Not sure if you should start a nonprofit or for-profit? Learn the difference between the two, and which one you should start.

LINK: Defining Your Nonprofit Organization" for $79:
https://www.amberwynn.net/shop-nonprofit-documents/p/how-to-define-your-nonprofit

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NONPROFIT SPOTLIGHT:
This episode spotlights the nonprofit "A Step to Freedom."

We would like to thank AS2F for all the advocacy work they are doing on behalf of justice-involved individuals in their community.

Check out A Step to Freedom! 👇🏿👇🏿👇🏿

Website: https://asteptofreedom.org/

Instagram: https://www.instagram.com/astep2freedom/

Facebook: https://www.facebook.com/AStep2Freedom/

YouTube: https://www.youtube.com/channel/UCLb7PJ9aAfuXdbKHe4-l3NQ
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Podcast Transcript

Speaker 1 (00:02):

Hey fam, it's your girl, Amber Wynn, Philanthrepreneur, and I'm excited about 2024. A lot of changes are in store here on air with Amber Wynn. And as I wrap up with new episodes and some new additions to the format, I wanted to revisit probably the most important episodes on the show, the nonprofit success roadmap, because when you stage your nonprofit, you save yourself hundreds of hours in sweat equity and thousands of dollars out of your pocket because you're not focusing on work, your organization isn't ready for it. Here's the thing, you have to be honest. If you've been self-funding your organization for the past 5, 10, 15, 20 years, don't say, oh, I have an accurate budget, or I have a clear mission. Because if you did, you wouldn't still be self-funding your organization do something different to get a different result. Okay? So take a look at the seven stages of the nonprofit success roadmap to determine where your organization is and work to move toward the next stage and look out for new episodes.

Speaker 2 (01:11):

Welcome to On Air with Amber Wynn, where nonprofit leaders learned 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 3 (01:35):

Hello everyone and welcome to On Air with Amber Wynn. I'm your girl, your resident, Philanthrepreneur, and my goal here is to support the most amazing people in the world, which is our nonprofit founders and executive directors. And how do I do that? I do that by providing you with the roadmap to long-term funding and sustainability. And at the end of the day, that's really what it comes down to because if it don't make dollars, it don't make sense. And we know in this world of it is or it isn't, that if you don't have the dollars, then you can't fund your staff, you can't fund your programs and you're not making an impact in your community. So what sets me apart from most other consultants is that I do. I focus on the money because the reality is you're doing the work. I know you're doing the work, you're just not getting paid to do the work.

(02:26):

So my goal is to shore you up because you know how they say on the airlines, you got to put your oxygen mask on first before you can take care of other people. Well, you need to put your oxygen mask on. You need to make sure that your organization is well funded so that you can continue to have the quality of life that you deserve while you're taking care of your community. And so that's why I'm here. In the last episode, I talked to you about the nonprofit success roadmap and it's where you stage yourself. You go through this nonprofit success roadmap, you identify where you are on that path, knowing that is going to help you identify what it is you need to do next. It's going to help you to create a strategy so that you're strong and so that you're resilient. And so today we're going to talk about stage zero, thinking about starting a nonprofit. Should you even start a nonprofit, what your options are, or should you start a for-profit? We're going to jump into that, but before we do, we're going to pause for some information from one of our amazing sponsors.

Speaker 4 (03:32):

Do you have a tool that organizes your company's paperwork and takes care of all your record keeping? Does your current record keeping systems send you 90 day alerts to remind you that your key documents are about to expire and need to be renewed? Can you find contracts and procurement opportunities in seconds from any of the 50 United States so you can grow your business? Us?

(03:57):

Is your business organized so that you can tell which key documents are needed to efficiently run the business? How about woman owned small business or disadvantaged business enterprise certifications? You have a checklist of all the key documents you need to become certified. Does your current system allow you to conduct market research from multiple sources and provide you industry and market data in seconds? Well, SmallBizPro does all of that and more SmallBizPro is the number one business management compliance, procurement assistance and market research assistance tool on the market today. Download the app now and you will be amazed. It's like having three additional employees working for you, but you don't have to pay them. What are you waiting for?

