preparing to launch
Funding: How to Start a Nonprofit When You Have Little Money
With more than 1.6 million nonprofit organizations in the U.S., you might be asking yourself this question — it can't be that hard to start your own organization from scratch, right? You have an undeniable passion for your cause, a clear purpose and mission, and an unrelenting drive to change the world. Isn't that the holy grail of successful nonprofits?
Short answer — yes, but it's not the only thing.
Even in the nonprofit world, cash, as they say, is still king. Without it, you can't offer the programs and services that your nonprofit is designed to provide. It'll be difficult to fund the fees for filing a 501(c)3 and tax exemption status. And even launching your website and other marketing tactics require a little bit of cash upfront.
But unlike a for-profit business, your nonprofit can't promise investors a return on their investment or look to future sales. So, where do you get the necessary cash to open your doors and get up and running?
The good news is, even if you have little-to-no money saved up, you can still start your nonprofit organization — you just need to know how to do it, who to ask, and where to look.
If you're ready to take the next step and launch your nonprofit, here are five tips to help you secure the money you need and start changing the world.
1. Start By Understanding How Much Money You'll Need Up Front
It's best to know what you're up against before starting a new challenge. That's why, as you gear up to launch your nonprofit organization, you should first ask yourself this one important question — how much money do I need to spend to start a nonprofit?
While there are a ton of different variables that could impact that answer, there are fortunately a few constants. As with any business, knowing these numbers upfront helps you understand how much you'll need to start a nonprofit before getting too in the weeds. With this pre-planning, you'll have more time to strategize how, when, and where you can find the appropriate funding, if you'll need to tap a few donors, or if you'll need to save up some of your own money to support these startup costs.
Generally, some of the first costs you can expect are incorporation fees. Before you can make your new nonprofit organization official, you'll first need to register with your state to operate as a corporation. This requires filling out and registering the right paperwork with your state.
And, like most things, achieving this status comes at a cost — albeit a very reasonable one. When filing your articles of incorporation, you can expect to pay anywhere from $30 to $125, depending on where you live. It's a small dollar sign on your overall startup budget but an essential step in getting things up and running.
Secondly, you'll need to consider any fees associated with filing for 501(c)3 status and tax exemption. These fees are largely determined by the size of your nonprofit's budget — that means whatever number you encounter here shouldn't be outrageous.
For example, if your operating budget is hovering around $10,000 or less, your fee will likely be about $400. On average, however, most nonprofits can expect to spend around $850 to file for their 501(c)3 and tax exemption status. There are also services available to help you minimize fees and file for your 501(c)3 status smoothly.
Some other potential costs depend on your nonprofit's unique setup and processes, but here are a few common costs to consider in your financial planning:
- Website domain costs
- General liability insurance costs
- Marketing and advertising fees
- Employee salaries
- Monthly rent
2. Do Your Research To Put Your Nonprofit on the Right Trajectory
Did you know that nearly half of all nonprofits fail because they don't put enough time into upfront planning?
While research isn't inherently tied to budgets, fundraising plans, or donation tactics, it still plays a vital role in all of these things — and more. That's because zeroing in on your nonprofit's mission and role in the greater community helps you build a strong foundation and clear vision. And with those things in place, it's a lot easier to get the outside support you need to get your nonprofit off the ground.
Here are a few questions to ask yourself to get a clear understanding of what path your nonprofit needs to take to ensure initial and lasting success:
Is there proof that your nonprofit is filling an unmet need?
Garnering community support, receiving grants, and getting donations or corporate sponsorships are a lot more tangible when you have strong data points to back up your idea. For example, if you want to start an educational program for homeless youth in your city, you'll need to have a good estimate of how many teenagers in your community lack a permanent roof over their heads.
Are there any other organizations doing what you do?
Even if you're targeting a niche need, it's essential to do your research to see if any other nonprofit in your area has the same focus. Knowing if you have any overlap with existing organizations can help you pivot, if necessary, or further refine your foundation. Having a truly unique nonprofit that fills a gap nobody else has touched gives your donors or sponsors yet another reason to back your cause.
To start your research, The National Council of Nonprofits offers a locator tool to find nonprofit organizations in your area.
3. Treat Your Nonprofit Like a Business
Here's something that's pretty easy to forget in the nonprofit world — your organization is still a business. That means, even if some of your processes and structures are different, it's essential to treat your nonprofit like a true business venture. While this requires a bit of heavy-lifting and planning upfront, setting this groundwork lets outside donors, corporations, or sponsors know that you're the real deal and that you're serious about making an impact on your community.
