The Secret To Funding Staff Positions As A Start-Up Nonprofit

STAGE TWO

One of the most challenging things a Founder has to do is to make the transition from volunteer to paid staff, followed by moving from an all-volunteer-run organization to paid staff. But for continuity and long-term sustainability, making that transition needs to happen sooner rather than later.

Research shows that typically, it takes three to five years for a nonprofit to transition to paid staff, supporting the stat that shows that over 40% of all newly formed nonprofits shut their doors within two years of incorporating. They don’t make it to that group that finally cracks the code and figures out how to make the shift from volunteer to paid staff.

To go from unpaid to paid staff you need the following three things:

1.    An annual organization budget

2.    A Fund Development Strategy

3.    A seasoned, active, and engaged Board of Directors

If you have these three things, you can go from volunteer to paid in six months to a year. If you are able to recruit some powerhouse board members, it could happen even quicker. Let’s look at how it’s done.

Many Founders start their nonprofits clueless as to why the IRS requires them to have a governing board of directors. They put Auntie Em, Billy Bob, and cousin Carl in those three “Board Member” boxes on the 1023 Form. That one decision just pushed back your transition from volunteer to paid staff about three to four years. That’s how long it usually takes for a novice to figure out if they want to shift to a paid staff they need their Board of Directors to make it happen.

The Board of Directors is charged with financial oversight of the organization. A part of their fiduciary responsibilities is to fundraise. But if you have friends and family members with absolutely no board experience governing your organization, they’re not raising funds to cover your salary. It’s likely that you are out pounding the pavement trying to deliver programs, fundraise, collaborate, and do the administrative work. What typically happens is that the Founder comes across a training, colleague, or resource that exposes them to the way a nonprofit is supposed to be run and funded: by the Board of Directors.

But just in case you’re reading this and haven’t come across those resources yet, let me explain to you what you need to do to make that transition.

The Annual Budget

The annual budget is the fiscal representation of your organization. What does that mean? Much like your household budget, your organizational budget helps you to get a clear picture of how much revenue needs to come in to keep the doors open, lights on, and the water flowing. Same as in your nonprofit.

Knowing exactly how much it costs to run your organization will position you for the next step, which is to develop a strategy to bring enough revenue in to cover all the expenses—including salaries—to keep the organization fully operational.

Take Action: Developing The Annual Budget

The Fund Development Plan

You will use the budget to help develop a fund development strategy to generate enough funds to cover the organization’s expenses. The best part about the Annual Budget is that the Board of Directors is required to approve it. Doing so says that they legally agree to raise the funds to cover the expenses listed. If your salary, or a percentage of your salary, is a line item on that annual budget, then your board is responsible for raising the funds to cover it.

And the Fund Development Plan will help you, help the Board, to do just that. The fund development plan creates a strategic plan to accomplish five things:

1. Identify the organization’s expenses

2. Prioritize the organization’s funding goals

3. Create specific fundraising activities to cover each goal

4. Assign responsible committees to specific fundraisers to increase engagement and prevent burnout

5. Diversify funding streams (increase passive income and unrestricted revenue) to keep the organization thriving

Seasoned, Active, and Engaged Board of Directors

Much like your personal finances, the budget and fund development plan are all that your board needs to fulfill their fundraising role: they tell them how much revenue needs to be raised and by when.

If your board has the experience, connections, and resources, your position will be funded by the time established in the fund development plan. For newer organizations, you may want to start off funding your position incrementally (i.e., 50% the first year, 75% the second year, and 100% the third year). It also depends on the number of board members you have. It may be easier for 11 board members to raise your salary than it would be for three. You will need to consider all of the variables that need to be in place to determine the amount and timeline (maybe you want to fund yourself and an administrative assistant or a program person part-time).

For Founders thinking about starting a nonprofit, this is what I mean when I say Start your nonprofit, the right way! Most Founders don’t start their nonprofits strategically positioning them for success. Spending time to research and recruit seasoned board members who understand and are comfortable with fundraising is the most valuable thing a Founder can do to reduce the amount of time it takes to go from volunteer to paid staff.

Your board is the secret to making that transition quickly and effectively. Click here for an eBook that explains How to Attract Powerhouse Board Members.