Speaker 3 (04:44):

Welcome back to On Air with Amber Wynn, your resident, Philanthrepreneur. Today we're talking about the nonprofit success roadmap and specifically we're going to break down stage zero thinking about starting a nonprofit. Now, this is a really important stage. You're not quite on the path. You're thinking about starting a nonprofit. When I meet with individuals who are thinking about starting a nonprofit, I am excited because nine times out of the 10 I can really convince them not to start a nonprofit. Starting a nonprofit is starting a business. Let's be clear. It's not something that's easier than running a business. It's not something that you should consider because you think all of this grant money is out the there waiting for you because it's not. It is competitive and typically it takes about two years before a nonprofit can really qualify for grant funds. That doesn't mean that you can't get revenue in until you're ready for it, but you need to know going into it that once you get your 501(c)(3) tax exempt status, there's not this pot of money that's waiting for you.

(05:51):

You have to compete against organizations that have been established for 10, 20, 30 years. And so coming that arena, you need to powerfully position yourself to qualify. Having a 501(c)(3) tax exempt status means that you're eligible, meaning that if you don't have that tax exempt status, you can't even apply. Having that tax exempt status simply means you can apply. It doesn't mean that you qualify for the funds. And I say that to all of the individuals thinking about starting a nonprofit because for some reason people say, oh, you need to start a nonprofit. You need to get money in to cover that. And it's not that simple. And I want you to understand that yes, it's a possibility that you can get funding for programs, but it doesn't mean that you need to start a nonprofit. Starting a nonprofit is starting a business. And so I say to a lot of people who are thinking about it, maybe you shouldn't start a nonprofit.

(06:50):

Maybe you should simply partner with a nonprofit, leverage their 501(c)(3) and accomplish what it is you're trying to accomplish. We're going to have plenty more episodes where I go into details on how to create those type of collaborations. But I really want you to pause right now. If you're thinking about starting a nonprofit because you're struggling with the for-profit, if that is indeed the case, then I'm going to suggest that you do not start a nonprofit because it's more work running a nonprofit than there is with a for-profit. But if your for-profit is solid, but you really would love to work with the community, if you have a heart for the community, you believe that maybe you can provide job training opportunities for youth or you could support seniors or homelessness. It doesn't mean that you need to start a nonprofit. What I would suggest is that you create a collaboration, you would use an MOU or an agreement, and you partner with the nonprofit.

(07:55):

You sign an agreement that says, I will be your subject matter expert and I will do the training for your clients in that grant or in the funds that they receive. You are a sub awardee. You get your money, and it's perfectly fine that you're a for-profit because in a grant, the lead agency or the grantee can subcontract out parts of the grant for specific organizations who have subject matter expertise. So you don't need to start a nonprofit, you just need to find a reputable nonprofit organization that's looking to enhance their programs. And so that's what I would suggest. But if you are ready to start a nonprofit and you think this is something that you really want to do, I'm not trying to discourage you. I'm not. I just want you to set your organization up powerfully for success. So what does that mean?

(08:52):

Well, the first thing you want to do is to, if what it is you're trying to do is even nonprofit is something that aligns with the IRS definition of what a nonprofit charity is. Sometimes people start nonprofits and they're not really public charities. They're pass throughs, right? They're pass throughs for a person to get money to do things that they aren't really supposed to be doing. And then sometimes when I'm talking to nonprofit leaders, they're not sure what I have for you today is an opportunity before you jump into it to find out. It's something that I call, it's a workbook. It's called Defining your Nonprofit Organization, and I'll provide the link in the comment section, but you want to go through actually looking to see if your idea is even fundable. People will start nonprofits and they're like, there's no grants out there. I can't get any money. Yeah, there are grants out there, but if it's saturated, if what you're doing is being done a hundred times over, then no, you're not going to get funded, and you want to know that before you actually get into that pool. So the offer that I have for you is a workbook where you get to go through the whole process of looking at what it is that you want to do.

(10:12):

It walks you through how you can look at what's going on, sort of like when you are for a business and they tell you, oh, you need to determine who your competitor is. Does the market support that? It's the same thing, but for a nonprofit. And so $449, which is a small investment because I tell you, 40% of all nonprofits actually get into starting a nonprofit. They invest hundreds of hours, thousands of dollars, and then they shut down. But $449 you can figure out right away should you even start a nonprofit. If you do start a nonprofit, is what you're doing going to be fundable? Is it in the community where it's going to be successful? And if not, how can you identify another community where it can be? So what I have for you is defining your nonprofit organization. It's a workbook that walks you through all of that.

