Starting a nonprofit is starting a business. Before investing thousands of dollars and hundreds of hours, learn why over 40% of nonprofits close their doors in less than 2 years so you’re not a part of that statistic. Start your nonprofit understanding what it takes to get grants, run, and fund a successful nonprofit.

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Podcast Transcript

Speaker 1 (00:08):

Welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding, impact, and sustainability. And now here's your host and resident Philanthrepreneur Amber Wynn. 

Speaker 2 (00:29):

Welcome fam. It's Amber. That's right, your resident philanthrepreneur. In today's session, I'm so excited because I get to talk to so many amazing Founders and Executive Directors and over and over I see the same thing. And so today we're gonna talk about the Five Myths that Derail Nonprofits. But before we jump into all of that, I just wanna welcome those for your first time being here. This podcast is for all things nonprofit, but in particular in support of Nonprofit Founders and Executive Directors. And I am your girl Amber Wynn, philanthrepreneur, and I leverage my 30 years of nonprofit experience to support the most amazing people in the world. And that would be you, my nonprofit founders and executive directors. In particular, I provide nonprofits with a roadmap for long-term funding and sustainability. And so as I mentioned, as I opened, today we're gonna talk about the five myths that derail nonprofits. 

Speaker 2 (01:32):

Last episode, we talked about the nonprofit success path. And the nonprofit success path is important for any founder, any person thinking about starting a nonprofit, or even if you're already in the nonprofit sector. If you can stage yourself, there's seven stages, zero all the way up to seven. If you can stage yourself, you can cut out a lot of wasted time, energy, and money. So for the next couple of episodes, we'll be talking about the nonprofit success path. It's about your nonprofit journey. And right now we're in stage zero. Stage zero talks about if you are thinking about starting a nonprofit. And that's why we're gonna talk about the five myths that derail nonprofits, because a lot of people start nonprofits with erroneous information and it just leads them down a path that's really, really difficult to self-correct from. So we're gonna pause for a second, hear from a sponsor, and then we're gonna come back and jump right in to the Five Myths that Derail Nonprofits.

Speaker 3 (02:38):

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Speaker 3 (03:01):

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Speaker 2 (03:47):

Welcome back to OnAir with Amber Wynn Philanthrepreneur. Today we are talking about the nonprofit success path, in particular, stage zero, if you're thinking about starting a nonprofit. So, specifically I wanna share with you the five myths that derail nonprofit organizations over and over and over again. I have well meaning, well intentioned, amazing people starting nonprofits, mostly starting them off of bad information. So today we're gonna tackle the top five. The first one being a nonprofit can survive off of grants alone. What typically happens is that someone's doing some amazing work in the community and someone will invariably say, you should turn this into a nonprofit so you can get grants. And there you go. And then the person starts off on this long winding road of trying to start a nonprofit so that they can get grants to fund their organization. Why is this a myth? 

Speaker 2 (04:47):

Because a nonprofit cannot survive off of grants alone. And so if you think you're gonna start an organization and you're gonna pay for your car and pay for equipment and pay for a building and everything is gonna be covered by grants, then you'll be setting yourself up and your organization up for failure. A nonprofit cannot survive off of grants alone. What's the formula? Well, grants should be a part of your fund development strategy. You should absolutely apply for grants, but it takes between six to 12 months to get a grant funded, and that's no guarantee that you'll even get it. And we'll talk about that in a whole nother episode. But what you should realize is that grants should probably only be about 35% of your fund development strategy. So you still have the other 75% that you need to fund. Show myth number one, a nonprofit can survive off of grants alone. It can not.

Speaker 2 (05:45):

It should be a part of your fund development strategy. You should have somewhere between five to eight funding streams to keep your nonprofit afloat and to be able to meet the needs of not only your organization but your community; five to eight funding streams. All right, myth number two. A nonprofit organization qualifies for grants as soon as it is incorporated. That is the number one myth that really sends nonprofits into a tailspin. Just because you've got your 501c(3) tax exempt status does not mean you automatically qualify for grants. It means that you're eligible, meaning you're more than happy to apply for the grant because the requirement is that you are a 501c(3) tax exempt organization. But it doesn't mean that you'll qualify. And I think this is a huge missing that a lot of Founders just don't understand. You're probably not gonna be the first nonprofit doing what you're doing, right? 

