TIPS & TRICKS

Considerations When Setting Up a Non-Profit

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There are lots of helpful guides out there listing the steps you need to take to start a non-profit. Even so, there are a few big questions, a few things to keep in mind, that these types of guides sometimes leave out. Today, we’d like to talk about a few things you’ll want to consider before starting a non-profit organization.

#1 – Is This a Problem that Can Be Solved or Funded Via Traditional Business?

“Consider the alternatives” is a tried and true bit of advice in nearly every arena, and it’s especially important here. Let’s say you would like to start a non-profit to help people in hard circumstances find jobs. That is a noble and societally edifying idea. Nevertheless, before beginning, it is important to look at the market around you and see if the need (jobs for people in difficult circumstances) is best served by you raising funds to offer placement services to these people, or by starting a traditional, for-profit business that can hire these people itself.

In other words, is the cause best served by a middleman or by another player? Sometimes there is a great need for that extra link in the chain – and sometimes there isn’t. Are there market solutions to the problem you would like to address with your nonprofit?

#2 – Can You Accept an Upper Limit to Your Salary?

Nobody sets out to end up on Ministry Watch’s list of overpaid non-profit and ministry executives, yet every year plenty of people are on it. There is nothing wrong with making a lot of money, but in a very real sense, running a non-profit that fundraises is taking a lot of money. There’s nothing wrong with that per se. We need to pool our resources to tackle big problems from time to time. Nevertheless, soliciting donations isn’t the same thing as creating wealth; it is cause-driven redistribution. There is therefore an ethical imperative for restraint in the executive’s personal financial ambitions – at least in regards to personal income earned from the non-profit.

Tim Ballard of Sound of Freedom fame, for example, recently got into hot water over his salary well in excess of half a million dollars from his anti-child-sex-trafficking organization, Operation Underground Railroad (which is only one of his organizations from which he drew a salary, it should be added). Something seems wrong about raising money using stories of violence against children and then taking a salary in the high six figures from those donations intended to rescue kids. If you have high ambitions for personal wealth, ask yourself if running a non-profit is something you really want to do.

Are you in a situation, or of a temperament, where you can be content with a salary that does not become excessive?

#3 – Succession, Exit Plan, and Limiting Principle

Jesus said that we would always have the poor with us, so we know that there are some societal needs that just aren’t going away. It is still important to point out, however, that the natural tendency for organizations is to become oriented around self-perpetuation over time until the cause takes a backseat to the needs of the organization itself.

Look way down the line, and ask yourself, “When will the task be completed?”

If you’re serving the poor, the answer is “never,” but if you want to start a non-profit to address the need for safe, public spaces for children to play in your community, that may be a goal with an endpoint. So what do you do when you’ve built three parks, a rec center, and a public swimming pool? Do you redefine and expand the mission? Or do you declare “mission accomplished” and close up shop?

Ambitious people tend to favor the “expand” option. Sometimes it’s better to have discrete, achievable goals, however, instead of being an organization that continues to receive money from the community indefinitely. What is the limiting principle of your organization? Can your cause be achieved? What is the plan if you are successful, or if you have to pass the baton to someone else?

Handling donations is something that should not be taken lightly – particularly when an organization raises funds from ordinary men and women, many of whom are struggling to pay rent and buy groceries in this economy. Fundraising is necessary for many things, but never take it for granted.

TL;DR

Non-profits can be a tremendous blessing and a great force for good in our communities, so we need to make sure that we ask the hard questions and maintain high standards when creating this type of organization. Don’t be afraid to really put your idea to the test and hammer it from every side before you begin. If your concept holds up to heavy scrutiny, then it may really be worth doing, and you can proceed with the confidence you need to make it happen.