Brief look to the nonprofit world :
I've been busy these past couple of months studying in dept the dynamics of a nonprofit organization (NPO or NP).
Could you imagine working for an organization that does not have to worry about making a profit to survive? Well this is pretty much a nonprofit organization. Could you also imagine getting "free money" that doesn't need to be returned? This is also referred as a grant, and there are thousands of organizations that are eager to hand it to you. Usually nonprofits and grants go together in life.
To my surprise these types of organizations work pretty similar to that of regular for profit entity. I don't have to tell you that my approach (most of the time) comes from the tax point of view, which serves a double purpose.
For starters, their name tells you that an NP can careless about the profits. A NP has as its heist priority their "mission statement" and the "programs they run". I'll explain those in more detail later; while for profit cares for their profits and (with this economy) for their survival. I can also tell you that a NP depends heavily on non refundable contributions (such as donations, grants, volunteers, etc) that could be goods, services, etc.
I could say (to my surprise) a NP has an easier way to develop services in this world then a for profit organization, and I tell you why, while for profit competes for sales with other for profits, an NPO can choose the specific services (programs), time and areas they want to serve.
An NPO can choose the timing (window period) to develop their programs. Unless, an NPO is developing a program that was funded with a grant (usually non reimbursable) it will be tied to a window period that is to be able to use this grant money.
Also, an NPO has more sympathy from potential donors and grant funders to receive contributions. Volunteers are another big help NPO's receive compared to for profits. While volunteers in for profits are often called "interns", the main interest from both remains the same, which is gain experience in a specific area.
You won't believe how many times I've witnessed all kinds of organizations with poor management going down (literally). Having just said that, things like: board of directors with no experience, lack of communication from one department to the other, accounting departments with obsolete systems, fear to change, bad planning, or worse, having a plan, but not stick to it. And these are just the tip of the iceberg.
And like anything in life, I would tell you just do what makes sense. Before starting, whether it is for profit or nonprofit, talk to an expert that can help you.
Anybody can start their own nonprofit. It just likes starting a new business. There are just a few things you may want to consider before you decide to start your own and try to change the world.
Mission statement:
Usually this refers to the core of the NPO; it usually is a short paragraph that entails the whole organization reason to exist. You can start your own NPO with a mission statement that goes from saving the daisies all the way to helping the homeless. Keep in mind that your mission statement is what is going to make people to put their little hands into their pockets and give you money, or (even better) to volunteer for your organization.
Like in the business world, you need a plan:
I would suggest starting with baby steps. Start your own nonprofit while you're employed, while you have secured income coming into your pocket. Often at times I suggest people the best time to start a business is while you're employed, so you can afford those expenses, pay the bills on time, while the business gets stronger, while your business grows, then eventually, you will get to the point when having a full-time job and a business on the side is too much, then you will know when is time to choose which one you want to pursue. This is the garage business start up plan, not quite glamorous, but still quite effective nowadays.
Programs:
This is usually referred to what is what you're going to do. At this stage your program relies heavily on "current statistical information," because it has to be "measurable". For instance let's say you want to take kitties away from shelters and put them into permanent adopting homes, or if you want to restore historic buildings in a specific area, or if you're an artist and want to spread your vision, etc. For anything the case is, and then you need to dig into the current information that is available to you. For the first case you could gather information from the local animal shelter, for the second case you could do the same with the city council, state department, or local historic building buro, and so on.
Once you developed a program that can be measurable (so your supporters can easily see the difference before and after) then it’ll be more compelling for potential donors to support your cause. From here you are pretty much set to start funding your programs.
Organization, organization, organization:
Since money follows action, I would suggest getting good accounting software. There are dozens out there, just pick and choose the one you feel more comfortable with, the one that makes more sense to you. However, if you purchased one of them USE IT, MAKE YOUR LIFE EASIER. I've witnessed a few times big companies wasting lots of money by having multiple accounting software. Picture this; a company pays multiple wages to multiple workers for using multiple software, paying different software licenses, this software overlapping the other one. Not good, right? Then, picture on top of that keeping records of all accounts in excel, and handwriting checks.
Ask yourself, will I donate $10,000 to an organization that does not have proper records in order? Or, would you be more compelling to donate $10,000 to an organization that has all its audited financial reports? It is that simple, right?
Keep in mind you always can pay somebody to train you in using accounting software. Or you can always hire somebody part-time to keep your bank accounts in order. Or just ask your tax professional to refer you to a good system that can work for you. Since your tax guy works with different people and businesses he must know different accounting software.
Money:
First, keep in mind that most NPO's depends heavily on contributions. Most first timers must fund on their own NPO's themselves, until other people get involved, like any business it starts with yourself, then family members, then friends, then more people get the word, then more people get involved in your movement. At this point you have no restrictions yet, and that is because anybody can do whatever the hell they want with their own money, but when you want the good stuff, "grants money" that is...
Grants Money:
Most of the time the operational expenses, such as utilities, rent, you salary (just to mention a few of those) could be just 20% of the budget. And I tell you why in a moment.
Ask yourself "would you donate $10,000 to any nonprofit that later will spend $8,000 of those in salaries? ... I WOULDN'T
As a general rule (and most grant funders have specific requirements) that no more than 20% of all the grant money will be used to fund operational expenses. And if you want otherwise, then you can wait, and wait, and wait until you find a grantor that is willing to do it. So, just prepare your programs to that kind of restriction.
If you want to start your own nonprofit or at least give it a thought, Click here So, this gives you an idea of how much money you will need in order to run your programs and to make a living out of it. But do not feel discouraged, there are hundreds, thousands of nonprofits that made it.
You will be surprised to know there are hundreds, thousands of grant funders willing to give you grants money, and all you have to do is to ask for it. Grants go from as little as $3,000 all the way to $1,000,000, or more.
Well, this is just the tip of the iceberg regarding nonprofit organizations. I will keep you informed, and feel free to contact me if you have in mind to start your own NPO.
And again, I'm not in the business or providing any legal advice.
