Resources..." to learn where to look for grant information and how to begin seeking grants. It's available at: http://thegrantplant.blogspot.com/2008/07/some-free-resources.html

In that post be sure to read tip numbers: 1, 3, 5, 6, 7, 9, and 10. Also look over the Archives section (on the lefthand side of this blog) and see the various topics that we've posted on, in this blog. (The 'tags' come up if you click on any archive and they're indices for the topics that we've written about, here). There is a lot of beginners info in this blog (e.g. 'how do I', 'where do I find', etc.)

Good luck in your important work for the community!

Best, Arlene

Anonymous said...

Hello Arlene,

First let me say thanks for being so direct and honest. After looking on grants.gov, Cfda, and a few others I have found that primarily I will have to fundraise on a regular basis as you said. We have started 2 days ago by filling our articles of incorporation. My name is Michael Jamieson and we are on our way to a slow start but a start non the less. The name of our organization is NOVAC which stands for National Organization for Vaterans Apreciation and Care.

We look to eventually have atleast one office in every state which is why I say a slow start. After 2 years of reading IRS publications, State requirements,ETC... and a lot of grant searching and money spent on scams for grants. I only have one regret and that is not finding your blog sooner.

Even with all the time spent not getting the grants because of not being a veteran in need of a College grant, Home grant, Bills grant, ETC... atleast we know where to file for the veterans and assist them until they get there grant. We plan on assisting Veterans in every aspect with no red tape. That means a lot of funding and no grants or atleast I haven't found one yet to help the people that gave there all so we could be free today.

Anyway I just wanted to say thanks and I hope you do well in your endevors.

Arlene M. Spencer said...

Michael,
You are so welcome and thank you for your kind comment. We're glad to help.

I wish you and NOVAC the very best, as well.
Arlene

Anonymous said...

I'm hoping to start a non- profit 5013(c) 3 for women who been incarcerated? Is there money available for starting a non-profit 501(c) 3?

Arlene M. Spencer said...

Dear Anonymous,
Read our post, Grant Writing 101 (which details how to and where to learn the grant seeking basics). http://thegrantplant.blogspot.com/2008/12/basic-grant-writing-101-information-and.html

You'll need to search for "seed money" or "start up" grants and funds. Good luck! Arlene

Clara Wilson said...

We are staring a 501(c)3. We just be came incorporated and will be filing our 1023 letter with the Irs in a few days. We have been seeking campaign and seed money with letter of inquiries to open our new ofice and cover staff for a mentoring at-risk youth program. We're finding that many grants are requesting an address of business and detailed information on all staff. We are not there yet. How do we address these questions such as(board financial information) in order to secure funding. Are many non profits making the investment of obtaining the building before seeking funding?

Glad we found your site..It has been very helpful..

Clara Wilson

Arlene M. Spencer said...

Clara, I'm glad that you guys have found this blog helpful. I recommend that you literally call the foundations that you're apply to for grants and talk to a program manager, before you submit a grant application, and explain that you're applying and that your organization is a start up. Before you do so, have all of the facts figured out (between the key leadership and board) and in front of you (so to speak). For instance, with regard to board finances - you should explain that you guys are a start up but then have a clear fundraising (or development) plan that has been ratified by the board that is truly going to be implemented and perhaps even include a two year projection (both what will be done to raise funds and project income brought in) in that fundraising plan. In regards to where your organization will initially begin its programs: again, know what the real plan is (having key leadership and the board already figured it out and officially set it up). Perhaps you guys are starting your services through an established, similar, older organization (e.g. they're a fiscal sponsor) and providing the services in their building; or perhaps you guys are getting to use another agency's space to provide your services (just borrowing a room a few days a week). Whatever the case, be sure that you can clearly explain what your agency's plan is. Donors aren't usually expecting you guys to have a million dollars raised or a physical address as much as what they really want to know is where are the applicant nonprofit's services and products going to definitely be provided to the beneficiary population; or what amount of money is the nonprofit holding itself accountable to be able to raise to bring its services to the community. Good luck and congrats on you guys receiving your official nonprofit status! Welcome to the world of nonprofits! Arlene

Travis D. said...

I'm trying to start a non-profit for Homeless Veterans, men and women, are there any start up grants to help me with 5013 C and other paper work I need to establish everything?

Arlene M. Spencer said...

Dear Travis,
There are. This blog is a wealth of free information on how to locate grants relevant to your nonprofit as are any of the resources I suggest on the left hand (middle) side of this blog page.

I'd encourage you to read Part 2 of 2 of this particular blog post, too.

Finally, click on "Prospecting" under "Labels" on the lower right side of this blog page and that will take you to several "how to" posts explaining how to efficiently but effectively locate potential donors for your particular nonprofit with a higher likelihood to give.

I wish you luck in your important work!

Best, Arlene

Jason Bonetti said...

Arlene,

I am currently trying to separate a program I started from the non-profit I started it in, any ideas on how best to go about that? It looks like to me a fiscal sponsor may be the best way to start off. Your blog has been a wealth of information so far and I really appreciate the great work YOU do.

Thanks,

Jason Bonetti

Arlene M. Spencer said...

Jason,
I would check. In whatever geographic region the program will serve - how is the community's general giving (to all nonprofits)? Are they rebounding a bit (as is the economy)? Whichever organization may become your program's fiscal sponsor - how are they doing in fundraising in this economy? Timing can be everything. But, yes - a fiscal sponsor is the way to go initially. I'd network and get a feel for the region's nonprofit sector's current fundraising experience and make decisions (on moving the program and then beginning to raise funds, etc. for it) on that.

