Fundamental Questions To Consider Before Starting A Nonprofit Organization
As the founder of both a social enterprise and nonprofit organization, I have regular conversations with people interested in making a difference. Through these conversations, it’s become apparent that many people hold the false assumption that the only way to make a difference is to start a nonprofit – but “nonprofit” does not automatically equal doing good, rather it’s only one way to make an impact.
With the shift in our societal DNA, business as usual doesn’t cut it – businesses must be charitable because today, consumers expect it. Because of this, nonprofits are no longer alone in making an impact – altruism is embedded in both for-profit and non-profit companies alike, heightening the way we do business. This is great news for world change, but it also means there’s more to consider when you have an idea to make a difference.
According to the National Center for Charitable Statistics, there are more than 1.5 million tax-exempt organizations in the United States. And while this model is beneficial for the many nonprofits that have chosen to organize this way, know that funding and sustainability remain among the top challenges for nonprofit organizations
And the competition is fierce.
So before you file a 501c3 and start a nonprofit, consider these fundamental questions to make sure you’re thoroughly assessing the problem you’re trying to solve and the solution you’re implementing.
Is it already being done?
Competition doesn’t mean you shouldn’t form a nonprofit organization, but it is cause for consideration. Again, one of the greatest challenges for nonprofits is the lack of funding available. If you have competition within the same geographic region, you may want to consider a partnership rather than starting an independent organization. Within the social sector, ‘completing’ is more important than competing. If your solution is similar to one existing, ask yourself why your proposed solution is better, and determine if it fits best within an existing organization or if you must face the challenge of competition despite funding challenges. If you decide to become a competitor, know why and let that drive the value you share with donors and supporters.
What value will this organization bring?
Beyond assessing the competitive landscape, truly think about the value your organization will bring to the community or industry. Similar to a tech startup or for-profit company, determine your value proposition – what makes your organization attractive to customers and the public? When you know the value your organization brings, you’ll better be able to determine the way you should run the business. Some businesses work better as for-profit companies that commit to ethical business practices or donating to aligned causes – others must exist as a legal nonprofit. Let the “why” and the value of your business drive your execution, not the other way around.
How will I support this financially?
If the only way to support the operations of your business would be to fundraise with donor support or grant money, a nonprofit may be the best option. But if you have a product or a service people will pay for, there’s more to consider in the equation. Again, look at the why of your business, and then think about the long-term gain of the for-profit or non-profit structure. Your value proposition and business model formulation will help determine the right way to go, and will help you be well-prepared for scrutiny and strategies as a social entrepreneur.
Don’t start a nonprofit for the sake of starting a nonprofit – determine the value you’re bringing and the why behind your mission. While there are ideas that are best suited for the nonprofit realm, others may actually have more impact by pursuing new models like B-corps, social enterprises, and LLC’s with a “purpose over profit” mantra.
In thinking through these questions, you can be confident you’ll choose the best model for your idea, and the one that will help you have the most impact at the end of the day. To be sure, make sure to consult your mentor, potential board members and other social entrepreneurs for advice and lessons learned.