Why You Should Start a Nonprofit as a Business Owner — and What it Takes to Make it a Success

Any entrepreneur or small business owner will tell you that running a business is a lot of work, which is why most of them bristle at the idea that they start a nonprofit. But starting a nonprofit can do more than just provide a way to use your talents for the good of humanity. It can do wonders for your business, too.

Why it’s beneficial to start a nonprofit as a business owner

The goodwill that comes from having a positive impact on your community can enhance your business’s credibility and trustworthiness. A complementary nonprofit will increase the net value of your business and make it more attractive to values-driven consumers. A nonprofit established as an arm to your business will also enable you to qualify for millions in grants. Securing funding for your philanthropic mission can also further build your reputation through the connections you’ll make with donors, many of which are Fortune 500 companies.

Among other benefits of starting a nonprofit are the tax incentives from donating to or investing in such an organization. The U.S. Internal Revenue Service and Canada Revenue Agency both allow small business owners to write off or deduct the funds and intellectual property that they dedicate toward nonprofit causes and initiatives.

The legacy your business would leave behind is yet another reason to consider establishing a nonprofit. When you commit to a philanthropic, charitable, or educational mission, you display a focus on more than just your business — you also focus on improving society and positively impacting humanity.

How to start a nonprofit organization

Much like any other business, starting a nonprofit takes time and effort. It requires a little homework to understand the need for your intended services and how your nonprofit will address that need. Then, you can create a road map to ensure you’re fully equipped to get the operation off the ground. Here’s what that road map should entail:

1. Define your identity

After conducting a market needs analysis, you’ll know whether there’s a gap in services for an underserved population in your community. The analysis results will help inform your nonprofit identity. Many nonprofits illustrate their identity through their mission, vision, and values.

For many people, writing a mission statement can be hard work, as it lays out the primary goals for your organization. Keep it concise, actionable, and informative. You want to educate people about the purpose of the organization, the group it serves, and how you plan to deliver your services.

A solid, forward-thinking vision gives direction to your organization and should articulate what you plan to achieve with the services you’ll provide.

Values express what your nonprofit stands for. They help you understand what and how to prioritize by aligning strategies with the organization’s foundational ideals to help you reach your primary goal.

2. Build a board

Few people can do everything, especially when trying to run a nonprofit. That’s where a governing body comes in. What do board members do for nonprofits? Depending on the nonprofit, they can offer financial advice; provide strategy recommendations on vision, programs, and initiatives; connect with others in the community; do a little grunt work — the list goes on.

This, then, leads to the question of how to find board members for a new nonprofit. The answer is rather simple: the community. Recruit other leaders in your city who are willing to volunteer their time and talents. Make sure to set expectations for the role they’ll play as a board and how they’ll contribute as individual board members.

3. Incorporate your nonprofit

One of the main reasons to incorporate a nonprofit is for contributions. When you incorporate and get tax-exempt status, donors can deduct their donations and gifts from their income tax returns. This makes you more attractive to donors. Incorporating also lends a sense of legitimacy to your programs and services.

There is a six-step process to incorporate your nonprofit, and many of the steps might already be complete: naming your organization, appointing a board, determining the nonprofit’s legal structure, filing incorporation paperwork, applying for tax exemption, and getting the required licenses.

4. Determine your structure

To decide how your nonprofit will operate, you must develop bylaws and an organizational structure. Both can help you maintain governance standards and clarify the roles needed to run the nonprofit. While these roles vary based on your mission, there are three that will likely take priority.

First, an administrative role will cover the clerical work associated with operations. You’ll also need an individual to coordinate and run volunteer opportunities and donor relations. Another professional will serve as your industry or subject matter expert. They will train volunteers, handle some of the day-to-day work, and so on.

5. Prepare for launch early on

As you move closer to opening day, clarify how you’ll generate revenue. The cost to start a nonprofit and keep it running can be substantial. Find and evaluate any funding opportunities, and then build a realistic revenue plan based on your operations budget.

You’ll also need to know how to market a nonprofit business. Nonprofit marketing is similar to any other marketing strategy. Build brand awareness and gain visibility by developing clear, consistent messages that explain what you do, who you serve, and why.

Then, decide whether your nonprofit could benefit from partnerships. A partnership can provide direction for additional resources, grant opportunities, volunteer groups, pro bono services, and so on. Government agencies, businesses, and other nonprofits are all partnership options.

6. Set strategies to support day-to-day work

It’s important to set up a daily plan to determine what technology you’ll need, who will design and host your website, how you’ll accept donations, and what type of database you’ll use to track all of your information.

Also, plan for how you’ll maintain compliance with various regulations and consider hiring an internal or contracted professional to help with this. Depending on the community you serve, you might be dealing with HIPAA compliance for health-related data, PCI compliance when accepting credit or debit card donations, and so on.

7. Establish a pathway for growth

Once up and running, your nonprofit is ready for a growth plan, and that means creating road maps for staffing, fundraising, and scaling operations.

Your staffing plan will predict the workforce you’ll need a year from now and when you foresee adding additional employees. Fundraising will plan for year one, year five, and further. Set realistic fundraising goals and determine what you’ll need to do to achieve them. Operations scaling refers to both staffing and fundraising needs and other business elements in tandem with your growth plan.

Finding worth in a nonprofit organization

“Why start a nonprofit?” is a complex question. You shouldn’t do it for selfish reasons alone. It takes a great deal of time and money to get one up and running, and it’s much harder than you’d expect to raise the funds necessary to keep the lights on. You can’t offer dividends or shares for an investment in your organization, so it can be a challenge to secure funding.

However, it’s still worth the effort, both personally and professionally. Find a need in your community and then fill it. Your business and your life will both be better for it.

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