How Much Does it Cost to Start a Nonprofit Organization? 7 Tips to Starting Your Own Charity.
There are more than 1.5 million nonprofit organizations in the US. It’s easier than you think to start one and start giving back to the world around you.
Many people think it’s too hard to start a charity but it’s not as hard as you think. They often think it’s too complicated of a process and are filled with questions like:
What are the first steps to take when starting a charity? We’ve got the answer below.
How much does it cost to start a nonprofit organization? You can start a nonprofit for less than a $1000 to open the doors and start helping others if you know how to do it.
Where do I find the resources and help I need to get one started? Right here!
Keep reading for 7 tips for starting your own nonprofit organization so you can increase your efforts to make this world a better place.
Let’s get started!
How Much Does It Cost To Start a Nonprofit Organization?
This is usually one of the first questions someone has when they want to start a charity.
The cost of starting a nonprofit depends on how you’re going about doing it because you can start a nonprofit in your grandma’s basement using your old laptop, some online forms and some handmade flyers, without a lot of overhead expenses.
Or you can have a great deal of expense if you decide to rent an office, hire staff and take film crews to tropical islands to create infomercials about the animals you are trying to save.
It doesn’t have to cost a lot to start a nonprofit organization. It’s up to you how elaborate your expenses are and how fast you increase them and expand your efforts.
If you follow the basic steps for starting a nonprofit, you can do so for a few hundred dollars and still be able to offer tax-exempt receipts.
1. Identify a Need and Choose Your Niche
If you’re considering starting a nonprofit you probably have a cause in mind that is important to you. There may be others in your community that are passionate about the same issues.
You’ll need to do a little research to find out what resources and charities are available and where there may be a lack of support or organizations to help with a cause.
There may be several organizations or foundations already raising funds in your area. You want to join those efforts, not take away from other great charities working towards the same results.
Find an area or niche that is lacking support or resources. You may be passionate about anything to do with dementia. After doing some research you may find that there are several charities in your area that are raising money for research and medical studies but very few to raise money for families to get support as they care for their loved one with dementia.
You could focus your efforts on offering support and resources to those struggling families and fill a great need for them and your community rather than competing with the nonprofits already in operation.
2. Develop a Foundation Mission and Plan
It’s much more difficult to work towards an outcome you haven’t determined you want or to reach a goal you never set.
You and the public need a clear understanding of why your foundation exists, what its purpose is and what you plan to accomplish. Most people don’t want to donate money if they don’t know exactly where it is going and what good it is going to do.
A detailed charity mission, vision, and plan will help you, volunteers, staff, industry and business associates, government, and the general public have insight into why you started the charity, what you plan to accomplish with your efforts and how you plan on doing that.
Your attention to detail on these aspects now will be beneficial to you in the future. They will be good motivation and resources to help you focus on why your efforts are worth it.
Setting up a nonprofit is the easy part. It’s the day-to-day operations and challenges that can be overwhelming at times.
Your mission, vision, and plan will help you set S.M.A.R.T. goals and persevere to be successful even when you’re having a difficult time.
3. Gather Your Dream Team
While it’d be great to be able to singlehandedly change the world, you are going to need help to make your charity successful. There are many different areas of operation to consider and various skill sets will help you do all of them well.
Some skills you’ll want to have on your dream team include:
- Financial Accounting
- Legal/Government Policy Management
- Fundraising and Volunteer Management
- Executive Director/Administration
- IT/Technology Management
You’ll want to make sure that each member of your team shares your vision and passion for the cause.
A good rule of thumb for your management education is that they should understand well enough to explain it to a six-year-old but also be able to discuss it with an educator on the subject.
You’ll also need to create a board of directors for the charity as a part of the conditions of incorporation of your organization.
4. Charity Policies, Bylaws, and Standards
After you’ve gathered your dream team and clearly outlined the organization’s mission and goals, you’ll need to agree on how you’ll do that.
The nonprofit bylaws will outline what the roles and responsibilities of each member of the team and board of directors are. It’s like your troubleshooting guide and rule book for the future day to day operations of the charity. The more you include, the easier it will be to resolve issues and misunderstandings in the years ahead.
5. Incorporation of Your Charity
If you want to be able to claim 501(c)(3) tax-exempt status and to collect donations, you’ll need to incorporate your nonprofit organization.
There is a fee of $750 but that may be lowered if you expect to generate less than the minimum allowed under current government standards. You’ll want to research and verify that you have met all your State and Federal requirements and have filed all the necessary papers with all levels of government to ensure you’re legal.
The benefit of this is that your donors can receive tax receipts for their donations and gives you more credibility when approaching potential givers.
6. Consider the Hidden Costs
While you can open the doors to a nonprofit for less than a $1000 dollars, you will need some money to be able to operate and be successful in your efforts.
Many people neglect to consider this and find themselves drowning in debt and unable to help themselves let alone anyone else.
Some of the hidden costs include:
- Daily Operation/Overhead Costs
- Marketing/Administration Operations
- Stationary/Business Inventory
- Phone/Website Operations Costs
It’s great to decide to hold a huge annual fundraiser but don’t forget the costs associated to organizing such an event. If you have no money in your budget, and no income it can be impossible to have everything in order.
If your computers breakdown or your company vehicle needs replacing, you’ll need to have the funds to do so, or face the possibility of closing down until you do.
How these costs are covered should be detailed in the bylaws and financial policies of the organization.
Some charities, such as the Terry Fox Foundation, don’t allow any donated money to go to administration costs or to run a fundraising event. Other charities allow almost all of their money to go towards the cost of running the charity rather than what the charity was actually created to help.
7. Ready, Set, Network
Now that you know what you want to do and how you want to do it, you need to find the people that are going to help you accomplish your goals. Networking with others in the business world, local and global community is going to be critical to your success.
It’s good to keep up on local charity and wall street news so that you know who is investing in and making advancements in your niche.
Starting a Nonprofit Takes Heart and Soul
When someone asks “How much does it cost to start a nonprofit organization?” Most who have done it will say it costs your heart and soul because you have to give them both to the organization to make it successful and help you reach your goals.
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