Wednesday, October 26, 2011 - 9:14am
posted by
Alex Levin,
Marketing Specialist and Writer
Lance Surety
Bond Associates, Inc.

Even in times of a weakened economy, the rate of nonprofit startups continues to grow. Currently there are over one million nonprofit organizations in the U.S.; their expansion has grown at twice the rate of for-profit organizations. Despite this rapid growth, many nonprofit organizations struggle to even open their doors.

A lack of research, understanding of legal requirements, and funding elements all play into the demise of a business before it begins. To ensure you’re prepared to open your doors, consider the following areas before you outline your business plan.

1) Know what’s out there.

Before starting any business, owners should be educated in regards to their competitors. The same is true for the nonprofit world — knowing what organizations are available and their services can be one of the easiest indicators of your success rate. As the amount of nonprofits grows exponentially, often times there are several organizations that currently fill the needs many start-up nonprofits are looking to provide. Understanding the nonprofits that currently exist in your market will help you determine how to set yourself apart from the pack and create a need for others to join in with your cause.

After performing this introductory competitor analysis, some find they would be more successful if they form a private business to help fulfill their charitable goals. New classes of businesses known as Benefit Corporations were established to serve just this purpose. They are companies whose goal is to “create a material positive impact on society and the environment.” Although time consuming, this preliminary research may be the most critical aspect to understanding the current demand for your services, and forecasting your success.


 


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2) Ask the necessary questions.

With the start of any major project, a number of very important questions are raised. From funding sources to employees, having the answers to these fundamental questions will serve as the foundation to your business.

Who will be required to make this venture successful?

Although there are exceptions to the rule, usually it requires a lot more than one or two people to keep an organization afloat. In the nonprofit world, often times a large team is established to help support the business operations. These individuals serve many functions, from board members to volunteers and grass-roots operators. Identify those who will be working with you and assign their titles — this will help you get a clear picture of the manpower you have behind your movement.

What am I trying to do?

Surprisingly many new nonprofits do not have a defined and unique mission statement before starting their organization. In order to ensure your mission statement is clear and will help separate your organization from what is already available create a mission statement that answers the following:

  • What is our purpose?
  • What services are we offering?
  • What changes do we want implemented from our services?
  • Who are we looking to provide assistance towards?
  • Where are we going to operate? Is your organization looking to only benefit a targeted, geographical region? How will our services be provided? How will they be disseminated?


What paperwork do I need?

Taking into account the current state of the economy, often times it’s beneficial for nonprofit entrepreneurs to partner with a current agency that is providing similar services that align with their goals. In order to get a better understanding of the requirements to starting a nonprofit, a business plan should be developed including detailed budgetary obligations, fundraising efforts, an organizational model, and annual salary requirements. Investigate the legal requirements for starting a nonprofit — oftentimes any business which involves fundraising requires surety bonding and some element of licensing. The level of insurance and type of surety bond required can vary from state to state, therefore you should research the state forms necessary for operating in your region.

3) Obtain your paperwork.

As with many businesses, the amount of paperwork required just to establish a business can seem endless. Research the documents you’ll need to file before starting your organization.

4) Check with the professionals.

To help guide you through your start up, establish a list of contacts to serve as your personal business advisors. Be sure to include attorneys, accountants, and local government officials to help answer your questions as they arise. Also, educate yourself as much as you can — from everything to starting a new business to staying on top of state guidelines for operating in your region. The more you know, the more likely your organization will be able to operate efficiently and provide the charitable services you’ve dreamed of donating.

Alex Levin is a writer for clients specializing in guiding entrepreneurs and small businesses through the start up process.


Like this article? Get another!

Click here to read "Crafting a Successful Third Generation Nonprofit-Business Relationship" — by Dr. Laura Bush.

Comments

You are very right about how in a weakened economy, nonprofits begin to grow in number but not particularly in size. I think because of the economy people want to reach out and help a cause thinking it is a was to keep their minds off being laid off or not being able to find a job. Also, by helping others and seeing others in need, one may realize the money they lost isn't worth the agony, and helping will fill their emptiness.

-Brennan Becker

I completely agree with the statement that was made in the blog about how when the economy goes down hill, the nonprofit organizations rise up and start to help out more. They come out in a time of need and that is because the person that is helping may need a helping hand as well. It is important for these nonprofit organizations to step in because the stress level in the economy is much higher than usual. Nonprofit organizations definitely have a positive impact on the society.
This article also had some extremely beneficial tips on how to start a nonprofit organization and what the requirements are. I think when starting a nonprofit organization, you definitely have to have a big heart because you aren't necessarily getting paid you are just wanting to help others out.

Tiffany Weaver

Thanks so much for all of this information! I did not know that a non-profit organization needed all of this. It is a bummer that non-profit organizations are starting up but are struggling to continue offering their services. Either if it is because of the economy or they just don't know how to run a business. They should read this post, it's very helpful

-Aliana Ebanks

I found your blog extremely helpful. I have copied and pasted it along with your information into a document so I could keep it for future reference. I think it is extremely important for nonprofits who are just starting up to take all this information into account when establishing themselves. As you mentioned, the weakened economy and the heightened competition are two very important factors to be considered when establishing a new nonprofit today and I believe your guide does an excellent job of acknowledging both of these.

Laura Duncan

All of this information would be extremely helpful to someone looking to start a nonprofit. I think that the first thing you said about researching what other businesses or nonprofits are already out there is a crucial step that some people easily look past. This is a helpful reminder of the basics to starting a nonprofit.

Whitney Fisher

This is extremely helpful as a group of friends (including myself) are currently in the process of starting a nonprofit. It's important for our eyes to be opened to how much work really is necessary to ensure a nonprofit can take flight. The fourth step (asking the professionals) is great! I will definitely be relaying this info on to help reach out to professionals thereby making a better organization for the community. Thanks for all the wisdom!

Erica Neal

I can honestly say that it surprises me how many nonprofits fail due to poor initial research and a lack of planning - you would think that in beginning the massive undertaking that is starting a company, one would do everything possible to minimze the odds of failure. That said, it is unfortunate that so many of them fail. Many nonprofits have only the best of intentions and their collapsing leaves a void of sorts in whatever endeavor that the failed organization sought to help in. I personally know of philanthropists whose attempts to make nonprofit organizations to help their communities failed - one, for example, was a food distribution center for low-income families. Many members of the community that the nonprofit was based in relied heavily on the center to feed their families, and so its closure was a huge blow to the members of the neighborhood it was based in.

-Kyle Knott

You made a lot of interesting points about starting a non-profit and you also pointed out some good things to keep in mind for people starting for-profit businesses, which is more applicable to my major of Tourism Development & Management. You made a great point with knowing what's out there. Neither a non-profit organization nor a business will do very well if they have tons of competition. Having too many similar organizations might actually hurt a cause, rather than benefit it. Defining what you're doing and creating a mission statement is something I've learned businesses need to do and it makes just as much sense, if not more, for the non-profits.

-Mandi Thomas

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