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Before You Start A Nonprofit

So, you’ve identified a need in the community and are looking for a way to serve? Great news! Our community needs visionaries like you now more than ever.

Before you fill out that nonprofit paperwork though, be sure to conduct an assessment of your target community’s needs as well as the resources already available to help. Often, the best way to serve is to collaborate with an established organization that is already working in your focus area, as it provides an opportunity to improve local services while limiting competition for funding and other resources. You should also know how your idea and future work fits with other service providers, because no nonprofit works best in isolation.

Check out this great blog post from BoardSource on why starting a nonprofit is not always the answer.

“Do you want to make a difference? Great. Please do. But don’t start a nonprofit.

Are you concerned about what is currently happening to vulnerable populations, the environment, and media freedom? I am, too.”

Click here to read more.

Here are a few simple steps anyone looking to start a nonprofit can begin with:

Step 1: Conduct a market survey

Vital to any entrepreneurial effort (social or otherwise), a good market survey allows you to determine potential start up and engagement risks.

Considerations include:

  • Whether you will be providing a service that is unique to the community (or a segment of it).
  • If not, who else does what you plan to do? How many organizations are doing it? Where are they doing it? And is there room for collaboration/partnership?
  • If your service is not unique but you still plan to proceed, what is different about the way you will be providing services that will allow you to attract new clients? What are your anticipated outputs and outcomes and how will you track and demonstrate impact?
  • What skill sets/program elements are you planning to incorporate that other current service providers do not have?

Step 2: Conduct a funding analysis

The fund development process has become increasingly competitive, strategic and focused and those looking for institutional support need to understand what donors are interested in and how nonprofits can best partner with funders to help them reach their goals. Solid nonprofits understand that being financially healthy means being diverse. So, a strong nonprofit will have a mix of planned, corporate and individual gifts, private and government grants, earned income and special event income to ensure its livelihood.

Questions to ask that pertain to financial health include:

  • What is my business plan and model for this work?
  • What’s my fundraising and/or financing strategy?
  • How am I going to cover the cost of salary and expenses during start-up and beyond?
  • Can I reasonably expect to receive a grant award to support my work in the future?

Step 3: Identify a diverse and influential group to serve as your board of directors

A nonprofit’s success often begins and ends with a board’s ability to understand its roles and responsibilities and carry them out well. It is important to remember that among other things, each and every member of your board will need to serve as your primary fundraising and public relations agent.

Finally, it is important for you to understand that a nonprofit 501(c)(3) designation is a tax status and you still need to have a certain amount of business knowledge/skills to effectively manage the organization’s activities.

Here are a few things to consider:

  • What are my staffing and volunteer needs? What policies do I need to put in place to manage what this nonprofit does?
  • How will we manage our finances? What financial structures and practices should be established and when? Who will handle tax filings and salary and benefit payments?
  • What internal controls processes and procedures do we need to put in place to ensure we operate with financial integrity and legally?
  • What are my capital, office and administrative needs and how will those resources be acquired?

Effective Nonprofit Management

Nonprofit effectiveness is a goal we all strive for, but what exactly does it look like?

At the end of the day an effective nonprofit is one that:

  • Has a clear sense of its identity and a compelling mission that is guided by organization values and planning efforts that are rooted in community needs that are clearly communicated to stakeholders;
  • Is stewarded by an engaged, thoughtful, ethical and competent board with best practice governance policies guiding their efforts;
  • Delivers programs and services of the highest quality which can demonstrate progress towards reducing the needs in the community served as evidenced through data and evaluation;
  • Is financially sound, with a diversified, stable funding base that is able to weather the ever changing economic and funding landscape;
  • Is respected by key stakeholders – clients, funders, donors, members and the field – and influences the sector and community of which it is a part;
  • Is managed and operated according to operational and organizational best practices;
  • Has knowledgeable and skilled staff that regularly tracks the best and promising practices of its field/service area, adapts and implements those practices as appropriate, and strives to be an organization of excellence; and
  • Can respond effectively to the changing landscape of community needs, economic ups and downs and other unforeseen circumstances.

EFFECTIVE NONPROFIT MANAGEMENT

Advocacy

Nonprofit advocacy extends beyond the bounds of simple marketing and branding, and is more strategically focused on relaying to the general public; local, state and federal governments; current and potential donors, collaborators and a whole host of others; what it is you do, who you serve and why the community you serve is better for it.

Today advocacy is becoming increasingly important as a tool for not only ensuring that financial and other resources are available and continue to flow your way, but by placing an emphasis on policy and systems change, you can also enhance your ability to make a long term impact on the issues that matter to you and your constituency. 