I'm so pleased that the blog's been helpful to you.

Good luck! Arlene

Valancia said...

I really appreciate this article you have posted. For a while now, I have wanted to start a nonprofit. Now I'm finally writing the plan, researching, & piecing things together. As you already know, 'I have no money to start', so I am dotting my i's & crossing my t's to figure out the best way. It even cost to get right with the IRS & so forth. I just finished reading your Part 1, so now I'm very excited about reading Part 2 because I want to know how to start even without being tax exempt, although I plan to become soon as possible. Thanks for the advice!

Arlene M. Spencer said...

Valencia,
You are so welcome and thank you for the kind words. I appreciate it. I wish you the very best in your new endeavor and hang in there. You sound to be well on your way!

Best,
Arlene

Susan Sheehan said...

Hi Arlene,

I am at the beginning of creating a facilitating service for combat Veterans and their families. Is a non-profit the right place for me to start? My course of study is in Human Services, with a specialization in PTSD. I plan to gather others who have the same goals and visions as I have.

I am reading Part 1 right now, and when I am finished will proceed to Part 2. I just need to know that I am heading in the right direction for this organization.

Thank you so much!

Susan I. Sheehan
surrealone75@yahoo.com

Arlene Spencer said...

Susan,
Thank you for reading and for your comment/question. I encourage you to research what veterans programs exist in the region you live (or where you are going to provide assistance) and whether any of those plans are just like or in any way like what you wish to provide in programs/services. You will know from this research, when its done, what services veterans receive there in spades but too perhaps what is needed but not yet being provided. It is key to not repeat what is already being done especially if it is a very successful program. It is important, too, to be offering services that the veterans, themselves, truly really need today. All of the best intentions does not make successful nonprofit programs. Responding to as yet unmet needs effectively and efficiently does. Finally, whether or not to launch a nonprofit may be answered by what you find during your research. If another agency is offering exactly what you wish to provide to veterans perhaps work or volunteer with that agency, learn the ropes, and in a few years go from there.

Good luck!
Arlene

Anonymous said...

Thank you for your post. I plan on starting a non-profit. Its focus will be to provide mentor-ship children. My question is about the organizational structure. I don't wish to be the executive director but I do plan to create a job position for me. I was thinking maybe helping in customer service or a fundraising assistant. I want no power in the job I take. Is there a way to ensure my position will not be eliminated by the board members. To be honest this is just a creative way for me to be free from gov't assistance since no one wants to hire the disabled.

Raquel Garcia said...

Hello Arlene,
I want to start a nonprofit organization for women with breast cancer who have no insurance & low income. I have an aunt that has been diagnosed with breast cancer & has low income her insurance only covered 80% she needed to come up with 20% to get her breast removed so i did a couple of carwashes but now would like to do other things to help out women in the same position. Really need some advise.

Arlene M. Spencer said...

Dear Anonymous, I apologize for getting back to you after such a long period of time. Thank you for reading, commenting, and for your work for the community. I understand your question and urge you to read two blog posts I wrote specifically on the very topic you are asking me about. The first is at http://thegrantplant.blogspot.com/2012/09/someone-has-to-say-it-nonprofits.html and the other is at http://thegrantplant.blogspot.com/2012/10/the-roles-nonprofits-founder-may-hold.html

Obviously, mine is one person's opinion but it based on experience and insight. At a minimum, I urge you to consider it, though.

I would also urge you to read up on nonprofit oversight, management, and operations. It might become clearer as you read others' suggestions on the same by other reputable sources (such as on The Foundation Center's website's free resources list or any reputable professional working in best practices). Read; learn; talk to successful nonprofit leaders you know about their organization's oversight, operations, and management success; and learn more.

Don't forget to learn basics from this blog too by clicking the "How To" and "Leadership" Labels to the lower right hand side of this blog page. Read the pertinent blog posts under each label.

Once you get a sense of how a nonprofit is started up to operate successfully and thereafter how its managed to operate successfully I think you'll get a better picture of just what position you want for yourself.

A board should never be beholden to anyone other than the best interests of the nonprofit organization (as the law actually requires in order for a charity to retain its legal charity status, etc.). Why? The nonprofit is not operating for the best interest of one person's career but for the best interest of the beneficiaries of the organization's work and the nonprofit, itself (it's mission statement and organizational goals). If a board is beholden to a founder rather to the best interests of the organization it is not doing its job.

Having said that - be the board president for as long as you are effective and the board sees you as such. Why would you wish it any other way?

I wish you the best in your efforts! Arlene

Arlene M. Spencer said...

Dear Raquel,
I apologize for how Blogger laid out the comment above your comment and then my response to their comment right beneath yours. Anyway, thank you for reading, for commenting, and I am so sorry to learn of your aunt's health issue.

I would urge, urge, urge you to get in touch with each and all local nonprofits and health centers that deal at all with breast cancer. Why? While you have bills to pay for her health treatments, they are established nonprofit organizations already raising funds. And (most importantly) they exist to assist those with breast cancer. How each organization provides assistance is what will determine which nonprofit can best assist your aunt and you. So, be sure to let the persons you speak to know about her diagnosis, her needs, and so on. Some organizations do indeed help people in need locate assistance to pay for medical bills. You will have to do some up front phone calling and research, but as you do I guarantee you will learn about which options and types of assistance your aunt has available to her.

Nonprofits exist to assist no matter how much money someone has or does not have. Really and truly. Let them fundraise and assist your aunt.

I wish you both the very best. Arlene