Advice for Starting a Nonprofit

In the past few months, several people have asked me for advice about starting a nonprofit.. I thought I would share my thoughts more broadly.

Why Before How — Structure Follows Strategy

I always start by asking why they want to start a nonprofit. What problem are they trying to solve, and is a separate entity the best way to solve it?

Some questions to consider:

• What problem are you solving? Who is your focus — and who isn’t? Why now? What makes it urgent or compelling?
• What would happen if you did not start this nonprofit?
• What already exists in this space? Who are your natural allies? Who might perceive you as a threat?
• Why start a new organization vs partnering or expanding an already existing one?
• Should you consider a fiscal sponsorship? This lets you operate under an existing nonprofit’s umbrella while you test your idea, which saves significant time and money upfront.

Governance

You need at least two or three committed, capable founding board members. These people will be listed in your Articles of Incorporation and should be part of all the initial planning. Get them on board as you work through the steps below.

• New organizations usually start with a working board but that changes over time. Set expectations around this. Make sure you have clear roles and responsibilities when you start out but recognize they will change. Be clear when you are acting as board versus staff: In one startup, I was board chair and did all the marketing and fundraising — pro bono. The ED and I would joke about which “hat” we were wearing at any given moment. I’d say, “Right now I’m in my marketing role and you’re my boss.” Later, we might be in a governance role and I was his boss. We laughed about it and we were good partners. But being clear was important.
• What skills do you need on your board– finance, legal, program expertise, communications, social media, fundraising, connections in community?
• Consider whether your board members give or raise money.
• Think about how the people you serve will be represented and what that means for board expectations. I once served on a board focused on early learning that included childcare providers — they offered invaluable insights but couldn’t contribute financially in the same way as others.
• There are IRS rules about having family members on your nonprofit board. Check these out.
• Avoid these pitfalls: a founder-controlled board with no independence, a friends-and-family board with no accountability, and unclear decision making.
• Once established, develop an onboarding process for new board members and do periodic board self-assessments.  
• Start doing performance reviews of the CEO from the outset. It can be awkward to add later.

Vision, Mission, and Strategy

Next work on mission, vision, and strategy. This is not about writing polished vision and mission statements – not yet. This is about having a good idea about the organization you want to start. Note also that this needs to be clearly stated when applying for nonprofit status with the IRS (more on this later).

Vision

• Your vision needs to be big, not something you can solve in a year. Usually not something you can solve on your own. A nonprofit I formerly served on the board of had a vision of “An Excellent Education for All.”
• What does the world look like if you are successful? How will it be different?
• Is this vision compelling? To whom?
• Because many nonprofits are founder-driven, ask yourself whether you’re building something bigger than the founder — something that would still make sense when the founder leaves.

Mission

• Given your vision, what specific role will this nonprofit play in achieving it? What do you actually do?
• Going back to the vision of “An Excellent Education for All,” your organization might focus on teaching excellence, policy change, stakeholder collaboration, or advocating on behalf of a subset of students (special needs, low-income, highly capable).

Strategy

• What is your model – what are the programs or services you would provide?
• What is your theory of change? How will your work lead to the outcomes you want?  
• Who is your target population or geography?
• What will you prioritize? What can you leave for later?
• What do you need in terms of delivery, staff, infrastructure?
• How will you measure and evaluate impact? What measurable impact can you see in the near term?

Financial Model

Before you launch, map your financial model for the first two years. You don’t need every detail, but you need a plan and a realistic path to sustainability.

• Where will you get initial funding?
• What type: earned income, grants, major donors, small donations?
• Why would each of these funders support you?
• If you have one large early funder, what is your plan when that goes away?
• How will you steward current funders and find new ones? Many nonprofits fail in years two to four after initial enthusiasm wanes.
• What will your costs be? Be exhaustive: include operations, fundraising, and programmatic costs. Build a spreadsheet so you can test scenarios. Don’t forget insurance, accounting, legal, state registration fees.
• Think about your values around the people who work for you. Will they be employees or contractors? What type of benefits can you provide initially? What do you hope to provide once you are established?
• Keep in mind that states or funders require an independent audit once you reach a certain revenue level.

Communications and Public Presence

Develop a strategy for how you will show up publicly.

• You will need a web site and social media accounts. And you will need someone to develop and manage these.
• How will your potential clients know you exist? What is your marketing strategy?
• Will you want more traditional public relations?
• What materials will you need for potential donors?

Sanity Check

Before you move into implementation. Do a quick sanity check:

• What assumptions might be wrong?
• What could cause this idea to fail?
• What external factors (policy, economy, partners) could affect you?
• How will you know if you need to pivot?

Decision Making

Once you have a board and are up and running, I encourage you to discuss how you will make decisions. I would do this early – before you finalize by-laws. I wrote at length about creating your own Rules of Order here: Ready to Kick Robert Off Your Board? – Leading Well Having this discussion is powerful, since you start with values. Thinking about decision making ahead also helps when conflicts arise – because you created a framework outside of any specific decision or issue.

Legal Structure

Don’t start creating legal structures until you have your founding board, vision, mission, strategies, and financial framework in place. Structure should follow strategy.