Board Governance

Having the right leadership is crucial. Active engagement, creative problem solving and a commitment to the organization and its cause are necessary ingredients for building an effective team. Board service is serious business. Individually, the members of a board are recognized by the local, state and federal governments as the individuals responsible for the legal, financial, ethical oversight and management of your organization. For this reason, it is important that board members understand what is expected of them.

Being smart, skilled, generous and conscientious makes an individual a great candidate for nonprofit board service, but those qualities do not guarantee that the individual is automatically knowledgeable of the laws, professional practice and responsibilities related to board service. The skills and experience necessary to be a board member are specific. Although they may be learned in a variety of ways, each person serving on a nonprofit board should receive a basic education in general boardsmanship that goes beyond their professional training and the mission of the specific nonprofit on whose board he or she serves.

Specifically, each board should be comprised of members who are collectively able to:

  • Adapt and respond to changing community needs;
  • Establish plans and goals for meeting the community’s needs within the framework of the organization’s mission;
  • Secure the resources (financial, human and community) needed to fulfill the organization’s mission and initiatives; and
  • Set and manage appropriate budgets (both income and expense) in order to sustain the organization.
  • To develop and maintain effective leadership, we encourage each nonprofit board to conduct the following basic activities:
  • Ensure that each board member receives a minimum of 4 hours of proper boardsmanship training within 120 days of joining a board.
  • A board should be aware of whether or not each of its members has ever been trained in nonprofit boardsmanship, and if so, when and how.
  • A board should also have a plan for how it will ensure that this training takes place. Boardsmanship training should not be the same as an orientation about an individual nonprofit.
  • Conduct boardsmanship training for the entire board on a regular basis (every 3 years at minimum) to ensure that every member is fully aware of all the board responsibilities and how those responsibilities relate to a particular nonprofit’s work.
  • Ensure that all board members understand the board’s role in fundraising, financial management, future board nomination and human resources (including board and executive director relations).

It is important to note that it is not the executive director’s job to ensuring that board members are trained. As the subordinate of the board, there is no way for the executive director to enforce requirements for board training. 

Financial Management

Being part of a nonprofit provides many rewards, both individually and communally. Too often, however, a nonprofit’s life span is cut short because of limited finances, a failure to plan, or a lack of oversight and internal controls. Often, this leads to questions of “Why did this happen?” or “How did we get here?”

A nonprofit’s financial health, as well as its adherence to legal, moral and ethical guidelines, depends on the precise execution of key components of the annual operating cycle. Having the right financial structure will require you to have policies and structures in place such as…

• a chart of accounts,
• a budget development and bill payment process,
• payroll system,
• internal controls,
• quarterly processes, and
• risk management measures.

While the Financial Officer and Executive Director are responsible for providing day to day management, fiscal oversight and accountability (legally and financially) remains with a nonprofit’s Board of Directors. If there are problems, the IRS will hold the Board to account (financially and otherwise) for the nonprofit’s activities. It is vital that Board members remain engaged in the process, review financial reports regularly and ensure the nonprofit has instituted and uses proper internal controls.

Fund Development

Implicit in capacity building is the value of investing in an organization so as to strengthen its ability to sustain itself in the years to come.

With low barriers to entry, new nonprofits enter the market everyday with the vision of meeting a need or addressing a perceived gap in area services. But with an increased number of service providers on the scene, comes an increase in the competition for funding. The result is that many nonprofits are left scrambling to identify and secure enough dollars to keep their programs and services adequately funded.

For many the “obvious” choice is to seek a grant. But grantsmanship is not enough as there are simply not enough grant dollars available to meet all the needs of our local nonprofit sector. Given today’s economy, every organization needs to be focusing its efforts on diversifying its income.

Nonprofits should be seeking funding from several of these sources:
• Institutions: Foundations and corporations
• Government funds
• Special events and earned income opportunities
• Individual donor gifts
• Operating reserves
• Planned gifts, and
• Endowments

HR Issues

Human capital is the foundation of every nonprofit, the driving force behind every great program or service your nonprofit seeks to offer. The recruitment, selection and retention process for staff and volunteers requires a significant amount of due diligence.

Job descriptions and regular evaluations are a must have for every position (from cleaning crew to board members), as are policies about whistle blowing, conflicts of interest, confidentiality and termination.

The board of directors hires, sets the goals for and evaluates the executive director or CEO of the organization. All other staff members are the responsibility of ED/CEO. Board–staff relations are therefore an interesting dynamic that requires significant thought.

