According to the National Center on Charitable Statistics, around 30% of nonprofits shut down their operations only a decade after they were founded. If you want your nonprofit to have real impact, it will have to last much longer than that—and to not only survive but thrive.
For a first-time founder of a nonprofit organization, the road ahead may seem murky, full of confusing paths and hidden pitfalls. To help you on your journey to establishing a successful nonprofit, we have identified the key mistakes nonprofits make at the outset that set themselves up for failure, along with essential advice to avoid them.
How can smaller organizations apply these lessons to their own fundraising efforts?
Nonprofit Mistake #1. Running In Without A Plan.
You wouldn’t buy a house that looks like it’s about to cave in; like houses, nonprofits need a solid foundation. The issue your nonprofit will address may be urgent, but it is a huge error to rush in to starting programs and seeking out donors if you haven’t come up with a detailed blueprint first.
Craft your nonprofit’s mission statement. Think of a mission statement as your organization’s battle cry: simple and clear, yet inspiring. In a few sentences, or even just one sentence, the mission statement should explain (1) who your organization will help, (2) what you will provide them, and (3) how you will accomplish this.
When potential beneficiaries and donors read your mission statement, they should know exactly what you do within a few seconds. Be specific, avoid buzzwords and jargon, and try to convey the emotional necessity for your work. A clear mission statement also keeps your organization focused and avoids “mission creep”—taking on projects irrelevant to your initial goals.
Develop a business plan.
Make sure it is detailed and realistic. At the very least, the business plan should include your organization’s budget, specific programs and how it will manage them, current and future beneficiaries and stakeholders, plan for financial stability and growth, and methods for evaluating success. If you don’t feel confident writing your own business plan, you can use a pre-made planning template or hire a consultancy firm to help you create one.
When plotting out your finances, don’t forget to think about starting costs: personnel, office equipment, website, software, insurance, renting or buying a facility, and registering a trademark and 501(c)(3).
Assemble a competent, well-rounded team. Your board of directors should be passionate about your mission, as well as have access to critical resources or be connected with people who do. Make sure everyone is on the same page about the goals and methods of the organization—the most effective teams are those that take the time to respectfully and conclusively resolve conflicts before moving forward. On that note, when choosing the number of board members, note that an odd number prevents voting ties. Some states have regulations about the minimum number of board members a nonprofit can have, so make sure you’re following the rules.
With both board members and employees, it is critical that everyone in your organization shares the same core values and trusts each other. This prevents abuses of power and ensures that the organization’s success does not rely exclusively on the charisma of the founder.
The exact number and position of employees you hire will depend on the scope and mission of your nonprofit, but remember that volunteer and internship programs can take on grunt work and even marketing without too much added stress on your budget.
Do the paperwork.
Incorporating your organization is typically the first step to officially becoming a nonprofit. This will give you exemptions from state and federal corporate income taxes, protect employees from personal liability, open up options for health insurance, and give you an overall more robust corporate structure. The fees and filings necessary vary by state, but each state has an agency to help you along the process.
Then, you can apply for tax-exempt 501(c)(3) status, which will allow you to accept tax-free donations. Each state has an agency that oversees charities, which you also should register with. These processes require a lot of paperwork—hiring a lawyer or accountant can greatly speed up the process and ensure everything is done by the book.
Nonprofit Mistake #2. Ignoring the Need for Research.
Imagine founding an organization, going through the process of getting registered as a nonprofit, hiring a board, composing a detailed plan—and then at the end of all that, you realize there’s another organization in your area that does the exact same work you do, except that they’ve been at it for decades! With a few simple searches, you could have found out that you had “competition” and then reorganized your mission and plan accordingly. The key lesson here: if you want to start a nonprofit, make sure to do your research first.
Find out if your organization already exists. Use searchable nonprofit databases like GuideStar to find out if other organizations are already at work at the problem you’re interested in. Even if there is one, don’t despair! Let the competition focus your mission. If another nonprofit is already attacking the issue from one angle, try to find a niche that they are missing, or another in-need population experiencing the same problem.
