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Starting a Non-Profit – How Much Does It Cost?

Do you want to know exactly how much it cost to start a non-profit organization? If YES, here is a detailed cost analysis for starting a non-profit and raising finance.

A non-profit organization can be defined as an organization that is founded with the purpose of offering services on a charity basis or at a discounted fee; an organization that does not intend to generate profits or distribute or share income/revenue to its owners or workforce. Having provided you with a:

  1. Non-Profit Industry Overview
  2. Market Research and Feasibility
  3. Non-Profit Business Plan
  4. Non-Profit Name ideas
  5. Non-Profit Licenses and Permits
  6. Cost of Starting a Non-Profit Organization
  7. Non-Profit Marketing Plan
  8. Marketing ideas & Strategies

We will consider how much it cost to start a non-profit or foundation from scratch including the operating costs.

Non-profit organizations are often termed ‘non-stock organizations’. Non-profit organizations must be titled as non-profit when it is being founded and may only pursue purposes permitted by statutes for non-profit organizations as stated in the country where they intend operating from.

It is worthy to note that non-profit organizations can decide to operate as charity or service organizations. This means that they may choose to be organized as a non-profit corporation, a trust, a cooperative, or they may choose to exist informally in some cases.

For instance, an organization that is termed a supporting organization usually operates like a foundation; but such a structure might be somewhat complicated because it holds more favorable tax status and are by law restricted about the public charities they can support.

  • Industry Overview

It is important to state that while most non – profit organizations offer services that are valuable to the community where they operate, it is often difficult to measure the actual impact of their services. This is so because changes in a community’s behavior or even in an individual’s behavior may take a while before it becomes obvious. Be that as it may, non-profit organizations still need to look for ways to measure the impact of their services because that is perhaps a major criterion that is used by donors before funds are released.

Most non-profit organizations are organized as corporations or associations and are formed under the corporation’s laws of a particular state. Each state in the U.S. has laid down rules for forming non-profit corporations; some states allow other forms, such as unincorporated associations and trusts et al which may be allowed to operate as non-profit businesses on some agreed terms and conditions.

It is important to incorporate a non – profit organization so that it can exist as a separate legal entity/organization. With that, it will be easier to own its own property and its own bank account and also to ensure that the foundation can continue on its own with or without the founder. Non–profit organizations are incorporated by simply filling articles of incorporation with the nearest state department office.

By law, non–profit organizations can apply for tax exemption from the country where they operate from. The fact that a non-profit organization applies for tax exemption does not stop the foundation from engaging in business activities. Non–profit organizations are allowed by law to generate income from engaging in business ventures, from donations and grants, and they are also allowed to hold passive investment portfolios.

Over and above, when it comes to running a non-profit organization, enough resources must be generated not just for setting up the foundation and renting an office space, but money would also be needed for taking care of the overhead for a period of at least 6 months. This is especially important if you want to maintain your workforce. In addition, money will also be needed to execute projects that are in line with your vision of setting up the foundation.

How Much Does It Cost to Start a Non-Profit Organization / Foundation?

Starting a foundation especially starting a service based foundation is not supposed to be as expensive as starting a business venture. Basically what is needed to start a foundation is an office facility, office furniture and equipment, and the money needed for incorporating the business, opening a website, producing publicity materials, and of course the money needed for overhead and running the office at least for a period of time before donations or grants starts coming in.

This industry has a low level of capital intensity which is similar to other service industries. The cost analysis as it relates to starting a non-profit organization in the United States of America, Canada, United Kingdom and Australia can be said to be almost the same except for few variations.

For example, the cost of setting up a full functional non-profit office with the required furniture and gadgets (telephone, printing machines, computers, tables and chairs, book shelves, cabins, standard library, photocopier, fax machine, amongst others) are same especially when bench–marked against the US Dollars.

For instance, if you choose to have an online presence for your non-profit organization, you can get that done with same price no matter the part of the world you live in. This is so because with the internet (world wide web), the world has become a global village and if you live in the United Kingdom, you can contract your web designing and hosting contract to a web designer and hosting company in the United States of America. It means that you will pay same price with someone in the United States of America.

Other factors that may be slightly different in terms of costing when it comes to starting a non-profit organization in any of the countries listed above are cost of labor, cost of transportation and logistics, local tax, business incorporation fee, rent/leasing amongst other factors.

Over and above, when it comes to starting a medium scale non-profit organization, you should be prepared to either rent or lease a standard and centralized facility in a business district; this is going to be one of the areas where you are expected to spend the bulk of your start–up capital.

