Things to Know Before Starting a Nonprofit

Launching a new nonprofit is relatively similar to any other business startup. To be successful, it requires a strong foundation of knowledge and skills, a viable idea, and all the time, money, and effort you can sacrifice to get it off the ground. In addition, the nonprofit realm requires that you be motivated by the good you do, not by increasing personal wealth or playing the role of owner. If you are thinking that starting a nonprofit, there are three things you need to understand before you take the plunge.

1. Lots of Work, Little Glory

Because of the very nature of a nonprofit organization, the only effective motivation is the intrinsic satisfaction of trying to do right by your target population. Many long-time nonprofit staffers will tell you how easy it is to burn out in the industry, especially when you find your day-to-day efforts filled with planning the details of fundraising events (Chicken or beef? Vegetarian? Have we sold enough tickets?) rather than serving the community you set out to help. If you have visions of humanitarian awards and banquets in your honor – think again. The most successful nonprofit leaders commit themselves completely to the cause without much (if any) expectation of acknowledgement or appreciation.

2. Resources Needed

A nonprofit startup is just like any other – there are expenses associated with launching the organization that will likely have to be covered by the founder. Yes, nonprofit organizations have access to grant funding, but very few are available to cover startup expenses because they want to contribute their dollars to those with a proven track record for addressing the problem. There is some money, in some areas, set aside for conducting needs assessments, but again an established organization is more likely to win those grants to fund new programs than a startup with no history at all. In addition to the cash you will need to put out, a nonprofit startup requires hundreds of hours of planning, paperwork, and other basic business work to get going.

3. No Increase in Personal Wealth

If you are making anything above minimum wage currently, creating a paid position in a startup nonprofit is not likely to increase your personal wealth. The IRS strictly scrutinizes all expenditures, especially personal payments, to ensure that no individual is unjustly enriched by the activities of a nonprofit. It is the fundamental no-no for a nonprofit with exempt status, and is the quickest way to lose your status. Key employees may be paid (though it is inadvisable to pay board members), but the salaries must be reasonable and customary. That is, total compensation must be comparable to similar positions in similarly situated organizations. Bottom line – you are not going to get rich running a nonprofit.

Launching a nonprofit to address whatever social ill energizes you is a noble idea. At the same time, it is important to be realistic about the level of sacrifice necessary for a new nonprofit to succeed in making a difference. Remember, there are ways to contribute and give back without taking on that particular challenge. For many, a better balance is to focus the time, cash, and effort into launching a for-profit business and running that with a social conscience – thus pretty much providing a best-of-both-worlds opportunity to take control of your work life and make a difference.