Are you interested in starting a non-profit organization? Do you want to learn what it takes to run an NGO successfully from home? If YES, here is a complete guide to starting a non-profit organization or a foundation for charity.
Okay, so we have provided you an in-depth sample a non-profit business plan template. We also took it further by analyzing and drafting a sample non-profit marketing plan backed up by actionable guerrilla marketing ideas for non-profit organizations. In this article, we will be considering all the requirements for starting a non-profit organization. So put on your entrepreneurial hat and let’s proceed.
Table of Content
- Non-Profit Industry Overview
- Market Research and Feasibility
- Non-Profit Business Plan
- Non-Profit Name ideas
- Non-Profit Licenses and Permits
- Cost of Starting a Non-Profit Organization
- Non-Profit Marketing Plan
- Marketing ideas & Strategies
What is a Non-Profit Organization?
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. It is an organization that does not intend to generate profits or distribute or share income / revenue to its owners or workforce.
Non-profit organizations are often termed “non-stock organizations.” Non-profit organizations must be titled as nonprofit 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 important to state that whilst 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 nonprofit organizations are organized as corporations or associations and corporations are formed under the corporation’s laws of a particular state. Each state in the U.S. has laid down rules for forming nonprofit corporations; some states allow other forms, such as unincorporated associations and trusts et al, which may be allowed to operate as nonprofit businesses on an agreed terms and conditions.
It is important to register a non – profit organization so that it can exist as a separate legal entity /organization. With that, it becomes 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 can apply 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 et al.
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 of an office space, but money would also be needed to take 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.
Starting a Non-Profit Organization / Foundation – A Complete Guide
- Industry Overview
About 62.8 million people volunteered between Sept. 2013 and Sept. 2014 in America. That’s a volunteer rate of 25.3%.The future of philanthropy is bright. U.S. charitable giving is predicted to grow by 4.8% this year, and another 4.9% in 2016. Individual and household donations make up the largest percentage of the whole, at about 70%, but foundation giving is expected to grow the most in the coming year.
- Interesting Statistics You Must Know About the Non-Profit Industry
American individuals, corporations, and foundations gave an estimated $335 billion to charity last year. Nearly 10% of donations come from mobile devices, and 16.6% of donors who support from an email are doing so on their device. The open rate for nonprofit emails is between about 15% and 17.5%, with appeals at the low end and advocacy and other emails garnering higher open numbers.
Religious organizations received the largest share, with 32% of total estimated contributions, educational institutions received the second largest percentage, with 15% of total estimated contributions and human service organizations accounted for 12% of total estimated contributions in 2014, the third largest share.
92% of nonprofit professionals use content marketing to spread their organizations’ missions, but more than half don’t have a documented strategy for their content. Nonprofits have an average of 4.4 employees responsible for technology in some way, a number that increases or decreases in correlation with the size of the organization.
- What Opportunities Does the Non-Profit Industry Hold?
The non – profit industry is a major component in the equation of our world; be it social welfare, health care, education, spiritual, as well as other ramification of life. On – profits organizations (NPOs) are establishments that make use of their excess revenues to pursue a cause that would be beneficial to the public or a particular group of people.
In a nutshell, the overall goal of non – profits organizations is not to be successful in terms of wealth creation, but to be a successful when it comes to giving value to the groups of people they direct their services at or to the cause they choose to pursue.
It is worthy to note that Non – profit organizations can decide to operate as a charity organization or service organization. This means that they may choose to be organized as a nonprofit 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.
The fact that an organization is considered to be a non-profit organization does not in any way mean that the organization does not have the intention of making profits. As a matter of fact, most non – profit organizations have revenue generating ventures established for the sole purpose of supporting the organization (their cause).
Even though, non – profit organizations are allowed by the law to run a profit making business venture, but there may be constraint to the extent at which they are able to generate excess revenue and even make use of the excess revenues being generated.
There are several not for profit organizations that have grown so big, so that the area which they cover is not just restricted to the location or country where they operate, but also to other parts of the world. For example; one of the wealthiest Non – profit organizations was founded in the United States of America – The Bill and Melinda Gates Foundation, with an endowment fund of about US$38 billion that covers countries all over the world and not just the United States of America.
Starting a Non-Profit Organization / Foundation – Market Feasibility Research
- Demographics and Psychographics
Non – profit organizations offer either tangible or intangible products to a wide range of people in the society from they operate. There are no restrictions to the group of people that can benefit from the products or service offerings of a Non – profit organization.