In essence, the amount required to start a foundation should be scaled down to the barest minimum except in cases where they can’t do otherwise. It is important to note that the amount needed to start a foundation is different from the amount needed to execute projects.

For instance; if a foundation decided to build and donate a hospital to a community, they don’t have to raise the money needed to execute the project before the foundation is registered, all they need to do is to incorporate the foundation, get an office facility and then set up a corporate structure et al. Thereafter, the fund raising for any project can then follow suit.

How Much Does It Cost to Start a Non-Profit Organization / Foundation in the United States?

These are the key expenses you are expected to make when starting a medium scale standard non-profit organization in the United States of America;

  • The total fee for registering the non-profit organization in the United States of America – $750.
  • The amount required for obtaining licenses and permits as well as accounting services (software, P.O.S machines and other software) – $3,300.
  • Marketing promotion expenses for the grand opening of the non-profit organization in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
  • The cost for hiring business consultant (including writing business plan) – $2,500.
  • The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
  • The cost for leasing a standard office facility in good location/business district – $150,000
  • The cost for remodeling the facility – $5,000.
  • Other start-up expenses including stationery ($500), phone and utility deposits ($2,500).
  • The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000.
  • The cost for start-up inventory (printing papers, printing ink/cartridges, pen and stencil et al) – $2,500.
  • The cost for cash register, security, ventilation, signage – $3,750.
  • The cost for the purchase of furniture and gadgets (telephone, printing machines, computers, tables and chairs, book shelves, cabins, standard library, photocopier, fax machine, amongst others): $4,000.
  • The cost for building and hosting a website: $600.
  • The cost for opening party: $5,000.
  • Miscellaneous: $5,000.

You will need an estimate of five hundred thousand dollars ($500,000) to successfully set up a medium scale non-profit organization in the United States of America. Please note that this amount includes the salaries of all the full– time staff for the first 3 months of operation.

Starting a small scale but standard non-profit organization that can only carry out basic social work within a community in the United States of America will cost about twenty thousand dollars to fifty thousand dollars ($20,000 to $50,000). Please note that just like most service based businesses, it is cost effective to start a small scale non-profit organization and you can afford to operate your office from your home if it is legal to do so in your state or country.

When it comes to starting a standard and large scale non-profit organization with several offices in key cities in the United States of America and perhaps other part of the world, a non-profit organization with over 20 full–time employees excluding volunteers and handling various projects, then you should look towards budgeting well over three million, five hundred thousand dollars ($3.5 million).

How Much Does It Cost to Start a Non-Profit Organization / Foundation in the UK?

These are the key expenses you are expected to make when starting a medium scale nonprofit organization in the United Kingdom;

  • In the United Kingdom, Online applications are usually registered within 24 hours and cost £12 (paid by debit or credit card or PayPal). Postal applications take 8 to 10 days and cost £40 (paid by check made out to ‘Companies House’). There’s a same day service costing £100.
  • Legal expenses for obtaining licenses and permits as well as accounting services (software, P.O.S machines and other software) – £700.
  • Marketing promotion expenses for the grand opening of the law firm in the amount of £3,500 and as well as flyer printing (2,000 flyers at £0.04 per copy) for the total amount of £3,580.
  • The cost for hiring business consultant (including writing business plan) – £2,500.
  • The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – £2,400.
  • The cost for leasing a standard office facility in good location/business district – £105,000.
  • The cost for remodeling the office – £3,000.
  • Other start-up expenses including stationery (£300), phone and utility deposits (£1,500).
  • Operational cost for the first 3 months (salaries of employees, payments of bills et al) – £60,000.
  • The cost for start-up inventory (printing papers, printing ink/cartridges, pen and stencil et al) – £2,000.
  • The cost for cash register, security, ventilation, signage – £2,500.
  • The cost of purchase and installation of CCTVs: £4,500.
  • The cost for the purchase of furniture and gadgets (Telephone, printing machines, computers, tables and chairs, book shelves, cabins, standard library, photocopier, fax machine, amongst others) – £2,500.
  • The cost for building and hosting a website: £600.
  • The cost for opening party – £4,000.
  • Miscellaneous: £5,000

You will need an estimate of four hundred and fifty thousand Pounds Sterling (£450,000) to successfully set up a medium scale non-profit organization in the United Kingdom. Please note that this amount includes the salaries of all the full–time staff for the first 3 months of operation.