Speaker 2 (06:50):

There are very few firsts in the nonprofit sector. The reality is, if we never started another nonprofit, we would be okay. But because you haven't that means that there are other people in your line of work that's been doing it, that already have a track record, that can demonstrate impact. And so you're jumping into that pool and you're competing against other nonprofits. So, a Funder is looking for somebody who, or an organization that they can almost guarantee is gonna give them a return on their investment. Meaning, if they give them this $250,000, they know that they're gonna get something in return. And when you're a brand new nonprofit, that's generally not likely. But more importantly, a  Funder can't determine that. And so when you have a track record and you have financial statements, that's something that can almost say to a Funder, okay, I've done this before. 

Speaker 2 (07:44):

Here's my track record, here's why you should trust me. So it's important to understand that just because you qualify for grants with your 501c(3) tax exempt status, that you don't go in thinking you're gonna automatically get grants. Honestly, it typically takes between one to two years for a nonprofit to really qualify for a grant. And that's because of all of the competition out there and the restrictions from a nonprofit organization. Can you get a grant coming out the door? Absolutely. If you have an amazing grant writer, you have an amazing Board. That's not to say that it doesn't happen. I've written plenty of grants, so where it happens, but nine times outta 10 when you start, you don't have the money for a grant writer. You're writing the grants yourself. You don't know what the buzzwords are. So it's just a lot that goes into writing a grant. 

Speaker 2 (08:33):

But it is by far the number one misconception about the nonprofit sector, that as soon as you get your 501c(3), the first thing they'll say is, I got my 501c(3). How do I get a grant? And we're gonna talk about what you should be saying. It's not, not how do I get a grant, but how do I fund my nonprofit organization? Myth number three, you can pay a grant writer from the grant after it's awarded. This is probably almost up there with, you know, you incorporate and then you think you can get a grant. People believe that you can pay a grant writer after the grant has been awarded. And that is one of the biggest myths that really derails a nonprofit because they come in with no money and they're thinking, oh, we'll just take some of the grant that you wrote and won and we'll be straight. 

Speaker 2 (09:23):

I don't care. I mean, it's not like I had money in the first place. The reality is, that is illegal. That action; you giving a grant writer money after the grant has been funded could be construed as mismanagement of funds. And I want everyone, everyone, everyone to listen to what I'm saying because I get this all the time. Oh, can you write me a grant? And when I ask them, well, do you have a budget? Well, no, I was gonna give you a percentage of whatever you want. And I tell them up front, that's illegal because your Funder is giving you money for the program, not for services that have been rendered prior to the grant being awarded. So if the funding period is August through July, they're not gonna pay for services that were rendered somewhere in January. Those are your responsibilities as a business. You are responsible for paying your grant writer. 

Speaker 2 (10:21):

The Funder is not. And so if they find out and would they find out? Probably not. But the reality is, if they find out, then that would be construed as mismanagement of funds. So I'm gonna state it plainly. If you can't afford to pay for your grant writer, then you need to do what you need to do to save the money to do that, because paying them out of an awarded grant is illegal. All right. So that's myth number three. Myth number four, you can get funding without an infrastructure. My people try and try, they try to get around it, they try to go up, they try to go down. If you have no infrastructure, it is going to be extremely difficult, dare I say, impossible for you to <laugh> get funding. Why do I say that? And what do I mean by infrastructure? I mean you need to have a bank account. 

Speaker 2 (11:17):

I mean, you need to have a tracking system. One of our sponsors, Small BizPro, they help you to create your tracking systems so that when you're ready to actually submit for a grant, you have all the documentation that you need. But if you don't have an accounting system that's tracking the money that's coming in and the money that's going out, then it's gonna be virtually impossible for you to provide your Funders with financial statements. So Financial Statements are gonna always be requested from your Funder because as I stated before, they wanna know. They want to have proof that you can manage their money. Now, someone may say, well, I don't have any money coming in, so why do I need financial statements? If you have people even volunteering and giving you money, donating, you have money coming in, it may not be a grant or it may not be anything huge, but you have money coming in. 

Speaker 2 (12:09):

So that means then that you should have a system that tracks that, right? Money coming in and money's going out. So you have to have an infrastructure in order for you to qualify for funds. It just is what it is. But it's almost the number one reason why nonprofits fail to get consistent funding because they can't give the Funder what they need in order to qualify for the grant. All right. And so myth number five, you can be both the Executive Director and the Board President. This is huge because people conflate the for-profit world with a nonprofit world and it creates a lot of issues. And from a Funder's perspective, if you know and understand the nonprofit sector, that's one of the things that's gonna be a red flag. So people will put on their signature block all the time, Executive Director slash President. Well, that's a red flag from a Funder because in the nonprofit sector, the Executive Director reports directly to the Board. 