Despite the fact that non – profit organization can choose a cause that they want to address, does not in any way deprive them from venturing into other services that can benefit the people that lives in the community where they operate from.
Everything that a non – profit organization do is ultimately directed towards serving their clients; the people that the foundation was created to serve. Clients are basically the “consumers” or “customers” of the services offered by non – profit organizations.
- Niche Ideas for Non – Profit Organizations
A non – profit organization can operate in an industry of their choice; there are no boundaries as regards the areas of operations for a non – profit organization. Here below are some of the niches of non – profit organization;
- Religion (churches, mosques, synagogues et al)
- Education (public schools, research institute)
- Skill Acquisitions
- Health / Medicals (public clinics)
- Politics (political organizations)
- Legal Aid Services
- Volunteer Services Organizations
- Labor Unions
- Professional Associations
- Governmental Agencies
- Arts and Culture (Museums et al)
The Level of Competition in the Industry
Despite the fact that non – profit organizations are not created with the aim of making profits, there are still competitions in the industry. Non – profits organizations are positioned to generate funds from donors and donor organizations.
Also, individuals must be convinced before they can give money to any cause. Most often, there are more than two non – profit foundations that will apply for grants or request for donation from an individual or organization. In such a scenario, the foundation that has a compelling profile and achievement stands the better chance of getting the donation or grants as the case may be.
It is important to note that the competition that exist in the Non – profit industry cannot be compared to that which exist in the business world. Non – profit foundation are not always under serious pressure to generate incomes or sales except on exceptional cases where they are required to achieve a set target or complete a project.
- List of Well Known Non – Profit Organizations You Can Model
There are several non – profits foundations that were established to meet different needs in our society. Some could be public health, and some could be empowerment and several other areas of interest. These are some of the world renowned Non – profit organization;
- Save the Children Foundation
- Bill and Melinda Gates Foundation
- The Henry Ford Foundation
- World Health Organization (WHO)
- United Nations Children’s Fund (UNICEF)
- Human Right Watch (HRW)
- Rotary Foundation of Rotary International
- New York Public Library
- Planned Parenthood Federation of America
- Environmental Defense
- Bill Graham Evangelistic Association
- Save The Children
- Acumen Fellowship
- World Bank PNGO Project
- National Center for Missing and Exploited Children
- American Red Cross
- World Wild Life Fund
- Habitat for Humanity
- JKF Center for Performing Arts
- American Cancer Society
- Amnesty International
- Doctors without Borders
- International Committee of Red Cross
- Boys Scout of America
- Samaritan’s Purse
Running a Non – Profit Organization can be challenging if there are no clear cut ways to attract funds. As such; what most Non – Profit Organizations do is that they try as much as lies within their power to cut down on the cost of overhead and the operational cost as well.
Some non – profit organizations also engage in business activities that helps them to generate incomes to run the foundation. The truth is that people that run non – profit organizations still go to the same market that real time profit making organization go to, hence they must do all they can to keep attracting donation and grants if they must continue to keep the foundation running.
Over and above, non – profit foundation should ensure that they put structure in place that will guarantee them steady flow of income; it could be building a civic center where people can rent for their events or it could be creating a skill acquisition center where people can pay to acquire different skills. Why is this important, you might ask? This is especially important because of the need to always run expenses within and outside the business.
- Should You Start a Non-Profit Organization or Buy a Non-Profit Franchise?
The fact that non – profit organization are not establish to make profits makes it difficult to start one by buying over an existing franchise. Moreover, there is hardly anywhere where you can get to buy a franchise of a Non – profit foundation. This is because of the point that each charitable foundation is unique with its own vision and mission. It is for this reason that anyone who chooses to start a Nongovernmental organization must have a clear cut aim of starting.
In view of that, if you intend starting your own non – profit foundation, the only option you have to run with is to start from the very scratch. You just have to go all the way to conduct a thorough feasibility studies and an exhaustive analysis in order to start your non – profit foundation on the right footing.
The truth is that, no matter the niche you choose to adopt, there are several world class Non – Profit foundations that are already doing what you intend doing or at least are doing something similar. So, all you have to do is just to model successfully the Non – profit foundations that are doing something similar to the kind of non – profit foundation that you intend starting. It will save you cost and it save you time to a very large extent.
