You don't need a grant writer to start a non-profit

Fully 50% of the calls or emails I get regarding my services involve a desire to hire me to help acquire funding for someone to start a non-profit venture or fund one that has just received a determination letter.

I'm flattered, but you don't need me to find you money, because neither I nor any other grant writer can "get" you a grant at that point in time.

The cold hard truth is there are zero grants available from either foundations or government agencies to start a nonprofit.

That's because true grants (money with no repayment required) have to be made to existing nonprofits. Legally, private grantmakers are prohibited by statute from advancing funds they receive or administer for charitable purposes to a for-profit or an individual.

In the case of  newly approved organizations, while it is technically possible for grantmakers to fund you, in practice that seldom happens.

Here's why.

Typically, every grantmaker will require  that you furnish them with a long-form 990 (the nonprofit equivalent of a 1040 or 1120) for at least the prior two taxable years. Some will even go back five years. They may also require audited financials or have a minimum revenue requirement that you must meet before you can even apply for funding.

Additionally, very few foundations or government agencies have rolling grant open application periods.  Thus, you typically can only apply at specific times, and the awards are actually funded as much as a year later. That means that you never have grant funds available at a moment's notice.

Grantmakers do not fund organizations. They fund programs that align with their interests and produce their desired outcomes. For that reason, they are very picky about what organizations they fund, and look for partners with a proven track record. Only about 1 in 10 grant applications submitted are funded.

Grants should never comprise more than 30-35% of your revenue stream, since they seldom if ever provide unrestricted funding, and almost never fund your normal costs of doing business, like utilities or rent.

In this 2012 report, on page 3,the National Center for Charitable Statistics (NCCS) reports that nearly 75% of all nonprofit income originated as fees for services paid by government and private businesses. 

In other words, you must find another way to fund your operations and programs 100% for a minimum of the first two years, and you must maintain varied income streams for the life of your nonprofit.

How do you do that?

The normal funding development progression happens like this:

·         Self funding – the board members either personally contribute the start-up funding or use their contacts to solicit funds from their business or social networks. BTW – don't state that donations may be tax deductible until you receive your determination letter.

·         Community events –think along the lines of auctions, car washes, bake sales, galas, sponsorships etc.

·         Social impact investors – although this option has not taken off the way the nonprofit industry hoped, there are still investor groups that are active in this field. Note that the funds received have to be paid back with interest, just like a traditional business loan or any other sort of angel financing. The investor's ROI expectations are typically within periods ranging from 90 days to three years.

·         Online appeals – Platforms such as GoFundMe don't require that you have nonprofit status to solicit funds. Other online fundraising options may or may not ask you to provide proof of status. There are fees and commissions involved so don't budget for gross donations. As an aside, the "Donate Here" button on your website will only generate a small portion of your needed funds until you have a track record and good outcomes to share.

·         Fees for services – for most nonprofits this is the largest single source of funds. Studies such as the one refernced above have concluded that from 60 to 75 percent of all nonprofit funding comes from contractual arrangements with government agencies or for-profit businesses.

What a grant professional CAN do to help.

Many grant writers, myself included, can and do provide research and development services to start-up organizations.

For instance I provide a feasibility service for would-be nonprofit founders. Think of it as a preliminary SWOT analysis as found in a business or more properly, a strategic plan. It evaluates such things as your mission goals, monetary support available for your mission and any other competitors working in your field, both for- and non-profit.

I can't possibly stress enough that you need to have at least a basic plan before you even apply for your nonprofit validation from the Internal Revenue Service.

In essence and assuming that you are just in the planning stages, a well researched and prepared strategic plan provides a step-by-step organizational development roadmap, as well as a series of benchmarks that allow you to evaluate your progress.

When I produce (with your input) a full strategic plan, it will cover such things as setting up your initial budget, based on operational and program costs for the first two to three years, whether to apply using the 1023EZ or the full 1023 application form, board development, what type of state corporation you need to form (a step required in advance of your 1023 application) and a brief overview of solicitation law affecting your fundraising. If desired, it may also have a mission development section that defines not just what your mission will be, but what programs and how much money, property  and manpower will be needed to produce your desired outcomes.

I hope this gives you a brief glimpse into world of non-profit financing.  Feel free to contact me at 208-525-2071, or email me at rightwords@ida.net if you have further questions.

Long-form thinking in today's short-form world

I've written a lot about having a cogent strategy when you start a new nonprofit or small business. I'm beginning to think that the market for that advice is as dead as a fossilized woolly mammoth.

  

I get that in the age of information overload, you have about 7 seconds to capture your target's attention. I've written my share of SEO-friendly 50 character action posts and catchy sales pages.

All that's fine, well, and good, as long as there is some actual thought behind your hastily thumbed tweet.

The problem is that it seems as though our brains are now in permanent short-form mode.

Recently a twenty-something wanna-be nonprofit founder/entrepreneur asked me to come up with some content for their Twitter feed. As she put it, "something that will show people we care about "X" and need their money to help."

So I did what any consultant would do…I asked her to outline her value proposition or mission and vision statement so I could better represent her organization.

She didn't have anything, beyond the idea that if she could separate enough people from enough money, she could "help."

No budget, no program/product outline, not even a firm idea whether she wanted to be a nonprofit or a for-profit with a philanthropic division.

Her reasoning?  She did know that it takes money to make money, and she didn't have any, so she figured she'd get the money first and figure out what to do with it later. 

I'm not sure if she was simply naïve or she'd gotten her hands on some really good weed, but that ain't gonna cut it.

Maybe it's old-fashioned, but believe it or not, people actually want some substance available before they invest in anything.

 

If you want other people's money, you have to provide value.  It's just that simple.

As boring as it might be, you have to have a plan, objectives, results and at least some understanding of why people purchase or support anything.

In short, this business thingie is a lot of real, brain-busting hard work.

Hopefully, there are still people out there that can think in those terms. 

Santa doesn't wear red, white and blue.

As those of you who follow this blog know, I get a lot of my column ideas from questions people are asking in emails, and there are a lot of questions about finding start-up capital. 

This past week, there's been a new twist on an old question.  The question is basically "can I get the government to fund my start-up".  Last week it was centered on Section 8(a) business development funding.

I would refer anyone looking for government grants for any kind of start up to the first sentence on the SBA website.

It reads: "SBA does NOT provide grants for starting and expanding a business."

It's hard to see how that could be any plainer, but apparently, some people think Section 8a funds are different.

First of all, this funding apparatus is for EXISTING businesses that have been in business at least three (3) years.

Second, the qualifications are not an "either-or" requirement. You must be BOTH socially and economically disadvantaged.

Third, this funding is for existing businesses that the government deems to be "small" businesses.

They make the determination, so what size you think your business might be is of no importance to them at all

.

Although the SBA is business-centric, nonprofits will find that the "three-years-in-business" qualifier is pretty standard even in the philanthropic arena.

There are tried and true ways for new businesses and nonprofits to raise money, but sorry, grants aren't one of the ways.

Almost all new business funding is in the form of one-to-one investors or donors.  It might be from venture capital, where you give up a share of your business in exchange for funding, or from a few major donors or supporters, or from friends and family, but grants…no.

If you are interested in Section 8(a) funding and can meet the basic qualifications, then of course go for it.

Like all SBA or any other types of government funding, there are many hoops to jump through, but if you can qualify, then go for it. Just remember, true government grants are usually focused on the research and technology transfer fields, so be sure you fit into one of those areas before you spend any money or time to apply.