Speaker 2 (13:11):

That means the Board has the fiduciary responsibility, the legal responsibility of hiring and firing the Executive Director. So if you're both the Executive Director and the President, are you gonna fire yourself? The answer to that is no. And so from a Funder's perspective, they need to know and understand that you know and understand what the rules are, established by the IRS. So if you are both the Executive Director and the President, then that says that you're not really doing your due diligence, you're not following the laws, you're actually functioning illegally in terms of structure. If you are a for-profit and you're a corporation like Coca-Cola or something like that, and you have a President slash CEO, that's perfectly fine for the for-profit sector. It's not a public charity, it's a corporation, it's publicly traded, and those titles are very common, right?. But in the nonprofit sector, it's important that if you are the Executive Director, that you're not the President. 

Speaker 2 (14:20):

And here's what happens. People wanna get paid. And so the position that receives a salary is the Executive Director, but as the Executive Director, you report to the President. So you're gonna have to make that decision, right? The highest ranking person in a nonprofit is the President of the Board because the President of the Board actually manages the Board and then the Executive Director reports to the Board. So the highest ranking person in the nonprofit organization is the President. And that's typically if you've founded an organization where you wanna sit. But, the Board also is a volunteer entity. So if you're looking to get paid, then you don't wanna be the President. So you have decisions to make, but I'm sharing this information with you so that you can make an informed decision, but more importantly, so that you can make the right decision because being the Executive Director and the President is a red flag to Funders. 

Speaker 2 (15:18):

So quickly, let's just recap. What are the Five Myths that Derail Nonprofits? Number one, is believing that a nonprofit can survive off of grants alone. The reality is you should have about five to eight funding streams. Number two, nonprofit qualifies for grants as soon as it is incorporated. Untrue, usually takes about one to two years before you qualify because you have to build up your organization so that you have success stories, and you can demonstrate impact. Number three, you can pay a grant writer from the grant. That is a myth and untrue. You need to pay your grant writer up front. A grant writer should be viewed just like an accountant or a marketing person. You are paying them for services rendered. You are not paying them whether or not you get the grant, it takes between 20 to 100 hours to create a proposal. 

Speaker 2 (16:19):

And so you need to pay your grant writer for the services they provided you, not whether or not you got the grant. And then number four, a nonprofit can get funding without an infrastructure. If you can't produce financial statements, if you can't demonstrate to a nonprofit funder that you can manage money, that you've had some success, that you have a Governing Board that knows what they're doing, that you have an entity that has been established according to IRS rules and regulations, then it's a high likelihood that you will not get funding. And the reason is, because they have to report to the IRS. And so if they're funding nonprofit organizations that are not in alignment with IRS rules and Regulations, then they're gonna get in trouble. So there's a high likelihood that unless you're just getting cash and cash and cash, which you're not gonna get major funders giving you cash, right? You can't get funding without having the infrastructure that is required. And then finally, you can be both the Executive Director and President. You cannot hold both of those titles. You're gonna be one or the other. So for those of you just joining us, this is Amber and you're On Air with Amber Wynn Philanthrepreneur.  And we are going over Stage Zero of the Nonprofit Success Path, and we're talking about the Five Myths that Derail Nonprofits. We're gonna pause right now for a sponsor break, but we'll come back and we'll jump right into the question of the day. 

Speaker 4 (17:56):

Starting a new career in a new sector with unfamiliar job titles and new jargon can lead to frustration and burnout. 

Speaker 4 (18:06):

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Speaker 2 (19:17):

Welcome back to On Air with Amber Wynn, Philentrepreneur. Today we're in Stage Zero of the Nonprofit Success Path, and we're talking about the Five Myths that Derail Nonprofits. I'm excited to be here and I'm excited to share my knowledge and wealth of information. And I'm everywhere. You can reach me on social media, my social media handles. I am on Facebook, that's Amber Wynn Philanthropreneur. I'm also on Instagram at Amber Wynn Philanthrepeneur. On Twitter, it's amberwynn.net. And you can reach out to me on my website, which is www.amberwynn.net. So if you have a question, if you are interested in resources or you just wanna check out what it is that I do, I am a nonprofit consultant and I've been in the industry for over 30 years. Check out my social media handles, leave me a question, check out the resources that I have available for you. 

