Episode 81: The Nonprofit Success Roadmap: Stage 1 Pt. 2 - How to Start a Nonprofit “The Infrastructure”
How to start a nonprofit in terms of building out the most important foundational elements of the organization - the infrastructure. Step 2 is the key to getting grants, recruiting board members, and becoming funder-ready. This is the part of starting a nonprofit that most Founders skip.
LINK: 7 Stages of the Nonprofit Success Roadmap
SPONSORS:
SmallBizPro: https://www.smallbizpro.net/
Nonprofit Elite: https://nonprofitelite.com/
NONPROFIT SPOTLIGHT:
This episode spotlights the nonprofit "Living Advantage"
Check out Living Advantage! 👇🏿👇🏿👇🏿
Website: https://www.livingadvantageinc.org/
Instagram: https://www.instagram.com/livingadvantage/
Facebook: https://www.facebook.com/livingadvantage
X: https://twitter.com/LivAdvInc
LinkedIn: https://www.linkedin.com/company/living-advantage-inc
YouTube: https://www.youtube.com/channel/UCuKNPgps4VaWEOSh-_u903Q
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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 (01:16):
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 3 (01:38):
Welcome fam, you're on air with Amber Wynn, and in this episode, we are still talking about your journey, the nonprofit success roadmap, and we're going to be talking about that for quite some time. It's important that you understand as a founder and an executive director that it is a journey, right? One of the reasons why I took this on is because I have so many people approach me about how to start a nonprofit, how to fund a nonprofit, where to get the grants, all of the things that are at the very end in the middle, but not in the beginning stages, and it's the beginning stages where you want to set yourself up powerfully for success. And today's topic, we're talking about how to start a nonprofit part two. If you miss the last episode, part one, it was talking about how to form your nonprofit, which is how to form the business entity.
(02:33):
That's the first step of how to start a nonprofit. This episode, we're going to actually talk about how to build the nonprofit infrastructure, which is the heavy lifting, but which is the most important part. Yes, you have your 501(c)(3) tax exempt status, but starting a nonprofit means creating the infrastructure so that you are ready to receive funding. You don't get your 501(c)(3) tax exempt status and then get all of this money. It doesn't work that way. You have to create an infrastructure that makes you grant or funding ready. We're going to talk about all of that, but right now I just want to welcome you to this episode. I want to let you know that I'm here to support you, Philanthrepreneur means I'm fusing all of my 30 years of experience to support the most amazing people in the world, which are you? My founders and nonprofit executive directors. We're going to jump into a commercial right now, but when we get back, we're going to talk about actually how to build your infrastructure.
Speaker 4 (03:38):
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 5 0 1 C3 application and for a full range of accounting, fundraising, and administrative solutions.
Speaker 3 (04:59):
Welcome back. You're on air with Amber where we discuss all things nonprofit, and in this episode we're talking about how to start a nonprofit. The conversation can go on for forever about starting a nonprofit, but today we're talking about how to do it the right way. There's a wrong way and there's a right way, and typically people who do it the wrong way end up with the 40% of all nonprofits who close their doors within two years, but that's not going to be you because you're understanding that number one, it's a two part process. The first one is forming your organization as a legal entity, and then the second part is actually building out your infrastructure. So what does it mean to start a nonprofit? There's three things that you should know. Number one, that the very foundation of your organization needs to be in place before you even start thinking about grants and funding.
(05:57):
Why? Because funders report to the IRS and they're not going to fund an organization that doesn't look like a duck and quack like a duck, meaning they're not going to give money to an organization that doesn't look like a bonafide organization. I say to nonprofits, no, you may not have a lot of experience, but you still have to look the part just so you can get in the door. So this episode is going to talk about what those elements are. Number one, you need to have a clear description of who you are, what you do, who you serve, and what impact you make. I can't tell you how many times I've had people come to me and say, oh, I have a nonprofit. We've been established for 10 years, and I ask them, what's your mission? And they go on this long five minute diatribe.
(06:42):
A mission should be succinct. It should be something that I would remember once you walk away from me. If you have a six sentence mission, then you need to go back to the drawing board. Girls Inc's mission is to inspire all girls to be strong, smart, and bold that I can remember. Your mission should talk about the state of your community after your intervention, so you don't need to talk about all the things that you do, all of that's your philosophy, that's your vision. Your mission should speak to the state of your community after your intervention. Then what you do, who you serve, all of that is in your program description. Your funders need to know who you serve because funders, they have specific people that they serve. You can't say, I serve everybody in my community. They're not going to fund you because some funders only fund children, some only fund seniors, some only fund youth.
