If you want to make difference in society and for your community, you can start a non-profit organization. Non-profit organizations can be personally fulfilling, but they are not something from which you can earn profits. If you have a steady business and a good income flow, you can emotionally reward yourself by starting an NGO. Many entrepreneurs and businessmen get drawn towards the rewards that a non-profit organization give them. Most of the rewards are intangible, yet highly satisfying.
However, we all know that starting a non-profit organization requires money, and money does not grow on trees. It could be a challenge to get the funds for starting businesses that will not give you profit. However, it is not impossible. We know people who have started social work and know organizations with zero funds, who have all thrived and helped million with their thoughtful acts.
If you have the vision, everything else is possible. Additionally, we are here to guide you with the steps required to start a non-profit organization with no money. We shall give you solutions that will help you achieve your mission.
The Difference between a Non-profit Organization and a For-Profit Organization
“A major difference is that a non-profit organization is like establishing an asset that you will never own. It belongs to the community and so you will never be able to sell it”, says Elizabeth Heath, founder and executive director of The Non-profit Centre of South Puget Sound in Tacoma, Washington.
Whether it flourishes or not, its assets will be used only for the community or distributed to other non-profits, in case it bursts. Under the IRS rule, no individual can get benefit from a non-profit’s activities. However, if the individual receives a salary, then that is all he will gain from the organization. However, as an owner, you will be able to make a profit out of it, which will help you sustain in rainy days and help you develop the organization.
A well-thought-out business plan is key to the success of any non-profit organization. So, you should also start with a solid one, and make that your guideline or standard to achieve your goals.
Step 1: Research Before You Start
Nearly half of the non-profit ventures fail to progress because they don’t invest in research and planning. So, your first step should be doing the groundwork and go on the right path.
- You need to identify your mission, as in recognizing the issue you see in your community that needs to be addressed. You need to put them into words and clearly communicate them to others, in form of figures, statistics, and measures. Gathering fund and receiving support will be a whole lot easier if you have strong research backing you up. For instance, if you think a school of down syndrome and autistic students need to be built, you’ll need to have a good estimate of how many children with down syndrome and autism live in the region that does not have a school to go.
- You then need to find out if there are any other non-profit organizations that are addressing the same issue as you are. You can get the information from The National Council of Non-profits of your country.
- You need tremendous support for your organization, and gaining extensive support is one of the crucial factors that determine the success of a non-profit. You have to find your target demographic. In order to find your target demographic, you need to practice Segmentation and Targeting. This will help you to meet needs better, invest your funds practically and raise funds more effectively. You can segment your customers based on geography, socio-demography, psychograph, and customer behavior.
Step 2: Create Your Business Plan
As we said earlier, you must establish a solid and full-proof business plan in order to grow and sustain as a non-profit organization. You should not skip this step and directly incorporate your business. Most people have the misconception that a business plan is only for ‘for profit’ businesses. It is not true. Just how you plan a lot before buying a smartphone or television set, you will need to plan for this business as well. In fact, soon you will realize donors, potential investors, sponsors,and even board members will want to read your business plan to calculate concreteness of your mission and strategies.
You can get help from a mentor, another established non-profit group, or from a knowledgeable lawyer. However, we have listed here the headings/areas you need to cover in your business plan:
- Executive Summary: An overview of your business plan that will outline the goals and mission, and purpose of the business in brief. It will act as your elevator pitch.
- Services: Here, you should include in detail what the community is lacking and what services you will be providing to address the need or lack. You can also offer additional merchandises to raise awareness and help raise money. For instance, Being Human, an Indian NGO offers tee shirts and formal wears to raise money for their charity.
- Competition and Market Analysis: Under this heading, you will have to present the figures and facts about the market condition, such as your competitors, your stakeholders, and why will your organization succeed, by providing a SWOT analysis report.
- Marketing Strategy: You will also have to present the marketing and advertising plan. It is the most important element that determines the success or failure of the company. In this digitally advanced world, a strong marketing plan is necessary to stay in the race and reach more target audience across the world. In your marketing strategy, you must consider the following: Who will your non-profit organization serve? How will you find these people? How will you find people who will support you? What should be your key differentiator?
- Operational Strategy: You will have to mention where your office would be located, what you will need to give the office a structure, how will you offer your services, how many staffs and volunteers you will require to run the organization and what will your day-to-day operations be.