Marketing

An important function of any nonprofit organization is communication.
How you communicate with your donors, program participants and the larger community influences the effectiveness of your organization. An equally important aspect of your communication is marketing. Reaching new audiences and encouraging donors to give to your organization or cause requires a marketing strategy that is usually quite different from what a for-profit business might undertake.

Establishing a marketing plan is a complex process, which must be done methodically to support the mission of your organization and there are several elements in the marketing process: research, branding, segmenting and communications planning, among others. It is important to look at marketing as a never-ending cycle of gauging your audience’s perception and adapting messages to propel your organization forward in an ever-changing nonprofit environment. Below is an example of a process for forming a marketing strategy.

Forming a Marketing Strategy:

Phase I: Analysis/Research
• Internal (Staff, Board, etc.)
• External (Public, Competition, Environments)

Phase II: Strategy Development
• Define marketing mission, objectives and goals
• Create a calendar of marketable activities
• Set a core marketing strategy

Phase III: Marketing Plan Development
• Standardize communication policies
• Set specific tactics
• Determine benchmarks and measurements

Phase IV: Strategy Implementation
• Implement marketing plan and assess performance

Program Evaluation

Evaluation – It’s a term that can evoke an array of emotions, most of which are not necessarily positive. But if we make it about improvement and not just proof, then the concept is not so intimidating. After all, even the simplest nonprofit should want to measure what it is doing and assess how it can better serve its constituents. Before beginning any new project (or reviewing the ones you have now), it can be helpful to clearly articulate your “theory of change.”

A Theory of Change reflects the end vision you hope to achieve, the methodology you plan to use, and the changes in behavior and/or thinking that you expect your program or service to bring about. Theories of Change are great tools for helping you pinpoint the underlying assumptions behind your initiatives so you can determine if the results you are expecting are actually viable given the resources your are investing (your inputs).

Similarly, the use of logic models can provide significant assistance in the program planning, development and evaluation phases. The elements of a logic model – inputs, activities, outputs and outcomes – helps nonprofit organizations (and valued stakeholders) quickly assess what resources are being invested in a project or service, what is being produced and how those production units are impacting target audiences immediately and over the long haul.

Technology

The age of cause-related technology is not only upon us, but its use and importance seems to be growing exponentially. With everything from social media tools to smart phone applications and workplace integration, there is a lot of information to keep up with.

It is vital that nonprofits at least stay up to date (and to some degree, engaged) with the demands and benefits of a technologically connected culture. We realize that for some, the thought of hitching their wagon to the latest trends seem both daunting and demanding. But the upside of it all is that nonprofits are reporting that information technology tools are proving useful.

Will you ream in buckets of funds with the help of just one click? Probably not, but with the right tool choices and a few tweaks in operations, your office may see an increased efficiency, improved donor relations practices, or possibly make it easier for the online learning and giving community to support your work.

Nonprofits wishing to maximize their opportunities must both understand that technology is changing the landscape of all communication in society and figure out ways to leverage it for the benefit of their mission.

Local Capacity Building Tools

Capacity Building Is…

Implicit in capacity building, is the value of investing in an organization so as to strengthen its ability to sustain itself in the years to come. As such, local capacity building tools are meant to:

  • Increase a nonprofit’s knowledge
  • Improve staff and board skill sets
  • Increase the effectiveness of the organization (the number of clients served, the way programs are delivered, the amount of costs incurred, etc.)

Local tools are available to help promote a number of activities including:

  • Excellent board governance
  • Fundraising
  • Cross sector collaborations
  • Leadership development
  • Outcomes assessment
  • Staff professional development

The following is a list of local agencies or efforts that may be able to help:

Act Locally Waco
Visit the Website >

Central Texas Association of Fundraising Professionals (AFP)
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Cooper Foundation’s Nonprofit Network
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Prosper Waco
Visit the Website >

Mentor Coalition
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Social Media Breakfast
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Today’s Action Tomorrow’s Leaders & The LeadershipPLENTY® Institute-Waco
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Waco Foundation’s Capacity Building Program
Visit the Website >

Other Resources

General/Effective Nonprofit Management

Advocacy

Board Governance

Collaborations, Partnerships & Mergers

Local collaborations:

Communications & Social Media Resources

Diversity, Equity, & Inclusion

Evaluation

Financial Health & Management

Fraud Prevention

Fundraising/Resources Development

Human Resources

ITC - Information Technology & Communications

Professional Development

Starting A Nonprofit

Strategic Planning

Volunteers