Starting a small scale but standard non-profit organization that can only carry out basic social work within a community in the United Kingdom will cost about eighteen thousand five hundred Pounds Sterling to forty-eight thousand Pounds Sterling (£18,500 to £48,000). Please note that just like most services based business, it is cost effective to start a small – scale nonprofit organization and you can afford to operate your office from your home if it is legal to do so in your state or country.

When it comes to starting a standard and large-scale non-profit organization with several offices in key cities in the United Kingdom and perhaps other parts of the world, a nonprofit organization with over 20 full–time employees excluding volunteers and handling various projects, then you should look towards budgeting well over three million, two hundred thousand Pounds Sterling (£3.2 million).

How Much Does It Cost to Start a Non-Profit Organization / Foundation in Canada?

These are the key expenses you are expected to make when starting a medium scale non-profit organization in Canada;

  • For federal incorporation of business in Canada, the cost to incorporate is $200 if filed online through Corporations Canada’s online Filing Centre ($250 if filed through other means).
  • The amount required for obtaining licenses and permits as well as accounting services (software, P.O.S machines and other software) – $3,300.
  • Marketing promotion expenses for the grand opening of the non-profit organization in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
  • The cost for hiring business consultant (including writing business plan) – $2,500.
  • The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
  • The cost for leasing a standard office facility in good location/business district – $150,000.
  • The cost for remodeling the facility – $5,000.
  • Other start-up expenses including stationery ($500), phone and utility deposits ($2,500).
  • The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000.
  • The cost for start-up inventory (printing papers, printing ink/cartridges, pen and stencil et al) – $2,500.
  • The cost for cash register, security, ventilation, signage – $3,750.
  • The cost for the purchase of furniture and gadgets (telephone, printing machines, computers, tables and chairs, book shelves, cabins, standard library, photocopier, and fax machine, amongst others): $4,000.
  • The cost for building and hosting a website: $600.
  • The cost for opening party: $5,000.
  • Miscellaneous: $5,000

You will need an estimate of five hundred thousand dollars ($500,000CAD) to successfully set up a medium scale non-profit organization in Canada. Please note that this amount includes the salaries of all the full–time staff for the first 3 months of operation.

Starting a small scale but standard non-profit organization that can only carry out basic social work within a community in Canada will cost about twenty thousand dollars to fifty thousand dollars ($20,000CAD to $50,000CAD). Please note that just like most service based businesses, it is cost effective to start a small scale non-profit organization and you can afford to operate your office from your home if it is legal to do so in your state or country.

When it comes to starting a standard and large scale non-profit organization with several offices in key cities in Canada and perhaps other parts of the world, a non-profit organization with over 20 full–time employees excluding volunteers and handling various projects, then you should look towards budgeting well over three million, five hundred thousand dollars ($3.5 millionCAD).

How Much Does It Cost to Start a Non-Profit Organization / Foundation in Australia?

These are the key expenses you are expected to make when starting a medium scale nonprofit organization in Australia;

  • In Australia, the fees to register your business name with ASIC include: $34 for 1 year. $80 for 3 years.
  • The amount required for obtaining licenses and permits as well as accounting services (software, P.O.S machines and other software) – $3,300.
  • Marketing promotion expenses for the grand opening of the non-profit organization in the amount of $3,500 and as well as flyer printing (2,000 flyers at $0.04 per copy) for the total amount of $3,580.
  • The cost for hiring business consultant (including writing business plan) – $2,500.
  • The cost for insurance (general liability, workers’ compensation and property casualty) coverage at a total premium – $2,400.
  • The cost for leasing a standard office facility in good location/business district – $150,000.
  • The cost for remodeling the facility – $5,000.
  • Other start-up expenses including stationery ($500), phone and utility deposits ($2,500).
  • The operational cost for the first 3 months (salaries of employees, payments of bills et al) – $60,000.
  • The cost for start-up inventory (printing papers, printing ink/cartridges, pen and stencil et al) – $2,500.
  • The cost for cash register, security, ventilation, signage – $3,750.
  • The cost for the purchase of furniture and gadgets (telephone, printing machines, computers, tables and chairs, book shelves, cabins, standard library, photocopier, fax machine, amongst others): $4,000.
  • The cost for building and hosting a website: $600.
  • The cost for opening party: $5,000.
  • Miscellaneous: $5,000.

You will need an estimate of five hundred thousand dollars (AUD$500,000) to successfully set up a medium scale non-profit organization in Australia. Please note that this amount includes the salaries of all the full–time staff for the first 3 months of operation.