(11:07):

When I work with my nonprofit founders and executive directors thinking about starting a nonprofit, this is what I take them through the exercise that I take them through. Where are you trying to set up your organization? Let's look to see if it'll be successful. So you can do that for a fraction of the cost because no mama ain't cheap. However, I want you to know that it's important that you know can determine whether or not you should start what you're thinking about starting before you do so that you can save money and really just be sure that you can be successful. So that's the offer. I'll put it in the link, but let's really talk about if you're thinking about starting a nonprofit. So there are five myths, right? I mean, there are five must haves that should have if you're thinking about starting a nonprofit, the five must haves, right?

(11:58):

Number one, you need to have money to start a nonprofit. I'm going to sit with that one for half a second because people think that since it's a nonprofit, it's something that should be started without investment and you cannot, first of all, you need to have money to file, right? Even if you do it yourself, if you decide that you want to fill out the paperwork and you don't want to pay a professional, which by the way, I don't necessarily recommend because a professional knows exactly what it is that the IRS is looking for and can help guide you with answering those questions. But that's another topic for another episode. You need to pay a filing fee. You can't get around it depending on what your budget is. If it's less than $50,000, it's going to be $400. If it's more than 50,000, it's going to be $800.

(12:46):

And it depends on which state you're starting in, but you have to have money. You have to have money to file. If someone's going to complete the paperwork for you, that can be anywhere between 300 to $2,000 just depending on the caliber of the professional. So right there, we're probably at around $2,500. That's just to start, right? So you need to know, you cannot start a nonprofit without any money. And to be real, you can't run a nonprofit organization without money like your own capital, not banking on grant money. So number one of the five must haves is you must have money to start a nonprofit. Number two, you need to have an annual budget. When I talk to founders, the first thing I ask them is, how much is your annual budget? They'll tell me, oh, about $24,000 because they think that's how much it costs last year for them to operate.

(13:42):

That is not an annual budget. An annual budget is not how much you fundraise. An annual budget is the actual amount that it costs to run an organization. And I'm just going to share with you from a funder's perspective, if your annual budget is anything under $150,000, I'm not going to take you seriously. So if you're saying your annual budget is 32,000 or 50,000, that's what you were able to raise last year. If you submit that to a funding agency, they're not going to take you serious. There is actual template and a process for developing an annual budget, and we'll talk about that a little bit later. But number two, you need to have an annual budget. Number three, you need to have a succinct mission. A lot of people will go in and just throw all kind of garbage into their mission. Our mission is to broaden the horizons of people through Los Angeles so that they could have a better future.

(14:36):

And what did you say? You said nothing that was googly go. It needs to be succinct because funders use your mission to determine whether or not it is a match with what they're trying to fund. So having a succinct mission that is clear and inspiring and impactful is huge. Number four, program description. When I talk to my founders and I say, what do you do? If they go on forever and ever, then I know that they don't have a clear understanding of what it is that they do, and maybe they do, but from a funder's perspective, what the three things that they're looking for is, and your program description, who are you serving? Where do they live and what's the criteria, right? You've got goals, which should be measurable and objectives, which should be actionable. So in your program description, that's specifically what your funder's looking for.

(15:26):

The next, you should have a seasoned board, right? A seasoned board. So that's not Annie Am and Uncle Jeb. It's not Mookie, Pookie and Sheeka and them. A seasoned board is someone who can say, Hey, I've got this organization whose board I sit on and I need you to give them access to. They can give you access to a venue or they can give you access to somebody who can help you accomplish your goal. And if that's your cousin, then great. I don't ever recommend that people put family members on the board, but sometimes it happens, especially in those inaugural boards. We'll talk about all of that a little bit later. But a seasoned board is going to help you scale a lot faster. If you have somebody on your board, they can help guide you, especially if you've never been in the nonprofit sector before, because if you've never been in a nonprofit sector, that means that you can't work in partnership with your board.

