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Are you an agent for a cause currently contemplating starting your very own nonprofit organization? Do you long to serve the greater good by improving communities and transforming lives? If so, then starting a nonprofit maybe the right choice for you. Or is it?
Take a second and think about these very important questions. Are you providing a product or a service? For the individuals you wish to serve, will they receive this product for free or will you require payment? Let me paint a picture for you.
Let’s say you want to provide underprivileged high school seniors with scholarships and first year dorm room college essentials during their higher learning transition. Well obviously, these students and their families would not be in a position to pay for these services therefore, a non-profit would be ideal for this scenario.
Why Do Some Entrepreneurs Start Nonprofit Organizations?
Well, largely it’s because entrepreneurs (sometimes referred to as social entrepreneurs) are driven more by solving the world’s social problems than they are about making a profit. Being successful in the business world leads many start-up innovators to want to make a positive difference in others’ lives.
Entrepreneurs also already have many of the skills required to run a nonprofit. Leadership, innovation, networking, thinking outside the box… all are essential qualities when starting a for-profit enterprise or a nonprofit.
What Are the Benefits of Starting a Nonprofit Organization?
Starting a nonprofit has many advantages: both business and personal.
Many nonprofits in the US enjoy a tax-exempt status, technically known as 501(c)(3) status. This means that the organizations have a boost when it comes to keeping funds in-house; and therefore, they have an easier time budgeting for any services or schemes they want to run.
There are a few ways to register for this tax-exempt status. I won’t go into them here, but I’ll point you in the direction of this thorough guide from donorbox.org.
Limited Liability Laws
Excitingly for wannabe nonprofit founders, many states are now bringing in laws that will allow limited liability nonprofits. That means that the owner of the organization will have greater legal protection from creditors and stakeholders. These protections aren’t often enjoyed by small business owners or sole proprietors.
Now here’s the good stuff for the self-actualization seekers like myself.
By building a nonprofit, you are giving yourself a wonderful gift: the knowledge that you are doing good in the world. This gives many people a rich satisfaction that’s hard to emulate in traditional business- or so I thought at the time.
It also helps build a stable sense of perspective, which I’ve found essential in my own journey. By creating something larger than my own experiences, I feel more secure of my own space in this universe.
The Challenges of Running a Nonprofit Organization
You won’t be surprised to hear that running a nonprofit isn’t all sunshine and roses. It definitely comes with some challenges!
Nonprofits are subject to plenty of regulation. You’ll need to familiarize yourself with federal and state law surrounding this structure.
Not only that, but nonprofits often operate across state borders. That means that you’ll need to be aware of the regulations enacted by other states.
Once you’ve got a handle on the regulation, there’s always a chance of sweeping reforms. Nonprofits in the US are currently working hard to adapt to tax reforms brought in by the Trump administration.
The nonprofit sector is a market like any other, in that it’s a bunch of organizations competing for finite public funding and government or corporoate grants. As competition increases, nonprofits are finding it harder to obtain the necessary amount of money, donations, and sponsorships vital to sustaining their organization.
Full employment is good news for workers, but challenging news for bosses! Finding enough qualified staff to man a growing operation can be tricky, particularly in boom years.
Again, the growing competition in the nonprofit sector means competition: this time, for volunteers’ precious time. Can you prove to people that their limited free hours are best spent helping your cause?
My Personal Nonprofit Failures
I write this article from my own experience; so I’m happy to share my own failures and successes.
We’ll start with the difficult stuff:
A lack of board management
Which meant that I didn’t reap the advantages of accumulated wisdom. My board was made up of co-workers, friends, and personal supporters who all had limited nonprofit board experience, including myself.
Difficulty obtaining funding
Due to inexperience in fundraising, crowdfunding, and grant writing it was a challenge to obtain the funding required to fund programs and events. Most of the activities were funded by my 9-5- straight outta my own pocket.
Difficulty recruiting supporters
Not everyone’s passions match mine. Finding out how to reach people who think differently was a steep learning curve.
Friends and partnerships don’t mix
A sad lesson that’s hard to learn. Even within the seemingly-softer world of nonprofit, the relationship that you’ve built with a friend might not survive business disagreements. Setting boundaries and expectations are a must.
My Nonprofit Successes
I took away many good things from starting a nonprofit. Here are just a few:
Living Outside of My Comfort Zone
I was forced to try new things and consider new ideas – basically every day!
Learning New Skills
Similarly, I found my skill set expanding at a rapid rate. Nonprofit development, event management, public speaking, program development… all new arrows in my quiver.
Developed New Partnerships
Although some existing relationships were strained, I forged new connections that have served us all well.
Confirmed My Strengths and Revealed Weaknesses
I was pleased to discover that my strengths – innovation, people skills, empathy, etc. – were confirmed in this challenging environment. I was less pleased to discover new weaknesses, but I took the opportunity to add them into my self-actualization journey!
Greater Social Impact
Of course, a huge reason that I started a nonprofit was so I could make a difference in the world. I’m pleased to say that I managed this.
Alternatives to Pursuing a Nonprofit If You Want to Make a Difference in the World
This article might have taught you that starting a nonprofit isn’t quite the right fit for you. Fear not – there are still plenty of options to be successful and do good at the same time.
For example, a social enterprise can also be structured as a for-profit. You can build a traditionally successful company and still be philanthropic. Just ensure that your products and value deliver massive value to the end consumer.
You might also want to pursue an exciting, rising trend within business: a B Corp certification. The B Corp movement is a group of businesses whose aim is to achieve high social and environmental performance in addition to earning a healthy profit.
The Wrap Up
As with most business decisions, starting a nonprofit has its pros and cons. They might be a bit more emotionally loaded than most structure discussions, but it’s important to try and take a step back and consider the real implications – good and bad – of starting a nonprofit as an entrepreneur.
I’d love to know what conclusions you reach!
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