(07:44):
So you've got to be specific about who it is that you serve. If it's young girls ages five to 17, that's it. It's not everyone. It can't be everyone. If you serve everyone, then it's got to be something like a debilitating disease like cancer, but even within that, certain organizations only fund cancer for children in cancer, for women are cancer. So it's important that you understand who your audience is and it's important that you figure that out sooner than later because if you get 10 years into your organization and you're still not able to clearly articulate that, that's going to impact your funding Geographically, where do you serve? Because funders will only serve in New York or they'll only serve in Florida. You need to be clear about that because when you start going for grants, you need to identify the funding source that's going to fund your geographic area and then also what type of impact you make.
(08:42):
This is the biggest reason. This is the number one reason why brand new nonprofit organizations newly formed organizations fail to get funding. It's because there's no proof that you're successful. Now, I'm not saying you can't. There's seed money out there. Organizations look at your board to determine whether or not you have strong leaders who can move you forward. They can trust you because they know that your leadership is going to move you forward. There's millions of ways to get around it, but the number one reason why nonprofits don't, nonprofits don't get funded is because they fail to demonstrate the impact that they're making in the community. Think of it this way, if your daughter or son came to you at the end of the week and said, mom, can you give me a hundred bucks? And you go through your house and you see that the dishes weren't washed, you see that their room is a mess and what am I paying you for?
(09:40):
Versus if at the end of the week your child says to you, mom, can you give me a hundred dollars? You look at your kitchen, it's immaculate, their room is made, they vacuumed it clean, then there's a return on your investment. It's the same for a funding agency. They're not just giving out money people. That's one of the myths. Oh, go get that free grant money. It's not free, and they are held accountable by the IRS by the way to and they're board to demonstrate what they did with the monies that they gave out. If you can prove that for the last year or the last six months, you've made an impact in your client's life, whether that's a success story, whether that's graduation rates, whether that's to reduce teen pregnancy, whatever it is, if you can demonstrate that proof, then you're positioning yourself to qualify for grants.
(10:33):
Doesn't mean that you automatically are going to get it, but those are essential foundational information, clear description of who you are, what you do, who you serve, and what impact you make. Then you need to be able to receive track and report on the funding, and that doesn't mean taking a check that the founder gave you and putting it into your personal bank account. That's not going to work. Number one, if you get audited and they ask you for your financial statements, your bank statements, and they see that you have charges there for lingerie from Fredericks of Hollywood, that's just not a good look. You want to separate your accounts and you want to make sure that you have a business account, but not only than that, you want to make sure that you have the ability to pay people, right? You've got money coming in, you've got money going out, you've got vendors, so you need to create a business infrastructure.
(11:26):
I can't tell you how important that is. If you have Wave, which is one of our sponsors, if you have Wave apps, that's free by the way. You set that up, you link it to your bank accounts, you have a chart of accounts, meaning you've got line items of people that pay you and people that you get paid from, it automatically creates financial statements. Your funders are always going to ask you for financial statements because it's what a business is supposed to have. So you want to get all of this set up before you even think about going to look for grants, because if they say to you, we need a balance sheet, you need to be able to push that button and create a balance sheet. Some people may say, well, if I'm just started, how am I supposed to do that when I have no money coming in?
(12:12):
You still need to have the system. You need to be ready, not get ready. So having things like a financial system in place for accounting, for payroll, even for volunteer management, that is essential. So you can't get around it. Don't think because you don't have paid staff that you don't need these systems. You need to be ready. Also, you need to be able to provide your funder with at a glance, look at what's going on with their money. Let's just say you get a seed grant for $25,000 and they want quarterly reports At the end of the quarter, you need to be able to say, of the $25,000 that you've given me, we've spent 5,000. How are you going to do that? You can't scribble it on a piece of paper and turn it in. What they're looking for is generally accepted accounting practices, GAAP, and what you would do if you had this infrastructure in place is you would simply go in to your accounting system and you would push a button and it would give you the timeline for the quarter and it would show all of the transactions that you've made from that funding.