(16:24):

And then if you have people on your board who don't know what they're doing, then it's like the blind leading. The blind seasoned board members are essential for success in the nonprofit sector. And we're going to talk about how you can recruit them a little bit later. And then finally, like I said before, measurable goals, actionable objectives. So let's recap the five must haves. If you're thinking about starting a nonprofit, money, at least $2,500 to start and then to manage and maintain, I'm going to say you need to have at least between 25 to $3,500 a month. And if you don't have that and that's like not counting grant money, then you should really consider starting a nonprofit. So one, money to start. Two, an annual budget. Three, a succinct mission, four, program description, five, measurable goals, actionable objectives in a seasoned board. So there you have it. If you are thinking about starting a nonprofit, those are the things that you really should think about.

(17:32):

And if you don't have them, it's okay. Either you can wait, because that's what I did when I started my nonprofit. I waited until I had the money to do it. I didn't jump into it. I knew that these were the requirements, and I want you to know what the requirements are so that you can set yourself up powerfully for success and so that you're not a part of that 40% that closed their doors within two years. All right, so we're going to pause here and we're going to hear from our sponsors. And when we come back, we'll finish talking about thinking about starting a nonprofit.

Speaker 5 (18:05):

You are a school, a foundation, a healthcare provider or an environmental group, a museum, a church, a shelter or a community service. You're starting a nonprofit on a startup budget, and you need to get this right the first time. No mistakes, no misunderstandings, and no costly. Do-overs at Nonprofit Elite. We know what you need because we've been there too. Accurate information, mistake free filings and peace of mind assurance that your 501(c)(3) application will be successful. This is what we do and we are very good at it, all backed by our industry leading guarantee and 100% IRS approval rate. But forming your nonprofit and obtaining tax exempt status is just the beginning. Once you're up and running, nonprofit Elite will consolidate the bulk of your operations into one place, including your accounting, compliance, website, fundraising, and more. We do the work of several full-time staff for just a fraction of the cost so that you can remain focused on advancing your mission. Contact nonprofit elite for expert preparation of your formation documents and 501(c)(3) application, and for a full range of accounting, fundraising, and administrative solutions.

Speaker 3 (19:25):

Welcome back to On Air with Amber. It's your girl, Amber Wynn, your resident. Philanthrepreneur. Today we're talking about thinking about starting a nonprofit. Should you start a nonprofit or for-profit or do something else? And we've been talking about the five must haves. If you're thinking about starting a nonprofit, you need to have money to start a budget, a succinct mission, program description, measurable goals, actionable objectives in a seasoned board. Now is the time of the program. Where I field questions in today's question with Ask Amber is how do I know if I should start a nonprofit or for-profit? Well, there are a couple of things. Number one, do you want to own the business? A lot of people start their nonprofits and they say, my nonprofit. And as a funder, I know just from that statement that you don't know anything about your organization, it's not yours.

(20:31):

Number one, a nonprofit cannot be owned. It is a public charity. And the IRS set it up as such. How do you know you don't own it? Because if you step in as the executive director, the board can fire you. As a matter of fact, I just had one of my clients call me and say, after 20 years of starting this organization, my blood, sweat and tears, all of the money, my board just fired me. Because it's not your nonprofit. You will always, always, always be the founder, but you can never, ever own, not you, not you and your family. The difference between a public charity and a private foundation, there are nonprofits that are private foundations, family owned, private foundations, but they're giving out money, right? Don't conflate that with the public charity that's asking for money. The family foundation, they set it up so that they're giving out money so it can be theirs in their family for decades.

(21:34):

But that's different than what you're doing. You're a 501(c)(3) tax exempt status designated organization, so you can never own it. That's important. I don't care if you're the executive director or you're a president. So if you want to own a business, if you want the money to come in to go directly into your pocket, then start a for-profit. If you want to impact your community and you understand that all of the revenue that comes in, and let's be clear, you have to have consistent revenue coming in that the money that's coming in has to go back in to strengthen the nonprofit organization. Then you start a nonprofit. That's the most important thing to understand. My nonprofit doesn't exist. The nonprofit is the truth. So secondly, it has to serve the public, right? It has to be something that anyone can access. You can have a specific goal where you serve African-American youth, where you serve Jewish youth, where you serve teens or you serve seniors.

