Starting a nonprofit organization can be an empowering way to give back to your community and provide valuable resources for those in need. As you might assume, building and managing a nonprofit takes plenty of determination, effort, and patience. However, before diving into such a monumental commitment, it is critical to understand each and every step involved in this process.
If you’re thinking of starting a nonprofit (club, charity, association, etc.) or 501(c)(3), you’ve come to the right place. As you make huge leaps and bounds toward fostering a space that aims to make the future of your community brighter, it’s important to ensure each of your foundational steps are well-rooted.
Using this guide, we’ll walk you through the steps you need to take to get your idea off the ground and your nonprofit actualized.
Step one: Develop a business plan
Prior to reaching out to investors or announcing your nonprofit to the public, you need to prepare a comprehensive business plan that details all of the nitty-gritty details about your company. A business plan is a comprehensive document that is designed to help you gain a full-picture look at everything from your mission statement to future funding. Ultimately, developing a business plan aids in bringing your vision to life.
So, what kind of information should be included in your business plan? Your strategy should include a clear and concise description of the methodology of your company, where you see it growing in the long run, and any applicable financial reports to show stability.
Here’s what to include in your business plan:
- Executive summary: This should be a succinct one-to four-page overview outlining the key concepts that make up the overarching purpose of your business plan, which essentially lays out the vision for your organization, where it integrates into its respective market, and how you intend to make it successful within your community.
- Market analysis: Here, you should identify your target market and plans for addressing and captivating this specific demographic. Ideally, your nonprofit will give people a convenient choice or satisfy a need that is not yet served in the existing marketplace.
- Financial plan: Your fiscal portion should encompass your revenue, your cash flow statement, and your balance sheet. This information provides stakeholders visibility into your current and ongoing funding and the possibility or future opportunities to invest in your organization.
Step two: Define your nonprofit’s mission
Ask yourself this question: what first inspired you to launch a nonprofit organization? Where did you identify pitfalls in your community that drove you to want to make a change for the better? Of course, you have a general understanding of your motivations and the goals of your nonprofit, but defining and communicating them to others can be challenging. This is where a mission statement comes in.
A strong mission statement should accomplish all of the following:
- Clearly articulate the motives and goals of the nonprofit
- Precisely define your organization’s work and relationships
- Ascertain your nonprofit’s growth and development
- Detail your nonprofit’s purpose to constituents, donors, and other essential funding bodies
Step three: Build your executive leadership team
With a mission statement and business plan set in stone, you can safely undergo building your executive team. You need a strong team of passionate leaders, who are as driven as you, to help guide the development and growth of your nonprofit. In many ways, this is the only way to ensure that your nonprofit becomes sustainable in the long-term.
Creating a reliable system of leadership is entirely contingent upon the rapport. Symbiotic, grassroots organizations are typically borne out of established networks of people that are united by a shared purpose or desire. When you’re associated with a community that works together to construct a positive connection with people and spaces, finding amazing candidates for your team becomes slight work. Make sure to vet your candidates properly to find the best fit for the roles as employee turnover and wrong hires can cost six to nine months of an employee’s salary.
Step four: File the paperwork
There is plenty of paperwork to be filled out once you’ve got all of your nonprofit details hashed out. With your business plan and executive board in place, the next step is to incorporate your nonprofit. Take a look at this section directly from USA.gov’s instructional guide on how to start a nonprofit organization:
- Choose a business name
- Appoint a Board of Directors
- Decide on a legal structure
- File your incorporation paperwork
- Apply for tax-exempt status
- Obtain necessary licenses and permits
According to the Internal Revenue Code, public charities, including nonprofits, must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3). Applying for 501(c)(3) status is absolutely crucial to claiming status as an official nonprofit. This comes complete with tax exemptions and deductions for your donors. Although the application process can be time-consuming, it is a vital step in establishing your nonprofit.
The most critical tasks associated with the 501(c)(3) application status include:
- Filing articles of incorporation with your local government
- Completing IRS form 1023
- Researching and complying with any ancillary state-level requirements
- Receiving an IRS employer identification number
- Creating your bylaws, leadership systems, and preliminary programming
Step five: Secure funding
It can be difficult to provide stability and ways to sustain your nonprofit, let alone figure out how to do it. However, securing capital for your nonprofit is absolutely essential. Wondering where to begin earning funding for your nonprofit? Each nonprofit is different, so there's no one-size-fits-all answer. Take the following funding suggestions to develop the right funding strategy for you:
- Product and service sales
- Community-based fundraisers
- Grant funding
No one is employed in the nonprofit sector because it's easy. Nonprofit entities are established for one primary cause: to make the communities and the people that compose it happy, healthy, and supported. If you have made the admirable decision to launch your own nonprofit, make sure you follow this guide to ensure you are prepared for every step of the journey. You can also assess your readiness to start a nonprofit and determine your next steps with this on-demand training from Candid Learning. Good luck, and happy planning!
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