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Starting a new nonprofit organization can be an extremely rewarding experience. Depending on how things work out, you can theoretically solve some major world issues in the process. Just like new companies, however, nonprofits often fail in their first year. Even though lack of funds can be a big problem, a majority of charitable groups are unable to find their niche and shrivel up for a variety of reasons that aren’t directly related to money.
If you’re in the process of incorporating any sort of non-business entity, then keep the following five pitfalls in mind. A little extra planning now will greatly increase your NPO’s chances at longevity.
Decide What Category Your NPO Falls Into
According to federal regulations, all NPOs have to fall into one of eight broad categories. If your group hopes to get classified as an official 501(c)(3) exemption, then it must fit into one of these classifications:
- Public Safety
- Amateur Athletics
- Scientific & Engineering
- Animal Welfare
Some groups aren’t able to offer a clear definition of what their new group plans to do. The IRS won’t approve a 501(c)(3) request form until they can.
Sort Out Your IT Issues
Digital technology has invaded almost every aspect of daily life for millions of people, and those who work at charities are no different. If you don’t take some time to sort out your IT issues now, then they can cause compatibility problems and increase expenses in the near future.
Consider asking for donations of gently used computer hardware and other tangibles instead of merely asking for money. This can help to show that you’re sincere about solving problems and not just looking for a handout. Some organizations provide web development and hosting services specifically geared toward the needs of NPOs, so you might be able to get a deal on these as well.
Specify What Each Person’s Responsibilities Will Look Like
When an entrepreneur establishes a startup company, they often have big dreams and believe very strongly in their product. However, they usually begin to suffer from doubt the moment the issue of delegating work comes up. Don’t let this happen to your nonprofit. Make sure you specify what each job title will entail.
You might have a number of unfilled positions at this point. If this is the case, then define what these jobs involve before you hire anyone. This can help to reduce the risk of having duplicate personnel. Keep in mind that an overwhelming majority of NPOs have a number of paid staffers as well as volunteers, so you shouldn’t be afraid of having to hire skilled people to fill certain vacancies.
Ensure That Your Intellectual Property Is Unique
Nothing is quite as important as having a catchy name. People support organizations that they can remember the name of. Your NPO is technically in competition with countless other groups, which means your brand image matters. Creating your own materials will ensure that potential donors can connect with your group.
However, you’ll want to check with the government before registering a name, logo, or any other piece of intellectual property. Head over to the Department of Commerce’s trademark database and make sure no one else is using the IP you plan to associate with your NPO.
Decide Who Will Have the Power to Make New Rules
IRS agents require every nonprofit organization to define a clear set of operating bylaws. These are needed to help illustrate that organizations aren’t fraudulent. Some state governments require groups to have these before they’re allowed to hold any fundraisers. You need to write a set of rules for your group at your earliest possible convenience.
Simply authoring rules isn’t enough, however. You need to decide who has the authority to create new ones as time passes. Some charities have a board of directors that mirrors those employed by Fortune 500 companies. Smaller groups tend to stipulate that only the founder and a few close staffers are allowed to vote on rules. Making a decision now is important because it stops power vacuums before they start.
Few things are quite as boring as writing an operating manual and registering trademarks. You might be trying to put off dealing with one or all of the items on this list. Don’t wait, no matter how much of a chore it might seem. By tackling your NPO’s problems right now, you’re helping to ensure it has a good chance to succeed in today’s competitive environment. You’re also reducing the risk of running into any major headaches in the future.