Speaker 2 (20:21):

So we're gonna jump in to Ask Amber. It is our question of the day. And it is a timely question because I'm sitting up here telling you if you don't qualify for grants, you're not gonna get funded just because you just formed your organization. So the question of the day is, if I don't qualify for a grant right away, then how do I fund my nonprofit? Now, I'm just gonna reiterate, and this is something that Amber will always say, so get used to it. A nonprofit organization is a business, and every business has business expenses. So if you don't qualify for grants, you need to take two steps back and put together an infrastructure where you can generate some funds until you qualify. So before you even do that, I would like for you to do a couple of things. One is, focus on building up your reputation, right? 

Speaker 2 (21:20):

Because this is a small community, and when Funders fund an organization and they have success, they talk to other Funders. So you wanna always have a good reputation. And the way that you do that is by creating an impact. If you're serving young kids and they're graduating, that's an impact. It's because of your intervention or prevention that these young students are graduating. So you can demonstrate impact. If you're serving seniors, you can say, okay, we've served over 250 seniors for the last … that’s an impact. So focus on what you do to improve your community. That's one. Number two, build your infrastructure. I can't express that enough. Make sure you have a bank account. A Funder is not going to want to see statements from your personal account. They wanna see a business account. They wanna make sure that you have your own telephone number, not your cell phone number, but a business number. 

Speaker 2 (22:19):

Things that represent a viable business. Your Board is extremely important. Focus on recruiting people who are seasoned board members that know what they're doing, not just your friends and people who love you. And then you are going to have to do some things to bring in money until you qualify for a grant. And that's things like having events and getting corporate sponsors and having board members who understand that their responsibility is to pay board dues. So one of the things that you can do soon as you incorporate is have an event. Now, the challenge is gonna be who's gonna come to your event because they don't know what the impact that you're having. But let's just say your friends and family, they wanna support you and you wanna have an event. A lot of the time my nonprofit founders just throw an event. You should have a funding goal and you should have a strategy, and that's gonna make sure that your event is successful. 

Speaker 2 (23:22):

Otherwise, you could be spending all of this money for tables and linens and AV and entertainment. And then after all of that said and done, you only netted $1,500. And that wasn't really worth your time or your effort or the people in your life who came out to support you. So today, I want to offer you, it's an amazing thing that I created. It's called How to Start Your Nonprofit 90 Days or Less Calendar. And it helps you just to work out all of the things that you should have before you even get started. And it's free and literally 30 days, 60 days, 90 days. It's a calendar that helps you to build your infrastructure, and it helps you to put things in place in order so that you're not spinning your wheels. So I'm gonna provide that for you for free, How to Start Your Nonprofit, the right way, in 90 days or less. 

Speaker 2 (24:15):

And it's a calendar and it shows you step by step the things that you're supposed to do. And that's gonna help position you to qualify for grant money faster, but it's also gonna position you so that you can get other types of funding. All right, so we're gonna slow things down, wrap things up, and we're going to jump into the Mindset Minute. Now, when I first started doing this podcast, I told you that I wanted to do just a couple of minutes on the mindset, because what happens is people come in with their mindset on what a nonprofit is supposed to be, and that's not always the case. There are rules and regulations. And so if you can just shift your mindset nine times out of 10, you can get back on track and you can do the things that you need to do to be successful in your nonprofit. 

Speaker 2 (25:04):

So this Mindset Minute is going to just have us pause and think, what's the real deal about grant writing? There's so much publicity out there. There used to be these information infomercials out there with this man saying, get free money. But that was just a scam. He was making money off of those books. But what is the deal about grant money? Well, grants are not the end all for the nonprofit sector. As a matter of fact, as I stated, they should only be about 35% of your fund development strategy. It takes between six to 12 months to get funding. And more importantly, if you're gonna secure a grant writer, depending on their level of expertise, it can cost anywhere between $1,200 to $4,500. So $1,200 being a foundation where it's like maybe five to 25 pages up to 4,500 if it's a government grant. And depending on how difficult it is. 

Speaker 2 (26:03):

As a seasoned grant writer myself, you're gonna catch me somewhere between $35, $45 hundred dollars. And if you want me to do the government grant, it's gonna go up after that. So just go into being in the nonprofit sector, not expecting grants to be the end all to everything. Expect grants to be just a portion of what it is that you're doing in terms of funding. All right, so that's all I've got for you today. I want to thank you all for joining me here On Air with Amber Wynn Philant. Remember, you can reach me on my social media. I'm on Instagram, I'm on Facebook, I'm on Twitter, and you can always check me out on my website@www.amberwynn.net. And we'll talk to you on the next episode where we dive into the next topic, which is Alternatives to Starting a Nonprofit. See you next time. 

Speaker 1 (27:05):

Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwynn.net/podcast for the links and resources mentioned in today's podcast. See you next time.