Monday, March 25, 2013

Starting a nonprofit without grants

As a grant writer and nonprofit consultant, a dozen or more times each month someone contacts me with an email subject line like this one.

"Need a grant to start a nonprofit"

My answer is always going to be along the same lines; it just isn't going to happen. You have to already be a nonprofit, and usually an IRS approved nonprofit, i.e. a 501(c)(3), with financial statements to apply for most grants. If disposable funds for these grantors become less available, as is forecast by many experts, guidelines even for approved nonprofits are going to tighten. Getting that determination letter can require a significant outlay of funds, typically $1,500 or more, usually much more. Typically, a nonprofit doesn't become a viable candidate for significant grant funding for three years.

That doesn't mean you can't start a nonprofit. You just have to recognize that you have to get the money from other sources.
First, you should be a corporation in your state. It will give you some measure of legitimacy and personal protection and you will need that corporate status when you do apply for formal 501(c)(3)status. Filing fees vary, but most states don't charge exorbitant fees to form a corporation. Most states have the forms and fees required available to fill in on their website. They are normally found on the secretary of state's page, but typing in "nonprofit corporation filing fees, your state" in a search engine will get you to the right starting point.

If you are detail-oriented and have a basic understanding of the legal and business terminology used on the site, and are willing to spend several hours understanding the legal ramifications of filing the paperwork, you can do it yourself. Hint-the purpose of filing isn't so you can get grants!

If you don't understand the terms, my company my company offers low-cost assistance to assist you in learning the terminology and provides research avenues for your education in the requirements. Typically, you are going to spend from $100 to $400.00 dollars at this stage.

Even this low level of spending can be daunting if you don't have any money. So where do you get it?

Most nonprofits start out as self-financed organizations, usually through non-tax-exempt donations from supporters. Some also use fiscal sponsors and that can be an ideal way for you to access professional expertise as well as funding. It will allow you put your program on trial status without the bother of having to dissolve a nonprofit entity if things don't work out
One word of caution is warranted here. Due to recent problems with some fiscal sponsor organizations, many are now requiring you to have your determination letter from the IRS, but it is still worth looking in your area for organizations with missions that mesh with yours. Fiscal sponsorship is a topic of its own, and I won't try to cover the requirements and ramifications here.

Who puts up the initial funding? Your friends, family and interested supporters will probably be your first donors. If you have been discussing a community need with friends and family, you start with them. For instance, you will need a board of directors. Although some states only require one board member to file the nonprofit paperwork, (California is one) you should have at least three, since you will need a minimum of a president, vice-president and a secretary-treasurer at some point. Start with prospects for that board, making sure that they have the expertise and commitment necessary to see the task of forming a nonprofit through to the end. They should be willing to provide the nucleus of your fundraising goal.

Maybe they each can only kick in twenty dollars. Ask them to recruit additional funding from people they know. Twenty people times twenty dollars will normally get you started. If you can't generate at least this much support in your own community, you might have to reconsider whether this is the right path for you, and/or redesign the way you are presenting the idea to supporters.

You will need to develop a mission statement, a strategic plan, by-laws, a business bank account and an "elevator pitch" to present your idea to these prospective "investors". In other words, you need to be credible. That's a great way to break into the fundraising side of the nonprofit world.

Other avenues include community fundraisers such as the ever-popular yard sale or car wash, Facebook campaigns, even Twitter posts to find more interested people.
Until you have your IRS nonprofit letter, you should not tell anyone that their contribution is tax-deductible, but you should keep track of donors even at this stage. Some of them may become the nucleus of your organization. They may also be willing to help you recruit more supporters. Call them or drop them a thank-you email even if their contribution is only five dollars, and ask them to refer you to their friends.

If the contributions are in cash at an event, have a postcard-sized handout you can give them outlining your organization's goals and asking for their help in recruiting other supporters. If you have a Facebook page, put out a call for supporters there.

The nonprofit world has certain ethical and business requirements exactly like those found in the for-profit world. It has its own jargon, rules and its own goals. If you understand that this is a learning process and are willing to start small and work at it, you can certainly succeed. 

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