(22:36):

You can have an area that you focus on, but it can't be exclusive. So for some of my nonprofits that say that has a religious tent, that's not to say that you can't, but as a public charity, you're going to reduce the amount of funding that you're able to give because as a public charity, it should be open to the community. What else is the mission inclusive? So again, I've had some people say that God has given them a vision. I'm not, listen, I'm not touching that you and what God has given you is what God has given you. But as a consultant, I'm going to say, if it's restrictive, then you are going to have a challenge. There's some organizations out there that fully fund religious organizations, so that's not what I'm saying. But when we talk about sustainability, we're talking about the ability to bring in consistent funding.

(23:30):

And when you cut things off so nearly, then that helps to, to cut off some of those funding streams. Do you have experience? I have so many people starting nonprofits, it's easy. And then when they get into it, they're like, well, I didn't know I was going to have to do all of that. What are you going to have to do? You're going to have to do human resources, marketing, volunteer management. You're going to have to do fundraising, financial management, fiscal management. There's so many things that you have to do to have a successful nonprofit. So if you don't have those skills, my recommendation is either go get them first or just wait. You can serve your community by getting on a board. You can serve your community by participating in some of these certificated programs. Go get the experience first. Don't start a nonprofit thinking that it's easy because it's not, and make sure that you recruit a seasoned board because if you don't know what you're doing and your board doesn't know what they're doing, you're going to be in a world of trouble.

(24:34):

Alright? And then finally, can you partner, right? Can you partner with another organization to accomplish your goals? Because funders want you to partner. They don't want to just fund one organization. They want as much bang for a buck as possible. So if you are like, this is my organization and I'm not trying to do that, then you shouldn't start a nonprofit because you won't really be successful. And then of course, finally, how do you know if you should start a nonprofit or a for-profit? Do you have money to invest? Do you have startup money? That's for both the for-profit and the nonprofit. But I'm specifically stating that because if you don't have any money, then you should not start a nonprofit. If you are broke, do not start a nonprofit. So that's our ask Amber question. It was a relatively long answer, but I want it to be specific.

(25:27):

If you want to own the business, if you have no experience, if you don't have any startup money, then you should not start a nonprofit organization. Alright, so that's that for Ask Amber. You can reach me people, my fam, if you have any questions, you can post them on my social media. I am on Facebook, I am on Instagram. I have a website that you can go check out. I have resources on my website. I'm also on Twitter. I'm here for you to support you in any way that I can. But if you have any specific questions you'd like for me to read on, ask Amber, just hit me up on any of my social media post your question, and I'll be happy to read them here on air. And now we're going to go to the part that I really enjoy most about my podcasts, which is featuring our nonprofits.

(26:22):

As I've said to you before, a key element of your success is being visible. So I want to do my part in spotlighting nonprofits all throughout the country if I can. I'm not limited to just Los Angeles because I'm here, but visibility is the key. Number one, you use your visibility to leverage, leverage your collaborations. If people hear about what you're doing and there's a missing gap and you can partner with somebody that's going to help build your credibility. Visibility also gets you in front of funders, so they may not know what you're doing, but if you're out and about and they see what you're doing, they may want to fund you. So I'm always, always, always, you're always going to hear me talk about you need to get visibility. Alright, so let's talk about today's nonprofit spotlight. And it's a step to freedom. A Step to Freedom is a transitional living home that was founded in 1987 by Kenneth Krum after he struggled to find resources and support after being released from prison.

(27:30):

Despite having no formal training, Kenneth had passion, commitment and an entrepreneurial spirit, and he leveraged every one of those to form this organization. He led the organization until 1997 when his daughter, Kenya Kirkland, took over the organization and officially incorporated it as a 501(c)(3) tax exempt nonprofit in the year 2000. So under Kenya's tenure, she has expanded her father's dream, taking it from a seven bed facility to a 78 bed at three sites, and welcoming women veterans ages 18 to 65 in their families by addressing psychological issues that perpetuate cycles of sub births of behavior such as trauma, lack of coping skills, life management skills, educational attainment and job readiness skills. She also provides quality wraparound services. So we're going to take a look at a video from a caseworker that shares her reason for working at a Step to freedom.

