It’s a good thing that social activists start nonprofits with a passion, a purpose, and—hopefully—enough bankroll to finance their budding organization. Starting a nonprofit is hard work and there is a cost involved. Few can cut it, though we’re confident you can. Begin with an inspiring task, like writing your nonprofit mission statement or examining what your vision for the cause is. Knowing why you’re going through the difficult planning and budgeting process may propel you through dreary days. But after crafting your mission statement, it’s time to settle into the difficult but immensely important financial planning process. Plan for the funds you need to start and sustain your nonprofit and you will save trouble in the long run (it might even save your nonprofit). Read on to review our list of the fees and finance-related tasks associated with starting a nonprofit.
Nonprofit executives will rightly tell you that a nonprofit is another form of a business. And like a business, you need more revenue than expenses. Create a business plan for your nonprofit so you know where the money’s coming from and where it’s going.
As you budget through your business plan, take a good look at your nonprofit’s revenue streams. Where did your current funds come from and can you count on them to continue after the nonprofit startup process? The health and longevity of these revenue streams (individuals, the government, grants) need to be on your radar for a stronger nonprofit. Don’t be fooled into thinking there will be a magic startup grant available for your cause. Most foundations require nonprofits to be existence for at least one year before considering them for funding. Consider alternative initial funding methods like earned income through product sales or services, a fiscal sponsorship with a like-minded nonprofit, or even a low-interest loan.
Take another cue from the business world and consider hiring experts to help you navigate the filing and formation process. Companies like BryteBridge specialize in helping nonprofits form and can ensure you don’t miss any pivotal steps (nothing is worse than rejection and having to start over). In fact, working with experts often saves you time and money in the long run.
Once your nonprofit is a corporation you can apply for nonprofit status. It’s best to do so within 27 months of incorporating. You’ll receive a letter approving your application, rejecting it, or requesting more information. It’s important that you look at the filing requirements and expenses for your state as they will vary. BryteBridge has an easy-to-use guide for researching what is required where you’re launching your nonprofit. Keep in mind that many filing expenses such as charitable solicitation licenses and tax filings are annual in nature and should become part of your operating budget. Keep in mind that if you’re not comfortable preparing your own filings, you may need to hire an attorney or CPA. This will add some professional fees to your startup costs but might save you time and trouble in the long run.
As many nonprofit startups have learned the hard way, you can exist without ever being found. Don’t overlook the importance of launching with a strong website, branded email, and a logo. Using free or low-cost platforms like Squarespace and Gmail will help you get your cause created without draining your startup funds. Make sure you’re easily found online and in-person if that is how you deliver your program. If your nonprofit requires a physical space to carry out its mission, consider asking a partner organization to borrow some space temporarily. Small business and nonprofit incubators are a great way to build your network and your cause while saving on the rent of a private space.
You want your nonprofit startup to look like it’s going to succeed. Show up strong with a logo and brand guidelines that will help build your organization’s reputation and recognition. You’ll need to work hard to get the word out initially. Invest in well-crafted emails, newsletters, and direct mail pieces. These “front door” pieces have a great return on investment. Consider using a freelance service like Fiverr or a volunteer service like Catchafire to help get the work done while keeping these costs low.
Delivering on your mission may be the hardest cost to estimate when you start your nonprofit. You might want to go from zero to 60mph when it comes to delivering on your purpose, but you’ll likely benefit from launching in stages. Map out your program’s impact and examine if you can deliver on it incrementally. This slow and steady approach may save your sanity as well as help you to determine your actual program costs more accurately.
Talk to your peers who deliver the same or similar program to learn from their experience. If you go outside your community or direct impact area the lines of communication will likely open up. Keep in mind, these peers were once trying to determine the cost to start a nonprofit, too!
The financial considerations involved in starting a nonprofit require a lot of legwork and more than a little paperwork, but you will be rewarded with financial security.
Here are a few more resources to help you determine your cost to start a nonprofit:
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