Let statistics guide you.
Nothing will help you plan successful programs like precise data. What is the population you hope to serve? How big are they, and where are they located? Figure out a statistic that measures the need of the population—the number of homeless people in your county, for example, if you’re providing shelter.
Good data not only lets you see where and how big the problem is; it also can illuminate a path for a solution and a way to assess results. If you’re looking to collect and redistribute unsold restaurant food that is still good, figure out how much food is wasted in your city, and then compare that to the number of those who lack the resources to feed themselves. If you create a plan that makes both numbers go down, you know you’re doing something right!
There are many resources to help you find data to support your organization. Sites like City Data, Data USA, the National Association of Counties’ County Explorer, and the U.S. Census Bureau are great places to find detailed and place-based demographic data. For deeper dives into specific issues, the Pew Research Center’s data sets are very useful.
Statistics are proof of success.
Crunching numbers not only aids you in planning your programs—it also helps you find and maintain donors. With each program, maintain accurate data on how your work is impacting the community your serve, and use this data to show donors that your organization delivers what it promises.
Don’t forget: if a picture speaks a thousand words, then a good infographic speaks a million! There is a plethora of visualization software available online that constructs beautiful, compelling, and easy-to-read graphs that will act as monuments of your success.
Nonprofit Mistake #3. Being Afraid of Money.
Some organizations seem to find money embarrassing. They think they need to operate on a shoestring budget to be legitimate, and that having sizable margins runs counter to the essence of a nonprofit – but this is far from the truth.
In reality, in order to run effective projects and grow to the scale you desire, you need sufficient resources. You shouldn’t be bragging to donors about how little money you need to run; you should instead highlight how much of an impact you’re able to make relative to your budget. Nonprofits are not defined by their frugality, but by their commitment to positive results. There is no shame in seeking money that you need to enact real change.
Manage your money.
Carefully record all your spending, and regularly evaluate where the money is going and if it is generating the desired results. Maintain healthy and justifiable margins to support future opportunities for growth. Avoid headaches by filing all your tax and other regulatory documents correctly and on time.
Actively seek grants.
There is a whole universe of grants available for nonprofits of all kinds. Useful directories include the U.S. government’s grants database, Candid, Google’s Ad Grants and AI Impact Challenge, and Grantwatch, among others. We’ve also pulled together a list of grants for nonprofits to apply for in 2021.
Make it easy for donors.
Set up an attractive website that clearly explains what you do and how to give support. Don’t bury important information in the site; everything should be accessible within two clicks.
Promote your nonprofit on social media, local news outlets, and to relevant community groups.
Make sure to target the demographics that are most likely to care and give money in support of your project.
Communicate with donors.
People don’t want to think their money has disappeared into the ether. On your website, social media, and newsletter, provide updates on how the projects are faring. Again, bring in data and graphics that concisely illustrate your progress.
If you want to get big, focus your funding sources. The “common sense” wisdom is that nonprofits need diverse sources of money to grow. But that is not the case. A fascinating study published in the Stanford Social Innovation Review discovered that the biggest nonprofits in the U.S. receive almost all of their funds from one kind of source. For example, the American Kidney Fund was fairly small for the first 20 years, but it became a formidable force once it made corporate donors their overwhelmingly major donors. The AKF and other organizations studied did receive money from other sources, but around 90 percent of their funds came from one type of source.
Instead of scattering your efforts in many directions and spreading your resources thin, you can hone your strategy. The trick is figuring out which kind of funding source is best for you. Is it government grants, corporations, service fees, individual donations, or foundations? This may require research and creative thinking. An example cited in the study is of the National Wild Turkey Foundation, which raises around $90,000 per year to conserve the wild turkey population. Most of that comes from individual donations from hunters, who want to make sure there are enough turkeys sticking around for next season.
Deciding to form a nonprofit—to devote your time and energy toward changing the world for the better—is a courageous move. Don’t be daunted by the process of starting up. Remember, your mission is important! As long as you pay the necessary attention to planning, research, and funding, you should find yourself building a solid foundation for a successful organization.