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Start Your Business Startup Basics

How to Start a Nonprofit Organization

How to Start a Nonprofit Organization
If you're passionate about a social cause and want to start a business to support it, a nonprofit might be the right entrepreneurial path for you. / Credit: Shutterstock

In the world of entrepreneurship, there are generally two types of businesses one can start: a sales-driven for-profit company whose proceeds benefit the business owners, or a nonprofit company whose proceeds benefit a greater social mission. If you're passionate about a certain cause and want to start a business to support it, a nonprofit organization may be the right path for you.

There are plenty of benefits to running a nonprofit business. Besides making a meaningful difference in your community, you can receive public and private donations to fund your efforts and be tax-exempt if you file for 501(c)(3) status with the IRS. But incorporating a nonprofit isn't quite the same as launching a for-profit startup, and like any business, it will present some challenges along the way.

The Vision Group, founded by Mike Stickler, is an organization that helps other nonprofits get started. With the help of The Vision Group, pediatric physical therapist Brett Fischer founded Victory Lane Camp, an organization that offers a "vacation with a purpose" for children with disabilities and their families. As successful founders of nonprofits, Stickler and Fischer know what it takes to get this type of business off the ground. They shared their experiences and tips to help fellow do-gooders start their own nonprofit organizations.

[Why Nonprofits Are Viewed Differently Than For-Profits]

As with all startups, the first thing you need for a successful nonprofit business is a great idea. Once you have that idea in place, you need to figure out how to make it a reality.

"When you're starting a nonprofit, you have to move from an idea and a mission to a vision," Stickler told BusinessNewsDaily. "Without finances, you can't really get there."

In startup planning, a vision statement is often used to outline a company's long-term future goals, while a business plan describes how the company is going to achieve them. You'll need both in order to get your nonprofit started. 

If you're planning to apply for tax-exempt 501(c)(3) status, Stickler recommended filling out your application as soon as possible, since it can take up to two years to get approved. He also advised seeking legal help, but to be very careful in selecting an attorney to work with.

"Find out how many nonprofits the attorney has helped in the past," Stickler said. "A lot of them have never done it before."

Your nonprofit organization could be the most brilliant, life-changing idea in the world, but unless you take the time to develop a relatable, cohesive brand that people will care about, you won't get very far. The process of laying this foundation for Victory Lane Camp was one of the organization's biggest challenges.

"Our concept of incorporating the child's rehab needs and equipping their parents in a camp setting is a new idea," Fischer said. "Helping listeners grasp all the facets of what we are doing is difficult, which is why we have built 'vacation with a purpose' into the camp as our brand."

Your board is going to be your team of go-to people for all fundraising, support and outreach efforts for your nonprofit organization. Many nonprofits start off with an incorporator board of the founder's family and friends. As your organization gets off the ground, you may want to turn to some professional contacts who understand entrepreneurship and running a business to serve on your board, said Stickler.

One of the most consistent issues facing a nonprofit is resources. In a for-profit business, investors will give money because they expect a return. Securing funds for a nonprofit is a little bit trickier, but "selling" it the same way as a for-profit can be helpful.

"When you're looking for supporters and major donors, the approach should be similar to investing in a for-profit business," Stickler said. "Their return on investment is changed lives. They'll give readily to your organization if they can see that ROI."

Nonprofits face just as many, if not more, challenges than for-profit businesses, and it's important to not get discouraged if things are taking longer than expected, or if you don't receive the overwhelming support you had hoped for.

"Criticism will come, but do not let anyone's thoughts or impatience in getting off the ground stop you, especially your own," Fischer said. "People of excellence rise to the top and are drawn to great causes, so keep casting your vision and trust that the people will come." 

For more information on starting a nonprofit organization, visit the Small Business Administration website.

Originally published on BusinessNewsDaily.

Nicole Fallon

Nicole Fallon received her Bachelor's degree in Media, Culture and Communication from New York University. She began freelancing for Business News Daily in 2010 and joined the team as a staff writer three years later. She currently serves as the assistant editor. Reach her by email, or follow her on Twitter.