How to Start a Nonprofit | Step 1: Research

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There are many ways to make in impact in your community and starting a nonprofit is just one. Starting and sustaining a nonprofit can be a significant challenge, particularly in light of today's economy. There are currently more than one million charitable nonprofits in the United States, but many struggle to attract increasingly limited funding. Before starting out, you will need to identify and quantify the need for your specific organization, to research whether there are other groups already engaged in the same or similar work, and to ensure that starting a new nonprofit is the right solution. 

Answering the following questions can help you determine if starting a nonprofit is right for you, or if an alternate solution would better benefit you and your community.

Is there a demonstrated need in the community for a new nonprofit with the mission we envision?

The first step to take is to define and quantify the problem that your nonprofit would address in the community. Just as you would do if you were starting a small business, you will need to define the "demand" and "market" for the services your nonprofit would provide. There is intense competition for limited dollars from individual donations and also from foundation grants. In order to attract funding, you will need to demonstrate that there is sufficient need for your organization's services and that your organization is best equipped to address that need. As you look into who else may be providing services of a similar nature in the community, you may find other organizations doing similar work. Rather than starting a new nonprofit, it may be more efficient to work with existing group(s). It may be more efficient and effective to collaborate with other organization(s) rather than creating an organization that duplicates what others are doing.

  • Have you investigated whether collaborating with a fiscal sponsor would be a useful first step?

Do we have a solid plan for financing the organization during start-up and in the future?

To be successful, a nonprofit needs more than just people passionate about programs. It also needs an infrastructure strong enough to support those programs over time. Accordingly, invest quality time up front to develop a detailed business plan. Such a plan will provide the structured discipline to think through the critically important operational issues. Moreover, once the business plan exists, excerpts can be pulled from it to insert into the federal Form 1023 application for tax-exempt status and in fundraising efforts.

What are the costs to start the organization?

Starting a nonprofit will take significant time, effort, and funds. Harbor Compliance has created a helpful chart to illustrate the costs of the necessary filings in each state, along with the anticipated amount of time to complete that paperwork. Beyond those fixed costs will be the costs to get your nonprofit off the ground. What are the infrastructure costs that will be necessary for your nonprofit to deliver services? Will you need office space? What supplies will be necessary? In some cases, special licenses, permits, or certifications will be necessary to provide certain services, such as child care or health care. We recommend finding resources, such as the state association of nonprofits in your state, and/or local lawyers familiar with the operations of nonprofits to get a clear picture of all the many legal and operational requirements.

Where will I get not only start-up funding, but also operational funding to continue thereafter?

Realtors stress "location, location, location." Founders of nonprofits have another mantra: "funding, funding, funding." Given the ever-growing competition for limited resources (board members are in short supply in some regions; dollars are increasingly scarce), make sure you have a realistic picture not only of what it will cost in time and dollars to create a nonprofit, but also how you will manage the day-to-day activities, and continue to attract revenue into the future. Financial sustainability may be the most difficult challenge your nonprofit will face.

How will this newly formed nonprofit demonstrate its impact?

In order to be sustainable, you will need to demonstrate to funders that your organization is making an impact and is worth continuing to invest in. To do that, you will need to measure and demonstrate your impact. It is important to plan for how you are going to measure impact, so that these measurement systems can be in place from the beginning. If you are not sure how to demonstrate the impact your organization is having, it will be difficult to sustain your organization and you may want to consider alternate options.

Is this the right solution for our community?

Once you incorporate at the state level and secure tax-exempt status from the federal level, then the real heavy-lifting begins: both internal (such as recruiting and orienting a great board, hiring and managing talented staff, finding and equipping an office, setting up financial structures, etc.) and external (such as registering with the state before you can fundraise, launching your fundraising program, securing any required licenses or permits, and so much more). Plus, given the need to earn donors' trust, you will want to have a clear commitment to ethics and accountability (such as adopting policies addressing conflicts of interests, compensation, travel, whistleblower protection, and more).

In many cases, there may be better options to accomplish your goal of making a difference. If there is an organization in your community that you admire, have you considered volunteering for that organization? or working with that organization to establish a new or expanded program to reach the people you are hoping to serve.

If you have decided that there is a need for and it's feasible for you to create a new organization and make a commitment of time and resources to getting it off the ground and sustaining it over time - then you're ready to move on to Step 2 | Building a Solid Foundation.

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