- Threat and Challenges
One challenge that non – profit foundations face is the ability to attract the best hands in the industry to help man key positions. It is no longer a hidden thing that non – profit organizations find it difficult to compete with corporate organizations when it comes to recruiting employees to occupy key positions.
This is simply because they may find it challenging to match – up with the wages that is usually offered by these corporate organizations. Most Non – profit organizations find it difficult to attract, pay and keep experts in their payroll which is why they result to recruiting volunteers
Lack of steady inflow of cash either through donations or grants is a major threat to the survival of non – profit organizations. There are many factors that can result to lack of cash inflow for non – profit organizations; it could be economic downturn and it could be the fact that many Non – profits competing for the available funds in the industry.
The truth is that if the economy of any nation is going through recession, it becomes difficult for non – profit organizations to receive donations and that can threaten the survival of the non – profit organizations.
Over and above, lack of finance is a major challenge for non – profit organizations. The fact that an organization decides to run as a non – profit making entity does not mean that they wouldn’t get to compete with others who are offering similar services or products.
Of course ‘for profit making organizations’, they will have the financial capacity to hire and retain some of the best hands in the industry, and also to sustain a robust media hype (publicity and advertisement).
Writing a Business Plan for a Non-Profit Organization
Business plan is like a compass that helps you know how to chart the course of your organization. This is why it is very vital that you draw up one. The fact that a non – profit organization is founded on the basis of making profits does not in any way stop it from coming out with a business plan on how you intend running the foundation. As a matter of fact, it is necessary for all non – profit organizations to draft a comprehensive business plan before launching out.
The truth is that it is quite challenging generating funds as a non – profit foundation; especially if you don’t have a compelling business plan in place. In order to attract donations and funds, you should be able to prove that you know what you are doing and that can only be reflected in your business plan.
- Why Do You Need a Business Plan for a Foundation?
A Business plan is like a blue print that is needed to successfully run a business; non – profit organization as expected to have a blue print on how they intend running their foundation and that is what a good business plan stands for. So, if you want to start your own foundation, you are required to write a detailed business plan that can pass reality test when it is subjected to it.
- Components of a Non-Profit Business Plan
The whole idea of writing a business plan is not just for the sake of having a business document in place; but a detail guide on how to effectively administer and manage your foundation. Your business plan should outline and cover strategies on how you intend to execute your projects and also fund raising strategies.
These are some of the key components that must not be missing in the business plan of a non – profit foundation. Furthermore, business plans contain some technical areas that needs a calculative attempt.
Other key components that should be included in your business plan are as follow; executive summary and foundation’s descriptions. In this section, you are expected to clearly state what your foundation is all about, the type of problems you want to solve in the society, how you intend sourcing for funds and about the founding members / board of trustees of your foundation. You are also expected to state your foundations’ vision statement, mission statement and the location you want to operate from.
Lastly, other key components that should not be missing in your business plan are; your products or service offering, SWOT analysis, fund raising strategies, marketing and sales analysis / strategies, pricing, costing and financial projection, publicity and advertising strategy, budget and start – up capital generation et al. As a matter of importance, none of this should be left out.
- Getting a Good Location for your Non-Profit Organization
The location of a non – profit organization depends largely on the nature of services they intend offering , especially if it is a foundation that is established with the sole aim of reaching out to specific groups of people irrespective of where they can be found. It is for this reason that you have got to plan well, so as to meet the need of the people you
Of course it gives credence and leverage to a non – profit organization if they are able to situate their head office in highbrow areas in the city; areas like New York City or Geneva, Switzerland. Most people will take such organization seriously; they will consider them a major player in the industry.
Be that as it may, there are no hard and fast rule about where to locate a non – profit organization. The rule of thumb is to ensure that you work within your budget, and also to ensure that you are closer to the community or people you want to serve. Besides a non – profit organization can be headquartered in New York City, U.S. and still have major impact all over the world.
- Technical & Manpower Details for a Non-Profit Foundation
Generally, non – profit organizations offers services or they execute projects as against running manufacturing factory which is why it will be difficult to state the kind of equipment or technology that they might need to execute their jobs.
- When it comes to technology, most service based non – profit organization make use of different software; software that will make their job easier
Some of the common software that are used by non – profit organizations are account software, customer relationship management software, HR and payroll software and project management software et al.
- When it comes to hiring employees, most non – profit organizations, including larger ones, often hesitate to spend money on administrative “overhead” such as consultants or other outside experts because this is seen as diverting hard – earned money from their major service offering or projects.
