Most social entrepreneurs with the desire to launch a new nonprofit are altruistic and selfless. They see a problem in the world around them — disenfranchised people, suffering animals, a declining environment — and they have the motivation and desire to exact change. They know that great personal sacrifice is part of the deal, and they generally expect little, if any, compensation for their trouble.
All that passion and dedication is admirable and a good start to launching a new nonprofit, but many founders incorrectly assume it’s enough to drive the organization to success. It’s not. A nonprofit organization is just like any other type of business — it’s money in and money out, getting the word out, and managing programs and people. All the skills of a for-profit entrepreneur are needed to succeed on top of a deep, selfless commitment to the cause.
Entrepreneurs who launch for-profit businesses can be, and usually are, motivated primarily by increasing their personal wealth. Any idea that can improve efficiency, increase sales, or reduce expenses means more money in their own pocket. The fundamentals of business are the obvious route to increasing profitability, so successful business owners often focus on these basics.
Nonprofit founders are motivated by making a difference — a concept that is less clearly tied to the actual business practices of the organization. However, the best run nonprofits are run like any other corporation. Business basics are critical, and no amount of passion can replace knowledge and understanding of accounting, marketing, and basic business planning.
To start, every new nonprofit must have a clear reason for being. The mission and purpose must be well-developed with a focus on both the ends and the means. The priority must be on the public good, with no place for individual gain. The programs and services should be developed with a recognition of what is already available to the same target population in the same area — direct competition in the nonprofit realm is likely to damage both organizations, not enhance them.
The founder and initial Board of Directors must be committed to providing leadership and governance to the organization. They should know and understand all of the operations, from fundraising to administering the programs and service. As the bridge between the nonprofit and the public, the board members must present a positive, trustworthy image and build support for the work of the nonprofit. They must take a central role in garnering donations, including giving themselves, and recruiting high-quality volunteers and employees.
Manage the Finances
Managing the finances of the new nonprofit is equally essential. The initial sustainability plan must rely on a variety of funding sources — expecting grant funds to cover all startup costs is unrealistic. Developing programs and services to provide earned income is the best option, and creating a sound, convincing fundraising program is a close second. The projected expenses of starting and running the nonprofit must be realistic and justifiable. Donors want to know that the money they give will be spent efficiently and will actually make a difference — the better your budgets and books are managed, the more confidence your supporters will have.
Use Strategic Planning
Good planning is also critical for successful nonprofits. The long-term, three to five year, plan should be clear to everyone involved — the board, staff, volunteers and supporters. Short-term strategic plans of ninety days to one year should be focused on moving consistently in the right direction. The board must be aware of the progress and hold themselves and the rest of the organization accountable. The marketing plan should be developed, evaluated and analyzed on a consistent, frequent basis as well.
Founding a nonprofit requires all the skills of running a for-profit business with the additional passion and dedication to the cause to keep you motivated. Business fundamentals are the key to nonprofit success. After all, business is business regardless of the purpose.