Before you Start a new Nonprofit

Someone asks me every week about starting a new non-profit. The idea may be great, the need may be there and the person asking me may be the exact right person to do it. Even so, I always ask “Is you starting this nonprofit the only way to move forward?” Sometimes it is.

Starting a new nonprofit is time consuming and expensive. You have to retain an attorney, file paperwork, create a plan, build a board of directors and jump through a lot of hoops before you ever get to raise one tax deductible dollar or offer one iota of the services you seek to provide.

Plus, there are already lots and lots of other agencies competing for resources, board members, and attention. Most of the time, there are other options.

There are plenty of nonprofits already in the world, some doing what you want to do. Call them. Go meet with their leaders. Ask lots of questions: Ask about their history and the length it took them to become viable. Ask about the need their program’s address and their funding streams. Ask about their programs and their impact. Ask about their organizational values and about best practices.

If you feel like there is some synergy, perhaps there is an option for you to create a program under another organization’s auspices? This is going to be the most attractive (to them) if you come to the table with a funding stream or if your idea for a program doesn’t need any resources. If that is the case, request you be allowed to partner with one of their staff or volunteers to form a committee to explore and implement your idea. If you have a funding stream, either because your idea is for social enterprise or because you have already secured a donor, perhaps they will consider putting you on staff or becoming a fiscal agent to your program.

Fiscal agents are mostly used by new programs that do not yet have a 501 (c) 3 partnering with an established agency. That means the established agency will allow you to use their 501 (c) 3 to accept tax deductible donations. Fiscal Agent agreements vary greatly. The only real consistency of which I am aware is they are all determined by whatever is included in the memorandum of understanding that establishes them. There are some agreements that allow the nonprofit to manage the money raised by the program, put the staff of the program they are assisting on the payroll and offer access to insurance. There are others that do not, but do allow the program to control the finances they generate. My understanding is the fiscal authority lies with the fiscal agent (established nonprofit), even in the second case, and the programmatic authority lies with whomever entered into the agreement with the nonprofit. As such, nonprofits are, and should be, very careful about what programs they take on as a fiscal agent, and programs looking for a fiscal agent should be equally careful. If you go this route, whether your eventual goal is to become a program of the nonprofit or a standalone agency, possibly competing for resources with the nonprofit, I encourage you to be clear about that up front.

Consider how much control you wish to retain and how much you might be willing give up and for what. It might be worth giving up some control for security, timeliness and to move forward on your idea. Then again, it may not. Only you can decide.

If you have explored the above and still want to start a new nonprofit, the last question I will offer for your consideration is this: do you aspire to employ yourself though this new entity?  I recommend you do not serve on the Board if you are being paid. Many founders initially serve as the Board Chair and acting (unpaid) CEO, and then move to the CEO position once the agency and income streams have been established. It will take some period of time for that to happen, which will require you to have income from another source. If that is your goal, I recommend you share that with everyone you recruit to serve on the Board. Be aware that the Board will have the power to hire a different CEO. Until that time and regardless of their vote, you will work (hard) for a not insignificant period of time without being paid.

There are myriad options to consider before establishing a new nonprofit. On behalf of all the established organizations out there, including the foundations that fund them, I ask you to thoroughly explore your options and plan accordingly. Raising money to support the operations of an established organization is difficult; it is much more challenging for ones that are just beginning.

 
What’s been your experience starting a new nonprofit? As always, I welcome your ideas and experience.