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Gene Takagi / Emily Chan

How to Start a Non-Profit

Sep 26 2012, 10:30 AM by

When exploring opportunities to pursue your passion to make a difference in the world, starting a charitable non-profit can often seem like the perfect strategy. In some cases, founders are able to create successful non-profits with hard work and good fortune. But more times than not, they create nonviable organizations that are abandoned or dissolved after a few years. What separates the founders who succeed from those who fail is not easily answered, but there are preliminary steps that would-be founders should take to increase their chances of realizing their goals.
Should You Start a Non-Profit?
Passion is important, but it’s not enough. A successful non-profit also requires resources to build the organization and engage in activities that will advance its charitable mission. Money, time, people, skills and energy will all be necessary, and they are not easily acquired. There will be much competition for scarce resources and this may persist throughout the non-profit’s existence. A viable plan for acquiring sufficient resources on an ongoing basis to advance your mission in an effective and efficient manner is a critical factor in determining whether to start a non-profit in the first place.

But an ability to acquire resources is also not enough. You should also determine whether the new non-profit can utilize those resources to provide a valuable service to its intended beneficiaries better than, or in a different way from, an existing non-profit. You should know the market, including your allies and competitors, before deciding to join what may be a very crowded playing field. Often, your best plan will be to work with an existing non-profit and possibly one serving as a fiscal sponsor of early stage non-profit projects.

Finally, you should know the rules of the game, namely the applicable laws that govern how a non-profit must be organized, operated, governed and managed. The more you know, the more you can assess the possibilities and parameters to know if your plan will work within the non-profit corporate and 501(c)(3) tax-exempt regime. Your knowledge and understanding will also provide confidence to those individuals and funders joining you to support the new non-profit venture.
Can You Recruit an Engaged Board of Directors?
If you determine that starting a non-profit is a good option after consideration of all of the above, recruiting a great board of directors may well be your most important task. A new non-profit has a significantly better chance at long-term viability and impact when the right people are at the wheel. These individuals should share your organizational vision and core values but should also bring other skills, perspectives and networks to the table. Additionally, these directors should understand their duties and responsibilities to act with reasonable care and in the best interests of the organization while providing direction and oversight over the organization’s activities, finances, executive and compliance.

Key components of sound governance by a board of directors include:
  • Charting the course of the organization and adjusting it as appropriate when circumstances change;

  • Reviewing (and understanding how to review) financial statements;

  • Reviewing programmatic results and metrics indicating how effectively and efficiently the organization is advancing its mission;

  • Reviewing and taking steps to ensure legal compliance and appropriate risk management;

  • Meeting regularly to actively direct and oversee the organization and not passively rubber stamp the decisions of a single leader;

  • Being sufficiently informed to provide direction and oversight (this includes preparing for meetings and acquiring the necessary information to make appropriate board decisions);

  • Asking generative questions about the decisions the board should make, the processes to be used to make those decisions, and the impact that the organization is making;

  • Creating and enforcing policies for the board and the organization covering areas such as conflicts of interest, document retention and destruction, whistleblowers, gift acceptance, executive compensation, expense reimbursements, finances and internal controls, and review of the IRS annual information return (Form 990);

  • Delegating management tasks with reasonable care, limited authority, accountability and appropriate oversight;

  • Ensuring the board, the executive and other officers and managers have sufficient tools to accomplish their delegated tasks; and

  • Keeping accurate records of all board actions.

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Posted in Associations & Organizations, Benchmark Series & Contests, Benchmark Series, Presence for Non-Profits

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