Starting a small scale but standard non-profit organization that can only carry out basic social work within a community in Australia will cost about twenty thousand dollars to fifty thousand dollars (AUD$20,000 to AUD$50,000). Please note that just like most service based businesses, it is cost effective to start a small scale non-profit organization and you can afford to operate your office from your home if it is legal to do so in your state or country.

When it comes to starting a standard and large scale non-profit organization with several offices in key cities in Australia and perhaps other parts of the world, a nonprofit organization with over 20 full–time employees excluding volunteers and handling various projects, then you should look towards budgeting well over three million, five hundred thousand dollars (AUD$3.5 million).

Estimating Start–Up Cost for Non-profit Organization Business Based on the following factors;

Specific Location

When it comes to choosing a location for a non-profit organization, factors such as service offerings; that is the cause the non-profit organisation is established to handle and also the availability of donor agencies and individuals and of course availability of volunteers, is put into consideration.

The bottom line is that a non-profit organization may have its headquarter in New York City – New York, US and their major projects in Bombay, India or Lagos, Nigeria. This goes to show that location is a factor that must be considered when starting a non-profit organization.

  • Staff/Manpower

When it comes to starting a non-profit organization on a large scale, you would need the services of the following professionals;

  • Founder and President
  • Executive Director
  • Human Resources and Administrative Manager
  • Accountant
  • Fund Raising Officer
  • Programs/Project Manager
  • Front Desk Officer/Customer Service Executive.
  • Volunteers

Can a Non-profit Organization be Bootstrapped on a Lean Budget Right from Home?

No doubt, the nature of non-profit organizations give room for them to be started from the home on a lean budget especially if you can be allowed to do so in your country of residence.

As a matter of fact, you can start a non-profit organization with as low as thirty thousand dollars or even less depending on how small you want the non-profit organization to be. All you need to do is register the non-profit organization, purchase the basic needed office furniture and equipment, print your business card, promote your cause and source for funds to finance your charity projects.

The challenge here is that you must be ready to take on more than half of the available roles in the organization. You should be able to serve as the Executive Director, Human Resources and Administrative Manager, Accountant, Fund Raising Officer, Programs/Project Manager or Front Desk Officer/Customer Service Executive.

How Much Does It Cost to Buy a Non-Profit Franchise?

From available research conducted, there are no known fully operational non-profit organizations in the United States of America, United Kingdom, Canada and Australia that is into franchising; most players in this line of business are adopting strategies that will help them push their services and charity projects beyond the city, state or country where their organization is domiciled to other parts of the world as against selling franchise.

The truth is that non-profit organizations and franchised businesses do not really tally. But sometimes some non-profit organizations find a way around it.  When the franchise benefits the mission of the non-profit organisation, the organization might consider forming a separate entity that will become a franchisee.  This type of arrangement is every so often referred to as “social franchising”.

Financing your Non – Profit Organization / Foundation

The ideal model of a non – profit organization is to reduce overhead cost and increase operational cost – this is the budget needed to execute projects which is why most non – profit organization maintains small staff strength. Non – profit organizations make use of revenues generated to achieve their present and future goals, against labeling it them as profits.

Their goal is not necessarily to be wealthy, but to be able to provide support for a community or certain groups of people in the society through various fundraising methods.

  • First and foremost, Non – profit organizations raise their start – up capital from contributions of founding members and board of trustees

Which is why it is important to woo people who can donate to your cause to be amongst your board of trustees. There are several basic sources of funding in the non – profit industry. The first among the pack is grant.

  • Grants are be given to non – profit organizations by government agencies, donor agencies, and foundations or corporations

In most cases, grants are given to non – profit foundation in order for them to execute specific projects, and accountability is always required from non – profits. It is important to note that grants from government, foundations or corporations are generally provided up front and require a report on program activities and expenditures at the end of the grant period.

  • Non-profit organizations also raise funds by soliciting money from individuals; usually these are generally small donation – ideally from a large number of people

Large cash gifts may come from individuals who are referred to as major donors and friends of the foundation. Besides, most non – profit organization usually hold special events to raise money. It could be the sale of ribbons, flowers or ticketed events.

Basically, there are two factors that can enhance fundraising efforts. One factor is good programs; programs that can address the basic needs in a community. Another factor is the ability of the foundation to create hypes around what they do.

A foundation that is always in the eyes of the press for the good reasons will struggle less to attract grants and donations. Although a good budget for publicity and advertisement must be in place in other to achieve the needed publicity.

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