(13:26):
So you have to have these systems in place so that you can be responsive to your funder. If you're not responsive to your funder guarantee, you won't be funded again, and running a nonprofit organization is all about long-term sustainability. If you want to see damage to a community, then watch when a nonprofit starts and then closes their doors because your community needs you, and that's not what we want you to do. We want you to be in for the long haul. So today we're talking about the nonprofit success roadmap we're talking about. Part one was forming your nonprofit organization, but today we're talking about part two, which is building out the infrastructure. We've talked about those things that you need to have foundationally, and at the end of the day, when you form your nonprofit, you need to have all of those elements that says to a funder and people looking from the outside that you are a bonafide nonprofit organization and nothing says bonafide nonprofit organization.
(14:30):
Then a powerful governing board of directors. I'm going to pause here for a second because when you don't understand what it is that makes you look powerful, when you don't understand what it is that the IRS has put in place for funders to know that you are powerful, then you struggle. I'm going to tell you a powerful seasoned nonprofit board is essential. You have to have a board that is a working board, not only because it's what the IRS put in place, but because if you don't, you're going to get burnt out because you'll be carrying the weight of the organization and that's not your role. So you need to have a powerful board. And finally, you need to have an annual budget. An annual budget is one of the things that a nonprofit funder funding organization is going to ask you for. What does the annual budget say?
(15:28):
The annual budget says to a funder, and I'm telling you from wearing my funder's hat, if your organization is bonafide, nine times out of 10 when I meet a new client and I ask them that question, what's your annual budget? They'll do this, last year was about 26,000, and right there as a funder, I know that you're not a bonafide nonprofit organization because an annual budget is not how much you raised. I'll ask the question and another thing, another response I'll get is I, what's your budget? I don't know yet. You don't know yet. Listen to me. An annual budget is not how much money you've raised. It's not how much money you have in your bank account. An annual budget is how much it costs to run your organization, whether you have it or not. An annual budget is how much it costs to run your organization, and I'm just going to give you a little tip.
(16:31):
If it's under $150,000, it's not a bonafide nonprofit organization. Do not submit an annual organizational budget under $150,000. I would go so far as to say it should be around $250,000. That doesn't mean you have that amount in your bank, but that's how much it costs to run your nonprofit. In future episodes, we're going to talk about actually how to build out an annual budget, and we're going to talk about how to use your annual budget as the starting point for your fundraising strategy. But this is, I'm going to just put a pin in here because this is really important. If you have an annual budget of $10,000, then that's what your board is going to be responsible for raising. If it costs in reality $150,000 for you to run your nonprofit and your board, or you only raise 10,000, what does that mean? That means you're going to stay in your pocket.
(17:28):
That means you're going to always be self-funding your organization because you don't have enough revenue coming in, and that's why it's important that you understand that the annual budget is not how much money you raised, but how much it actually costs to run your organization, and that's the document that funders are going to ask you for. Send me your annual budget because they want to know how much it costs to run your organization. If it costs $250,000 and you're asking them for $250,000, what they know is that you're not fundraising. You expect them to take care of them. A funder never wants to fully fund a nonprofit, and now I'm putting on my grant writer's hat, if you want to be successful, don't ask them for the full amount, ask them for one third at the max, one half of your budget, but you need to know your budget and they want to know your budget.
(18:21):
We're going to go into this into another episode, but as a funder, when I look at a budget, I can, I can look and see the line items. If you don't have DNO insurance, I know that you don't have high powered people on your board because a seasoned board member is never going to sit on your board and not have their assets protected. So that annual budget is extremely important. How do you know about all of these things? Well, number one, I'm going to share them with you, but your board is the most important part of actually building out your infrastructure, and I have available for you the nonprofit board recruitment package. I'm going to put the link in the comments for you to check it out, but it's a major process. It's not just about asking your friends, Hey, will you sit on my board?
(19:14):
You want seasoned individuals and seasoned individuals understand what it is to run a board. So you want to look the part, and what I have is the board recruitment package, and in that package, it just breaks down everything from where to look to get seasoned board members to the letters templates, right, that you would send out to corporations associations. It has a personal board invitation, so you don't even have to think about what to say, what to do. It's a template. You just fill it in. It has the questions that you would ask during an interview, which let you know there is an interview. You don't just let people walk onto your board. It has a section that even covers board orientation because you want to onboard your board members so that they don't get on your board and just start going nilly willy at the board orientation.
(20:05):
You let them know, this is how we function, this is how we roll. Are you on board? So all of those things you'll be able to find in the nonprofit board recruitment package, and all of this is a part of building your infrastructure. We're on stage one, how to start a nonprofit, and this is the very beginning of your nonprofit success roadmap, and it's the most exciting part because you get to put together your foundation and set yourself up powerfully for success. Alright, so we're going to pause right now for our sponsor, but we'll weave that and we'll talk a little bit more about how to start a nonprofit.