Of course, most non – profit organizations have no choice because they may not have enough money to even consider hiring consultants the way an organization that was setup to make profits can conveniently do. Which is why an average non – profit organization usually resort to making use of volunteers.
- When it comes to securing an office space, it is economical to start with a moderate office space in a location that is not too expensive, a facility that can accommodate the numbers of administrative employees that are needed to drive the foundation.
The numbers of employees that a start – up non – profit organization can employ is solely dependent on the nature of the services they intend offering and the areas they want to cover.
For a service oriented non – profit organization, the key employees that are supposed to be hired on a full – time agreement are Executive Director, Human Resources and Administrative Manager, Accountant, Fund Raising Officer, Programs / Project Manager and Front Desk Officer / Customer Service Executive. That is about seven full – time staff and volunteers can be used for other duties.
- How Non – Profit Organizations Operates
On the average, non – profit organizations are service based, except when they have to deliver on certain projects. This include projects like building accommodation for displaced people, providing borehole for a community and building hospitals for a community et al.
Basically, the standard operating process of most non – profit organizations is to first defined as an area of need in a society or community, prepare a document that clearly states how to proffer solutions, source for funds, executive the project and then measure the success (deliverables) of the project after a set period or target time – frame.
Starting a Non-Profit Organization / Foundation – The Marketing Plan
No one gets to know about a business without proper awareness. This is why it is very important that in starting a Not-for-profit business, there are great strategies in place. Non – profit organizations just have to position themselves in order to attract grants and funds from donor agencies and individuals.
They need to come up with projects that will best serve a larger percentage of the society; which is one of the surest ways of appealing to the good will of potential donors.
Technology and content marketing strategy has been proven to be the most effective means of generating revenue for non – profit organizations. With the internet and social media platforms, there is no limit to the numbers of people that can be reached per time. With such platform, you can easily appeal for donations.
No doubt there are many non – profit organizations that are out there competing for the available funds. In order to secure funding for your project or foundation you should be able to do what your competitors aren’t doing and you should create budget for a robust publicity and media hype. The truth is that, if a non – profit organization is always in the eyes of the public for the good reasons and for commissioning of finished products, it will be much easier for the non – profit organization to attract funds, grants and donations from the general public.
Another strategy that can help non – profit organizations secure steady funds to run the organization is to source for celebrities to endorse their projects or their foundation. The truth is that people will put more trust in your foundation and donate their resources and perhaps their time as volunteers, if some well – respected people in the society or country identify with what you are doing.
These are a lots of ways which some non – profit organizations generate funds. It is only left for you to choose the type that can well suit you. Here are some ways you can raise funds, for instance;
- Donations from Board Members
- Fund Raising Events (Fund Raising Dinners et al)
- Revenues from Sales of Tickets at events
- Revenues from Exhibitions (crafts and other products)
- Revenues from renting of training facilities
- Revenues from sponsorship deals
Relationship Management Strategy for a Non-Profit Organization
It might be difficult for non – profit organization to secure funds and grants to execute their projects, but it is more difficult for them to retain most of their donors especially private donors. Proactive non – profit organizations ensures that they do all they can to maintain cordial relationship with individuals and donor agencies (corporate organizations and government agencies) that donates to their cause. They maintain a CRM system that will enable them stay in touch with this group of people.
Relationship management and excellent services delivery is a key factor when it comes to maintaining the channels where revenues are generated for non – profit organization. Once a channel for funding is open, it is important to keep the channel open for as long as you can.
Tips for Running Your Non-Profit Foundation Successfully
There are several things that cannot be toyed with when running a non- profit foundation is in focus. Some of the key things are the values and excellent services deliveries. This is very important because they are the driving force in the non – profit industry and every of the daily activities in the office should reflect what the foundation is set out to achieve excellence. The responsibility of the executive director is to give direction to the business and also to manage the affairs of the foundation.
The usual daily activities of a non – profit organization are meetings and review of ongoing projects, follow – up on those who promised to donate money or resources but are yet to remit it, completion of outstanding tasks, sourcing for grants and donations and so on and so forth.
Bottom-line is that starting an NGO is indeed a great venture. This is because of the huge level of success that can be attained. However, to a very large extent, care has to be taken so that all the needful steps are taken, and the right energy is channeled in the right direction so that success can be attained. Also care has to be taken in choosing the right team to work with so that success can be achieved faster.