You can find drafts of Articles of Incorporation and Bylaws online, but I have always used an attorney. Think about what you want before you hire an attorney — they are expensive. Consider an attorney when you apply for nonprofit status with the IRS as well.

Some specifics:

• Incorporate in your state. You will need a name – check on availability. Articles of Incorporation are straightforward.

• Get an EIN from the IRS.

• Depending on your state, you may have to register as a nonprofit before you can fundraise.

• Draft Bylaws – think through these before going to an attorney to save money:
  • Number of board members. This will be a range, and you will often start with fewer and add a few every year in a “class,” creating staggered terms.
  • Term limits: Some organizations have none, while others add them later. I generally think they are a good idea, but I understand the need for continuity, especially when getting established.
    • Most organizations have two or three 3-year terms for a total of six or nine years. I know one that has three 2-year terms with an optional additional 2-year term for a total of six or eight years.
    • I prefer a longer commitment so that individuals do not have to move into leadership immediately upon joining the board. (See my next point on officers.) Note that neither the board member nor the organization is obligated to continue beyond one term
  • Officers. All organizations have a Board Chair, Treasurer, and Secretary. Some states limit a single person from holding two of these positions.
    • Many organizations have a two-year limit per role, especially if you have two 3-year terms as the limit on the board. Organizations with no term limits for board members often have no limits with officers either. I like having turnover. It brings new energy, though I served as Chair in a start-up organization for six years.
    • I advocate for a unique model for the Chair role. It may seem a bit complicated at first, but once you start, you will see excellent continuity plus great mentorship. So, let’s follow Chris: Year 1, Chris moves into leadership as the Chair Elect and shadows the current Chair for a year. In Year 2, Chris becomes the Chair, and the former Chair stays on as Immediate Past Chair to offer counsel to Chris. There is no Chair Elect in Year 2. In Year 3, the Immediate Past Chair steps down, and a new Chair Elect shadows Chris. In Year 4, the Chair Elect becomes Chair, and Chris becomes Immediate Past Chair. Your attorney will say it’s too complicated — but everyone I’ve seen use this model loves it because, after a year of shadowing, they feel genuinely ready. The tradeoff is a four-year commitment, which is one reason I favor longer board terms.

• Apply for nonprofit 501(c)3 status. I have always used a lawyer. But if you do it on your own, follow the IRS guidelines closely and use their language. But also make sure it matches your Articles of Incorporation. Inconsistencies can cause problems.

• Adopt core policies. Most common are conflict of interest, whistle blower, and document retention since these are listed on the 990, which is the return you will file yearly with the IRS. One important caveat: it’s better to have no policy than to have one you don’t follow. Don’t adopt a document retention policy unless someone will manage it.

Financial Controls

Good controls from the start will make everything easier as you grow and as staff turnover occurs. I have some posts about controls and risk management. Risk Management in Uncertain Times – Leading Well, Financial Fraud Can Happen to You – Leading Well, and Avoid Chaos by Managing Critical Business Accounts – Leading Well.

• Basic internal controls: Approvals and reconciliations.
• Separation of duties: No single person controls money end-to-end.
• Board oversight of finance.
• Security: Maintain two administrators so you don’t lose access if something happens, and manage MFA through both.

People and Culture

Think about what type of culture you want in your workplace. Culture is much easier to shape at founding than to fix later. Be intentional from the beginning.

• How will you handle disagreement and conflict? Model this from the start.
• How much transparency will you have with staff about finances, strategy, and challenges? More is generally better in small organizations.
• How will you recognize and appreciate people? In resource-constrained environments, this matters even more.
• What does accountability look like? Early nonprofits sometimes avoid hard conversations in the name of mission and relationships. That’s how bad culture starts.
• Nonprofit work is emotionally demanding. Any startup requires a lot of work. How can you avoid overextending yourself and your team? How can you avoid pressuring staff to work 70-hour weeks? How will you check on team wellbeing and what boundaries will you set for yourself?
• If there are co-founders, have an explicit early conversation about decision-making authority and what happens if one wants to leave.

Administration, Fundraising, Board

A few things to get right from the start:

• Administration: Take the time to establish effective administrative processes and procedures. Cover compliance and reporting (state, local, federal), HR (hiring, performance review, setting salaries, bonuses), tech, security. For insurance, you will need: General liability, D&O, and possibly professional liability, depending on services
• Banking: Choose a bank that works with nonprofit organizations and can help set up accounts with appropriate signatories.
• Fundraising: You may not have a donor database from the beginning, but keep detailed notes about every donor, their background, their giving history, how you connected to them, and more. A spreadsheet works fine at first and can later be imported into a database. Always send the official gift acknowledgment in a timely manner.
• Board: Take minutes, not notes – there is an important difference. Scroll down in this post, Changing Board Culture – Leading Well. Also consider keeping a single running document of every board vote: the date, the motion, and the outcome. This will save you enormous time later when you’re searching for a past decision.
• Volunteer Management: Many early nonprofits rely heavily on volunteers. The legal and operational considerations are different for staff.