Speaker 5 (20:44):
Do you have a tool that organizes your company's paperwork and 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?
(21:09):
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, small BizPro does all of that and more small BizPro 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 (21:56):
Welcome back to part two of How to Start your Nonprofit, and we're talking about the nonprofit success roadmap because if you're not successful, then I'm not doing my job and if I'm not doing my job, listen, I don't even know why I'm here. I wanted to just point out that I have been talking in this session about creating your infrastructure and small BizPro is a part of that. It helps you to create this system that you may be trying to manage on Google or you may be trying to manage on some other system altogether. You can create a system where you can access your documents at any time, any place it's secure, but more importantly, you have the opportunity to build out all of your infrastructure in one place and it guides you through all of that with resources and everything that you need so that you can have a solid infrastructure.
(22:53):
When your funders say to you, do you have this document? Can you produce? I need this. You have it all in one place. And so what I try to do with my sponsors is make sure that it's information that you can use, information that'll move you forward in terms of building out a powerful, I mean a strong organization. Otherwise you've got little leaky parts in your nonprofit and that's not going to help you. We want you to be solid and we want you to be strong. Alright, now it's time for Ask Amber, and in this portion of the session you get to ask me your questions. You are burning questions and you can reach me on any of my social media handles and ask your question. But today the question is how do I attract high powered board members as a startup? Now, before we went to commercial break, I was talking to you about how essential board members are in the success of your nonprofit.
(23:54):
They are your governing entity. They are responsible for the board. Even if you are a founder, a lot of times people start nonprofits not really realizing that they're not the most powerful person in the organization. As a founder, you founded the organization. That's amazing. But the way the IRS set up the organization is that the governing board with the president being the most powerful person in the organization determines the outcomes of your organization. So this is a very good and important question. How do I attract high powered board members as a startup? As I said before, as a startup, you don't really have a lot, right? You don't really have an impact. So why would a high powered individual join your board? And I'm going to tell you this, it's because they resonate with what it is that you're trying to do in this world.
(24:48):
So you need to have a mission that inspires. Before the commercial break, I shared with you the mission of Girls Inc. Their mission is to inspire all girls to be strong, smart, and bold. What woman would not resonate with that mission? Because we know as women in this world, you have to be strong, smart, and bold because there's so many things that come at us. And so with that mission, you'd find people who could get behind that. If you have a mission that's filled with Goobly goop, then people aren't going to know what you're doing and they won't be inspired to help you bring that mission into fruition. You also need to have clear goals, objectives and measurable outcomes. Seasoned board members, high powered individuals or people who are busy, unless they're retired and even in that space, they're still typically busy. So if you're unclear about what your goals and objectives are, if you don't have goals that can be measured, you're not going to attract high powered board members.
(25:51):
Secondly, you have to have some type of structure. Again, typically seasoned board members are business people. They sit on boards because it benefits them and because it's their way of giving back to the community. So if you have no structure, they're coming into a bunch of hot mess, then you won't keep them. So you have to have structure. So what we're talking about, creating your infrastructure with your accounting systems, with your tracking systems, making sure that you have everything that you need, those are the things that you need to do in order to attract high powered board members. People think, oh, I need to pay my board. You don't. You shouldn't. In a nonprofit, your board of directors are volunteers. They are on your board because they believe your mission. But if you don't have an infrastructure, you will not be able to recruit high powered board members, trust and believe.
(26:44):
The last thing I'm going to say about how to attract high powered board members as a startup is to make being a board member easy. That means making sure that you're communicating consistently. We're going to have our board meeting in three months, not we're going to have it tomorrow because high power board members are high powered businesspeople. So, if you purchase my How to Recruit board members package, you'll have in that invitation a calendar. And in that calendar, you will list all of your board meetings for the entire year. And what that says to a high-powered individual is like, oh yeah, I can work with them. They have structure, they are planned out and you're making it easy. They don't have to email you to find out or when are we going to meet? They don't have to email you for the board packet.
