It’s a rainy Sunday morning and I just opened my inbox to find one of a thousand emails I get each year from folks asking for advice. They have a passion for a community or cause and are seriously considering starting a nonprofit. Some ask how to start a nonprofit off on the right foot; others are trying to decide if that is the right path to take.
We help thousands of these folks every day through my membership program – the Nonprofit Leadership Lab – and we are instrumental in getting many of them off the block. It can be so inspiring to work with these founders and gratifying to see them build something through our resources and support.
And yet…
In nearly every case, I wish I could have had a conversation with the founder months before the 501(c)(3) application was submitted. I strongly believe that if we had these conversations beforehand, a few things would be different:
- There would be fewer 501(c)(3) applications.
- Founders who did start a nonprofit would do so with eyes wide open.
- Early-stage nonprofit organizations would be stronger from Day One.
- There would be fewer problems to fix nine months down the road.
So, in this post, get ready for some compassionate truth-telling! Before I dive in, let me be really, really clear. The ideas, the energy, the drive, and the perseverance that I have seen from founders through the last twenty years are OFF. THE. CHARTS!
This passion and determination give me so much hope for human beings and for the future of our world.
I want you remarkable people to know and hear a few things that could bring that idea to life in a deeply meaningful and truly impactful way.
START WITH YOUR WHY
Based on my experience, founders have a compelling and inspiring WHY. That is to say, there is a strong reason that you choose to create a nonprofit like:
- There’s a gap: You see a legitimate gap for services or advocacy in your community or your state.
- It’s personal: You are mad as hell about an injustice that has touched you personally, you get vocal, and you naturally become the person folks turn to for a solution.
- It’s a legacy: You have experienced a tragic loss and you have a deep need to honor the legacy of your loved one – a need you just cannot ignore.
- You’re an innovator: You have thought long and hard about a problem and have come up with an idea for a nonprofit that innovatively addresses that problem. The people in your life are drawn in and encourage you to move forward with a 501(c)(3) application.
If I had the chance to meet with everyone three months before they submitted their 501(c)(3) application, you can rest assured that when I heard their WHY, my reactions would range from amazement to tears to a serious case of goosebumps. The conversations would affirm my faith in the power of the human spirit.
Even so, what is the best way to serve others with your WHY? And do you truly need to file for a 501(c)(3)?
5 QUESTIONS TO ASK BEFORE YOU FILE FOR A 501(C)(3)
1. What other nonprofits exist that are fulfilling the same needs and serving the same people? Are they financially stable?
Please, I beg you, do your homework. REALLY. Do you know how many times I have heard this?
“Well, there is another organization kinda doing this but they don’t do it well. I couldn’t work with their E.D. They would take credit for the idea. Nobody really knows much about them.”
I’ve heard this so many times. These are NOT compelling reasons to start a new organization.
Arguments like these are a challenge for our sector. They can:
- Affirm the perception that the nonprofit sector is overly competitive. Too many organizations are competing for the same dollars with similar missions.
- Create a perception that your ego is too wrapped up in this whole thing and that you are not thinking about how to best deliver the service, advocate for the mission, and change hearts, minds, and laws.
2. Is your idea a new organization or a program idea for an existing one?
Starting an organization is a very heavy lift. Funders have to see a clear, unique need that your organization will serve.
- Existing organizations have their own challenges in resourcing the programs they have. It’s possible that a program like yours was considered but the organization prioritized other programs.
- If you had a great idea for my organization and knocked on my door, I would ask the above question and if you couldn’t answer it, I’d either question your drive to secure funding for it or because it was not my first time at the rodeo, I’d likely see the funding challenges quite clearly.
- Just because it may not work now doesn’t mean it should be rejected altogether. Continue discussions, iterate the idea, and keep the program idea on the list, raising it with funders and stakeholders. It might not turn from an IF to a WHEN.
3. Who are your champions?
This is a big one. No doubt you have shared your idea with friends and family and you have inspired them. You ask for help and you are not to be denied. You hear from those you hold dear and they say, “Count me in, I want to help!”
Most founders in these stages lead a small posse who are smitten with your idea. And it is these folks who are the obvious ones to go to when it is time to fill out the 501(c)(3) application.
Champions, yes?
What about devil’s advocates? Folks with access to networks to pressure test the idea in your sector such as individuals who have unique skill sets, who have been stewarded, and who are all in to stand on this initial board? People who can spread the word, spread the goosebumps, and help build a bigger posse of folks who are motivated to broaden the footprint of your vision.
In the vast majority of situations, these are followers who want you to be successful. However, these are often the folks who agree to be named as board members on the 501(c)(3) application with zero understanding of the level of commitment they have just made.
Three months before the application is due, bring your close champions together and brainstorm 3 to 5 skill sets, areas of experience, and attributes that are essential to get your idea off the ground.
4. Does it have to be a 501(c)(3)? Or could it be a B-Corp or LLC?
No, your organization does not have to be a 501(c)(3) but that is where the conversations typically begin after someone has said, “I’d write a check to get this off the ground”.
I worked with a client decades ago. I asked:
“Why is this a nonprofit and not a production company that does work in the public interest?”
Answer: “We had a big investor and she wanted it to be tax deductible!”
(Picture me with my head in my hands.)
The folks who started Bombas were driven to help the unhoused, understanding that socks were the #1 item homeless folks needed while living on the streets. These founders were not apparel guys. They were helpers. Could they have started a nonprofit? Of course. But instead, they built a sock company, got B-Corp certification, and gave away a pair for each one they sold.
As of August 2023, they had donated 100 million pairs of socks. Their hugely successful business has given them the ability to market their good works and highlight the challenges faced by the homeless folks in our society.
Bring smart people together and put all of these on the table. There are many LLCs and B-Corps whose impact on the social sector is priceless. Please explore your options.
5. Where will the money come from?
I’ve met a few (more than a few) folks who believe that “if you build it they will come”. And then they get their 501(c)(3) and realize that this work, while so rewarding, is also just plain hard.
You must seek out funders in the space. Does your idea cut through funder clutter and light someone up? Ideally, a grant funder will be able to see the organization’s promise as soon as you open your mouth.
Wendy Kopp from Teach For America spent her senior year at Princeton securing grant funding to bring her vision to life. She was a “dog with a bone” founder. In her own book, she writes about her relentless pursuit of funding to get her vision off the ground. Nothing could stop her – and nothing did. And while she hit some ideological speed bumps, Teach for America is still a blue-chip organization built to last.
ONE LAST THING
The IRS says yes to the vast array of 501(c)(3) applications. Don’t expect the IRS to dig deep and explore the merits of your vision.
That’s your job.
Dig deep into the answers to these five questions before you even download the document to apply. It’s possible you will change your mind or your approach but if you do move forward, you’ll come out of the gate so much stronger and set up to have the kind of impact you hoped to have when the idea first came to you.
If you have your 501(c)(3), your mission statement, and your board but you need resources and guidance to move in the direction of your vision, please consider joining thousands of founders just like you in our Nonprofit Leadership Lab. We can help you thrive!
