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10 Nonprofit Start-Up Mistakes

  • Poor Initial Research
    While passion for your cause may be strong, research is essential before determining if a need exists for a new organization to address it. Can the need be addressed if you partner with an existing organization? Do you have any idea of the operational aspects of a nonprofit organization? Would the organization qualify for tax-exempt status? Read everything you can before starting.

  • No Business Plan
    You will quickly discover that a nonprofit organization is a business. In order to survive, it must have at least as much money coming in to the business as it has going out in services and expenses. Have you written a realistic business plan?

  • Not for a Charitable Purpose
    Sure it's a great idea, but does in qualify as a charitable cause? The basic definition of a tax-exempt 501(c)(3) nonprofit organization is one that serves the public good and is organized for religious, charitable, educational, scientific or literary purposes. If you are unsure, research similar organizations for information.

  • Failure to Register
    Registration of nonprofits is required in most states. Some people think they donít have to register and since they are "nonprofit" they really wonít get in any trouble. Wrong! I spoke with the head of a state charity bureau who used to be a prosecutor and he looks forward to being one again any time it is necessary to protect the interests of the people. Registration protects citizens of states from becoming victims of fraud and registration of charities, paid solicitors and fundraising counsels helps to maintain a responsible environment for charitable work.

  • Failure to Keep Good Records
    As a business, the organization will be required to file various reports of business activity. You just canít make things up thinking that you wonít be held responsible. (see Failure to Register) If you are not organized, learn to be before starting a nonprofit.

  • No Funding Plan
    Raising money is a tough and competitive requirement of most nonprofit organizations. If your experience with raising funds was through attending a dinner, golf outing, bake sale or car wash, you need help with fundraising. Without funding, there is no way to sustain a nonprofit organization.

  • Not Complying with IRS Statutes
    Yes you must file a federal tax return and yes you do need to learn what the federal government requires of nonprofit organizations. You receive great tax breaks by being a 501(c)(3) nonprofit and complying with reporting is a fair deal considering the benefits you receive. To help you, the IRS has a Web site dedicated to exempt organizations Ė http://www.irs.gov/eo

  • Misjudging Time Requirements
    Running a nonprofit is not a hobby. If you think that you can run a nonprofit organization part-time, you need to have others helping you or you will fail. When you consider that it is a business and is subject to filing and reporting requirements in addition to service work, you quickly realize it requires a full-time commitment.

  • Not Building an Effective Board
    Leadership is critical and an effective board is one that is composed of talented, dedicated and working people. Your board should add integrity to your work, offer access to funding, provide some of the expertise you need and be dedicated to your mission.

  • Not Investing in Professional Talent
    At a minimum, you will need a lawyer and an accountant to help you get started. They donít need to be on staff and instead can be retained only as needed. The same is true for fundraising counsel. There are a few critical areas that will make or break an organization and you will be better able to survive by paying a professional well only for the time you need rather than paying an inexperienced worker to muddle through. Having certain systems set-up by experienced professionals will save money in the long-run.

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