For nonprofits, this means building a business plan. This will help you plan for and track your nonprofit budget down to the penny, making it a critical part in attracting major donors, applying for grants, and persuading foundations or corporations to fund your mission. A well-thought-out business plan can also help you recruit board members, which can be vital to keeping your nonprofit's financial goals on track.
As you build out your business plan, here are the key components you should include:
This describes your mission statement and provides a list of your services, programs, and overall objectives.
Programs and Services
This is where you can describe your core programs and services in more detail, and it's an opportunity to explain what problem you're trying to solve and why it matters. You can provide data points on the challenges you're addressing while also outlining how your programs or services can solve them.
Every nonprofit needs some form of a marketing plan to gain a following. In this section, detail how who you ideally want to serve and what channels, tactics, and outreach you'll use to connect with them.
How do you measure success? It's easier to get support from donors if you can prove that your efforts make a difference. Outline how you plan to measure your impact.
What are your primary sources of income? Do you have any fundraising plans in place? What is your current financial situation, and what are your long-term goals? The answers to these questions can help you feel more confident when approaching potential donors and foundations.
4. Turn Your Board Into a Fundraising Force
When starting your nonprofit, selecting the right board members is a critical step in getting things up and running. These volunteer leaders help to form and oversee your nonprofit's strategic direction and financial plans. But did you know they can also hold an invaluable role in your fundraising efforts?
Consider establishing an ongoing giving or donation plan for your board members. Similar to asking for dues, it's acceptable to ask your members to contribute a specific amount every month, which can be as small or as large as you feel comfortable with. Here, the most important part of your fundraising strategy is that everyone gives. This strength in numbers can turn a $20/month fee into enough cash to fund your startup costs — and then some.
If you're not ready to ask your board for money, that's OK! Remember, the people you brought into your organization are hopefully well-connected with large networks. Take advantage of it. Consider giving every board member a fundraising task to ask their friends or colleagues to make a contribution.
5. Explore Your Fundraising Options To Cover Initial Startup Costs
You already know that fundraising is the lifeblood of any nonprofit. It's what helps you raise awareness, develop programs, and provide the right services to your community. Fundraising is also a great way to secure the money you need upfront to get your nonprofit established. And the best part? There are multiple ways to do it.
Here are a few common fundraising avenues to explore:
Grants are funds that come from governments or foundations to help nonprofits reach their goals. Grants are usually restricted to a specific sector, location, or type. Fortunately, it's fairly easy to search for grants that align with your organization. Grant applications have a reputation of being tedious and time-consuming, so make sure you plan ahead if you're relying on a grant to start your nonprofit.
Individual donations make up nearly 72% of charitable contributions, making them the bread and butter of most nonprofits. Usually, these types of donations take a few different forms:
By adding a "Donate" button to your nonprofit's website, social media channels, or email outreach, you can encourage anyone to support your cause by simply filling out their billing information.
Many nonprofit organizations will encourage supporters to become a "member" by signing up for a recurring giving program. This ensures a sustainable stream of revenue while also making it easier for your supporters to make their contribution without the extra work every month. Introducing this easy way to contribute can also lead to higher retention rates for donors.
Whatever your nonprofit's threshold for major gifts (some can be as small as $250, while larger organizations define it as gifts of $10,000 or more), this type of support takes a little more work. This is where your board can tap into their own networks and connections. Most corporations want to give back to their community (even if it's just for PR reasons), so it never hurts to reach out and ask.
Hosting events can be a reliable way to get the funds you need. Charity walks or runs, auctions, or galas are a way to not only engage with your community but encourage their support, too. You can encourage donations through ticket sales, merchandise, or even in-person donations.
Can You Start a Nonprofit With No Money?
Technically, you need some cash up front to start your nonprofit. Like any business, upfront financial planning is an essential step in securing the funds needed to set your nonprofit up for success.
The good news is, though, you have an entire network and community that wants to help. If you're ready to get your nonprofit off the ground, remember that your passion and commitment to making your community a better place is the most invaluable form of currency. With these things, you can inspire the people around you to be a part of the cause, too. And whether that comes in the form of donated time, resources, or money, all of these things put your nonprofit one step closer to changing the world.
With the right upfront planning and fundraising strategy, you can start securing the funds you need to finally launch your nonprofit organization. While you're busy chasing down donors, let Swyft Filings handle some of the busywork that comes with making your nonprofit official. Reach out to our experts to learn how to establish a nonprofit in as few as 10 minutes!