(27:37):
Everything is already done. All they have to do is show up, get their marching orders, come back, report out. That's what you want to provide for your seasoned board members. Don't have them come to your meeting and you're like, okay guys, what are we going to do? You want to have an agenda, you want to have things already outlined that you need for them to do in terms of recruitment committees, all of that. If you want high powered board members, then you need to make it easy for them to be on your board. Alright, so that was our Ask Amber session. Like I said, you can hit me up on any of our social media and ask your question and I'll share it here and answer it here. Now comes the time of our show where we do what I love to do, which is to acknowledge and highlight and give visibility to those nonprofits actually working in the community, doing the grunt work, whether they've got their infrastructure together or not.
(28:36):
My people are doing it and they're doing it because there's a need in the community. And so with this section called Nonprofit Spotlight, I highlight nonprofit organizations doing the work. Today we will be featuring Living Advantage. Living Advantage offers services that ensure youth from foster care have a support system that they can always rely on. Living Advantage has developed as a solution to a serious national foster youth stumbling block, lack of personal documentation. Think about it, youth in foster care, they're moved from location to location. So who has all of their documentation? Who has their birth certificate, who has their id, their immunization records, these things, they either get lost in the fold or the youth, they just have no idea who has them. So living at Vantage collects the personal records such as their birth certificates, social security cards, immunization records, all of the things that are mandatory for social and medical services, employment, housing, and school attendance. Think about it. If you are emancipated or whatever, you don't have these documents, then you can't qualify for basic support. So I chose to highlight this organization and I want to share with you a video from one of their spokespersons that speaks about why he thinks that Living Advantage is important.
Speaker 6 (30:07):
Happy birthday to you. Happy birthday to do you
Speaker 7 (30:13):
Know when you were born? Hi, I'm Chad l Coleman, actor on the Hit TV Show, the Walking Dead. I'm also a former foster youth, but you know me, I have an identity. Unfortunately, many of our foster youth do not. Their birth certificates and social security cards get lost because they move from home to home without their vital identification. Some foster youth don't even know their birthday partner with Living Advantage. To donate to our foster youth program, go to our website, www.livingadvantageinc.org. Remember, identity equals opportunity.
Speaker 6 (30:57):
Should I say anything?
Speaker 3 (31:03):
Thank you. Living Advantage for all the work that you do for youth from low income and foster youth care. Now it's time for our mindset minute. This is where we pause to really focus on those things that in my opinion, cause founders and executive directors to flounder. A lot of the times people with great hearts and great intentions step into this space believing something. And nine times out of 10, it's not true. So in our mindset minute, we just pause for you to think about something in a different way. And today I want to focus on the fact that people just make things up. They make them up, or they believe something to be true and they run with it. So you cannot make things up as you go. And that's why today we were talking about part two of how to set up a nonprofit.
(32:08):
You may think all you have to do is get your 501(c)(3) tax exempt status and you qualify for grants. That's because you didn't do the research and you believed, I don't know where you got the information from, but the reality is there are rules, there are expectations, there are eligibility and qualification requirements. So as a public charity, you fall under the auspices of the IRS. You fall under the auspices of the tax franchise services and they have rules and regulations. The fact that you don't know that they exist is unimportant to them. Once you file as a founder or as an executive director, they expect you to do the things, the legal things that you're supposed to do as a leader of the organization.
(32:58):
So I am going to implore you that once you're in this space to be very, very inquisitive and to try and obtain as much knowledge as you can because you cannot make it up as you go. If you try to squeeze a circle into a triangle, you will fail. And that's how people get on that side. On the 40% of all nonprofits that close their doors after two years, they close their doors because they've tried to force things into doing the way they think it should be going. And what that results in is them not being able to get funded. It's them self-funding their nonprofit organization. And we don't want that to be you. So when we talk about shifting the mindset, if you're in this space and you're serious about making a difference, I'm going to ask you just to sit back and really start being inquisitive and asking the questions like this, what is required of me as a nonprofit leader?
(33:58):
And if you can come from that mindset, you're going to learn what it is that the IRS expects from you. You're going to learn what it is that funders expect from you, and then you will be successful. But if you go in saying, I thought it was this, or I'm trying to do this, or it should go this way without actually doing your research, you're going to falter. And that's not what I want for you. What I want is for you to be successful. And on that note, we're going to wrap up today. I'd like to thank all of my sponsors and I'd like to thank you for joining me on Air with Amber, where I serve the most amazing people in the whole wide world, nonprofit founders and executive directors. And my commitment to you is to provide you with a roadmap for consistent and long-term funding so that your organization can make an impact in your community. Thank you for joining me and we'll see you next week.
Speaker 2 (35:00):
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.
