Starting a Non Profit Takes Money

Almost every week, I speak with someone who has just started a new non-profit organization. Many of these fine, well-intentioned folks call me because they want to find grant money to help them get started. I am not surprised when some of their expectations are a little out of alignment with reality because anyone who would go to the trouble and expense of starting a non profit organization is a bit of a dreamer and idealist to begin with. Sometimes people dive in on faith without checking the depth of the water and that can be a painful mistake.

The trouble is starting a non profit organization is an expensive undertaking, and dreams don’t always align well with reality of implementation. The legal paperwork, the tax deposit, and the time and effort to start a non profit all add up to a sizable sum of money. Many of the people I speak to are already “tapped out” by the up front expenses of becoming a legal entity. They’ve got the status, but not have no money to do what they wanted to do, so they call me about seeking grants. But grant seeking costs money too if you want someone else to do it for you, it’s a lot of work with no guarantees.

I know from first-hand experience that it’s a lot easier to start a non profit than to raise the money to keep it going. I learned this through direct experience serving ten years as a founding board member for a national non profit, starting my own non profit organization (which failed to thrive), and serving on the start-up Board for another non profit that did thrive (due to good leadership).

Here are ten things my experience tells me you should consider before paying the up front legal expenses to start a non profit organization. Attending to these things may help you avoid finding yourself in a financial hole before you even get started. I advise you to delay filing the legal paperwork until:

1. you have recruited a large enough Board with sufficient connections and resources to provide a base of local funding and support for a basic level of services;

2. you have completed a thorough assessment of the need for the services you want to provide including competing agencies and services;

3. you have surveyed potential participants on their need for the services and their preferences in terms of service delivery;

4. you have identified a sustainable entry level of service delivery;

5. you have at least explored finding a suitable and available location and/or facility to house your services;

6. you have developed at least a rudimentary fund raising plan that includes multiple funding streams and an identifiable donor pool (a fund-raising plan that may include grants, but is not dependent on grants);

7. you have recruited a Board member who is a CPA, or you have enlisted the assistance of a CPA firm willing to donate or discount their accounting services;

8. you have, or you have Board members with, credentials, experience, and connections in the area of service you want to provide;

9. you and your Board have written a mission statement that is meaningful to the community you’ll be raising funds within;

10. you have listened - really listened - to the “devil’s advocates” who can give you an alternative perspective on what you want to do (might be your wife!).

You can’t be afraid of examining your mission through the lens of the devil’s advocate. You must be courageous enough to listen to alternative points of view as you plan your non profit. If you don’t, you’re going to miss something important and you may just spend a lot of money starting a non profit that has a noble cause and no money to support it.

Funding is the life-blood that your heart-based operation must function on. Not all good ideas are fundable. Few brand new non profits are fortunate enough to identify a deep enough pocket to establish themselves. You can’t count on securing a huge grant to kick off your non profit! (In fact, as a start-up, you can probably count on not securing a huge grant) It’s probably going to take the shallow pockets of lots of people who believe in your mission to fund your project.  Take the time to test the waters before you dive in!