What to Consider Before Starting a Nonprofit

There is no question that nonprofits enrich our communities. Every day, individuals like you are inspired to start new nonprofits because they are moved by a need in their community and want to address it. We applaud the commitment to helping others. 

However, starting and sustaining a nonprofit are not easy tasks. As you will learn in the New Mexico Nonprofit Principles & Practices Guide, operating a healthy and sustainable nonprofit involves a lot of energy, time, money and people power. 

Driven by a cause or an idea, you want to get out there and “do the work.” Though, when it comes down to it,  the “idea person” may not be the person doing the work because their time is taken up with other responsibilities.

Before making a decision to start a nonprofit, you should be able to answer the following questions.

Questions to Ask Yourself

Is there a demonstrated need in the community for a new nonprofit with the mission I envision?

Doing research before starting a nonprofit is your first step. You need to define and quantify the problem that your nonprofit would address in the community. Just as you would do if you were starting a small business, you need to define the “demand” and “market” for the services your nonprofit would provide.

There is intense competition for grant funding and individual donor dollars. In order to attract funding, you need to demonstrate that there is sufficient need for your organization’s services and that your organization is equipped to address the need. You may need to pause and conduct research to demonstrate the need for the new organization.


Is somebody already doing what I want to do or something similar?

You need to research and learn about other programs, people and organizations out there. The New Mexico Nonprofit Directory is a free, online directory of nonprofits operating in our state. Other resources include your local community foundation, United Way, Chamber of Commerce and local government agencies - contact them to find out if your proposed organization will address a significant need and if they are aware of other organizations already doing work to address the need. If there is an existing organization, connect with them!
 
Rather than starting a new nonprofit, it may be more efficient to collaborate with an existing organization because they already have an infrastructure in place. You could also work with them as a volunteer or Board member.
 
Something else to consider is enlisting the assistance of a fiscal sponsor. Often, a fiscal sponsor can serve as an incubator for the program allowing it to (1) be piloted, evaluated and improved and (2) secure funding prior to becoming an independent nonprofit.


Do I want to be in charge of/maintain control of the work?

Nonprofit organizations are public entities, they are not controlled by any one individual.
 
Starting a nonprofit requires having an independent Board of Directors that oversees, guides and directs the organization. The Executive Director answers to the entire Board.


How will I finance the organization during start up and in the future?

To be successful, nonprofits need more than just people who are passionate about the programs. They need an infrastructure strong enough to support those programs over time.

You need to invest quality time up front to develop a detailed business plan. A solid plan will provide the structured discipline to think through the critically important operational issues. Once the business plan exists, excerpts can be pulled from it to insert into the IRS Form 1023 application for tax-exempt status and in fundraising efforts.
 
Along with the fixed costs associated with necessary paperwork filing, there will be other costs to get your nonprofit off the ground. Do you know what the infrastructure costs will be for your nonprofit to deliver services? Will you need office space? What supplies will be necessary? In some cases, special licenses, permits, or certifications will be necessary to provide certain services, such as child care or health care.
 

Where will I get the initial start-up funding and the operational funding to continue?

Given the competition for limited human and financial resources (Board members are not always easy to find and dollars are increasingly scarce), make sure you have (1) a realistic picture of what it will cost in time and dollars to create a nonprofit, and (2) how you will manage the day-to-day activities and continue to attract revenue into the future. Financial sustainability may be the most difficult challenge a nonprofit will face.


How will my nonprofit demonstrate impact?

In order to be sustainable, you will need to demonstrate to funders that your organization is making an impact and is worth continuing to invest in.

You will need a plan for how you are going to measure impact. You should have these measurement systems in place from the beginning, otherwise it will only become more challenging to determine how to demonstrate the impact your organization is having.


Am I sure that this is the right solution for my community?

Once you incorporate with the New Mexico Office of the Secretary of State and secure tax-exempt status from the Internal Revenue Service, the heavy-lifting begins.

You will need to recruit and orient a great Board of Directors that shares your vision. You will need to hire and manage talented staff, find and equip an office, set up financial structures, etc. You will also need to register with the New Mexico Office of the Attorney General once the organization exists and before you can fundraise. You will need to secure any required licenses or permits, make withholding tax deposits, and much more. You will need to have an ethics and accountability program in place, including policies regarding conflicts of interests, compensation, travel, whistleblower protection, etc.
 
If you learned through your research that other nonprofits are already working on the issue that you want to address, rather than starting another organization and creating even more competition for limited funding, you may want to find a way to work with that existing organization. You can donate to the organization, volunteer or join their Board of Directors, join their staff and work with them to establish a new or expanded program to reach the people you are hoping to serve, or investigate the possibility of that organization serving as your fiscal sponsor.

How to Open a Nonprofit in New Mexico

When you have considered the above questions and reviewed all of your options, please review How to Open a Nonprofit in New Mexico.

 

 

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