Questions to ask before starting a 501(c)3 nonprofit organization
With 1.5M+ nonprofits in the United States, new organizations often struggle “to marshal the necessary resources to effectively deliver on their vision and mission.” Sadly, the well-meaning intentions of do-gooders can sometimes create more harm than good. As a nonprofit consultant, I often hear from advocates ready to launch 501(c)3 organizations without the research or experience needed to build sustainable, impactful organizations.
A recent conversation with a prospective client illustrates the haste of some nonprofit founders:
Client: “Can you help me write a grant to build a homeless shelter?”
Consultant: “Possibly! Where are you in the process of starting your organization? What is your background in nonprofits and this service area?”
Client: “I see a lot of homeless people on my way to work every day and want to help. I just need you to write a grant to get startup funding, because I don’t know anything about nonprofits.”
The client thought he generated an easy solution for addressing homelessness locally and that he was the right person to fix the problem. However, his misplaced intentions could have caused “duplication of services, donor fatigue, and waste.” The major city already operated dozens of established shelters and homeless resources, even though research shows that shelters do not lead to long-term housing stability. I hope this article will help other potential nonprofit founders achieve the positive intended impact of their actions.
Ask yourself these tough questions before creating a new organization and filing for nonprofit status:
Why do you want to start a nonprofit?
Being honest with yourself will help you decide if and how to move forward with establishing a nonprofit. There is no “right” reason to start a nonprofit but exploring your personal motivation might lead you in a different direction. For instance, a young man contacted me wanting to create a nonprofit to boost his resume. Instead, he decided to volunteer for a leadership role with an existing organization and still grew his professional network. Another client lost a dear friend to suicide and wanted to start a nonprofit in his honor. After learning that our state is home to thousands of suicide prevention organizations, she instead organized a fundraising campaign with her friend’s name to benefit a thriving agency driving measurable change.
In other words, can you achieve your “why” by any means other than starting a new nonprofit? Prevent the duplication of services, competition for limited financial and human resources, and a short-term solution to a long-term need by taking time to self-reflect.
What is the need?
Potential board members, volunteers, and donors will ask this question throughout the life of your nonprofit; be prepared to continuously answer this question if hope to secure the resources needed to start and maintain your organization. Stakeholders only support organizations that address a proven need defined by the target population, political and economic climate, geographic location, and lack of existing programs/services.
Conduct a needs assessment before taking any actions towards incorporation, fundraising, marketing, or board development. The initial needs assessment can range from a short, informal writeup to a 10+ page report conducted by a specialized research firm. Regardless of your startup resources, you can still answer these critical questions:
- What challenges does the targeted population face? Answer this question with data, not personal opinion.
- What are the short and long-term impacts of these challenges?
- What has already been done to address these challenges? To what extent have they been successful?
- What agencies, communities, individuals, or governments already serve the target community?
- Does the program/service exist in the planned service region?
- What will be your organization’s unique value proposition?
The findings from the needs assessment may not be straightforward. As nonprofit leader Ashley Smith explains, “there are some cases where having multiple nonprofits in a field makes complete sense. Nonprofits with billable services are a great example.” Interpret the assessment’s findings critically and in collaboration with stakeholders.