Speaker 6 (28:39):

Hello, my name is Sade Op and I'm a case manager here at a Step to Freedom Reception site. What inspires me to do this type of work is being a part of the solution. Homelessness is a large issue in the Los Angeles County, and homelessness with substance abuse addiction and mental health component are an even larger issue, and I'm so very proud to be a part of the solution, helping those gain permanent housing gain resources and get their lives back on track.

Speaker 3 (29:14):

And individuals with justice involved backgrounds really have multiple challenges. And so I'm really excited about the work that's happening. At a Step To Freedom, they have been actually doing this work for over 30 years. They're celebrating 30 years of quality services, compassion, passion, and advocacy for justice involved individuals. And if you'd like to support them, reach to Kenya Kirkland at www a step to freedom.org. Thank you. A step to freedom for all you do to transform lives in our community. And so here we are wrapping up stage zero of the Nonprofit Success roadmap. As I said to you before, it's important for you to know where you are on that nonprofit journey because once you know which stage you're in, you have a clear understanding of what it is you need to do. We don't want you to be in stage one doing the work in stage seven because it's just going to have you spinning your wheel.

(30:20):

So it's important for me that you understand all of the stages so that you can put yourself in where it is you need to do, and then you can be laser focused on all of the things you need to do to get you to the next stage. At this time, I really would love to thank my sponsors. Small BizPro. When we talk about building infrastructure, it's important that you have what you need in order to give those statements and to give those documents to your funders. Small BizPro helps you to create that solid infrastructure and have access at a drop of a dime. Nonprofit Ready is really important for this stage because if you're thinking about starting a nonprofit, you want to start it the right way. And Nonprofit Elite, I'm sorry, Nonprofit Elite allows you to do that. They have a hundred percent guarantee, which not too many people have.

(31:10):

And so it's important that you know, have a resource to help you actually form your nonprofit. And then finally, we'd like to thank a step to freedom for all the work that they're doing in their community. And so if you want to reach me where you can reach me, I'm on social media, I'm on Facebook, I'm on Instagram, Twitter, and if you need to visit me on my website, today's offer was defining your nonprofit organization. I'm going to provide that link for you and you can use it for $149. You can use it to determine whether or not you should even start your nonprofit, whether or not it would be viable, and whether or not what you're thinking about even qualifies as a nonprofit idea. And so we're going to wrap up today's session with Mindset Minute. Why do you want to start a nonprofit?

(32:04):

I asked this question of anybody in this stage. If you're thinking about starting a nonprofit Stage Zero, why do you want to start a nonprofit? Because if it's for the wrong reason, you will fail. I had a gentleman once who wanted to start a group home, and it was clear to me that he wanted to start it because as he stated, you can get a lot of money for, you can get a lot of money for a child who starts fires. You can get a lot of money for a child who is violent. And so it was clear that he was going into that for wrong reasons. Now, I'm not saying because I'm all about the dollars you need to make sure that you generate revenue, but starting and running a successful nonprofit requires a lot of work. It does require compassion and passion and energy.

(32:53):

So if you're starting a nonprofit because you think you're going to easily start a business, then don't do it. If you're starting a nonprofit because you think there's this slush fund of grant money, free money waiting for you, don't do it. If you're starting a nonprofit because you think it's something that you can do not having experience or that you won't have to fundraise, then don't do it. Just don't do it because you will struggle and eventually you will close your nonprofit organization. So I want you just to take a minute and really be honest with yourself. If you think that starting a nonprofit is something that you can own and something that'll be yours and you can control, then don't start a nonprofit. But if you're willing to do the investigation, do the work to learn what the IRS has defined and to obtain the skills that it needs to be successful, which is volunteer management, board management, staff management.

(33:51):

If you're ready to put in the work, then I'm going to encourage you to start a nonprofit. I'm going to encourage you to see where you are on that nonprofit success roadmap. And not only am I going to encourage you, but I'm going to give you the resources that you need to be successful because that's who I am. That's what I'm here for. I am the Philanthrepreneur and I am your biggest cheerleader. I'm so excited that you joined me today, and we look forward to seeing you next week when we talk about stage one on the nonprofit success roadmap.

Speaker 2 (34:22):

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