- Financial Plan: This is very important because most investors and donors directly turn to this section to see how well you have planned your finances for growth, profit, and contingencies. A strong financial plan will help you apply for grants and loans. You can take the help of an accountant or financial advisor to project cash flow analysis and plan a budget. You will also have to present strategies for generating finance for your organization.
- Organizational Structure: You would need to list your staffs, their roles, and how they are organized. You will also have to mention the expertise you would require for each staff role.
On the internet, you will find several business plan templates for non-profit organizations that you can use for creating yours.
Step 3: Incorporate Your Business Legally
Just like any business, you need to officially incorporate your non-profit business to run it in accordance with the law. You must receive a 501(c)(3) tax-exempt status to accept donations and function your organization as a legally formed non-profit institute. You have to file non-profit articles of incorporation and submit it at your state’s corporate office. However, do some quick research on your state’s non-profit laws so that you do not miss out any document required to apply and file the article. Few things that are mandatory for filing the article for incorporation are organization name, office address, and name and address of the trustees or board members.
The requirement may vary from state to state. So, do your research and get the help of an attorney if things look confusing. However, the process of incorporating a non-profit organization is easier than it seems.
Step 4: Build Your Team and Define Bylaws
Board Members and Volunteers:
You need a strong leadership team who will be ready to support you throughout the creation of your non-profit organization. You may already be a part of a group that has the same vision and mission. If you do not have partners, you need to find people who share your passion and interest,who are committed, and who are looking for people to start a group. To begin with, you will need several board members, an executive director,and a volunteer. Make sure that your board consists of members from different walks of life so that they provide valuable guidance in respective areas of business.
It is also important to accept help humbly from wherever possible. Your organization should always be open to help even if it is meager. Once your business has gained a good footing, you can move ahead to hire more dedicated staffs and create a stronger leadership structure.
Most often non-profit organizations grow out of individuals brought together by a common goal or mission. If you are already volunteering for a cause or social project, you will find your board members amongst other volunteers from the group.
Bylaws are formed to give your organization’s operations a direction. It is important to document your bylaws so that it affects the internal culture and functions positively.
Bylaws are formed to govern the management and operations, and they are important for tax exemption status. Your leadership team and you should sit together and form the bylaws. The bylaws should address several topics, including:
- Leadership roles and staff roles
- Mission statement
- Membership programs
- Donation protocols
- Policies for resolving conflicts, settling interesting, reimbursements etc.
- Policies and procedures for amending bylaws
- Financial protocols etc.
Bylaws are a required part of the federal 501(c)(3) status application, therefore the earlier you draft and vote for the bylaws the better it is for a strong precedent.
Step 5: Ways to Fund Your Non-profit Organization
While it is no secret that businesses earn profits by selling their products and services, non-profit organizations differ in the ways of earning revenues. Their main sources of income are from sponsors, donors, big corporates, and individuals. You will have to mix strategies and use different ways to secure revenues. Most successful non-profit organizations use all or few options from the three approaches listed below:
Revenue from Selling Goods and Services to Private Sectors
These include membership fees, event tickets, professional services, and selling merchandises, such as t-shirts, mugs, embroidery work and so on. However, membership dues and event tickets are deemed the biggest contributors. Membership dues are monthly and yearly subscriptions that people pay to become your organization’s member. Most individual subscribe to availing tax-exemption.
If you are a tennis club, a foundation, or a dance charity, you can rely on events to support your finances. Through events, you can raise funds in the form of entry ticket fee, food stalls, and fun games.
You may have to complete Charitable Solicitation Registration to accept donations for private individuals or engage in fundraising activities. The requirement may vary from state to state. To reduce personal tax, many individuals contribute money to non-profit organizations. So, private contributions can be collected from/by:
- Regular individual donors
- Fundraising activities
- Sponsorship relationship
Getting hold of sponsors can be tough, especially for start-up non-profit organizations. However, discovery calls are a fruitful way to win over sponsors in a very short time frame. In fact, with discovery calls, you can begin a sponsorship relationship right then and there.
Government grants are public subsidy authorized by the federal government to people for personal and business purposes. However, you have to fill in government grant correctly, on time and within the word count. You have to know first what grants you can apply for and then apply in advance. Visit your country’s government website to find out relevant information on government grants.
We have covered everything that you must know about starting a non-profit organization with no money at hand. One of the main benefits of incorporating a non-profit organization is getting tax-exempt status. And, there are more than 25 types of non-profit organizations that can file for tax-exemption under 501(c) of Internal Revenue Code. You must learn about this to make sure you fall under one of the types.
For more information about non-profit organizations, comment your questions below and we shall get back to you soon.