Episode 91: 5 Reasons Why You Shouldn’t Start a Nonprofit
There’s more to starting a nonprofit than passion and commitment. You know the reasons why you should start a nonprofit. Learn the 5 Reasons why you shouldn’t.
🎯 Borrow My Brain: 60-minute Strategy Session 🎯
👉🏿 https://calendly.com/amberwynn/60min-call 👈🏿
----------------------------------------------------
🔦 NONPROFIT SPOTLIGHT 🔦
National Forest Foundation: https://youtu.be/0GV-UZxCXQU
----------------------------------------------------
Sponsors:
1. YouTube Nonprofit Program https://youtu.be/3dLVnQIVA-Q
2. Google for Nonprofits https://youtu.be/t2xe82vZn9k
----------------------------------------------------
Want to learn more about Amber Wynn’s success with helping nonprofits?
CONNECT WITH AMBER:
👉🏿 Follow me on Facebook
👉🏿 Follow me on Instagram
👉🏿 Listen to my Podcast
-------------------------------------------------------------------
Got Questions? "Ask Amber" on any of my social media platforms or email me at amber@amberwynn.net.
Podcast Transcript
Speaker 1 (00:11):
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 (00:33):
Good morning fam. It is your girl, back again. Did you miss me? I missed you. I know it's only been a week, but when you're with your people, you miss your people and you are my people and I miss you. Guess what? Today I am going to cover five reasons why you shouldn't start a nonprofit. Now, I know that seems a little counterintuitive because I am a nonprofit consultant and my livelihood is based off of people having nonprofits, but my passion, my purpose, my mission is to improve communities all across this country, and it's important that when you start a nonprofit, you do it for the right reasons and you do it because you're going to make an impact and trust and believe there are a lot of people out there who are not making an impact because they have no idea what they're doing because they're starting for the wrong reasons. Because we're going to go over all of the becauses in a minute. Five reasons why you shouldn't start a nonprofit after this message.
Speaker 3 (01:43):
Everyone's on social media these days taking photos of their food, following the latest influencers, but as a business, social can feel like a party you're not invited to. Some brands are out there sharing cool stuff, meeting new customers, and growing their business, so why not yours? With Hootsuite, you can join the party with one easy to use platform that grows with you and your popularity, schedule content in advance and see what's working across the social networks your customers use. You can also use Hootsuite with the tools and love like Google Drive, MailChimp, and Dropbox. Find new customers by joining in with conversations about your brand and automatically boosting your most popular posts to a wider audience. Easily create and publish stuff people will love by tracking trends and creating amazing content from a variety of sources and stock images. Then see the results of your social activity in one, easy to understand report based on the numbers that matter to you. Hootsuite also helps you keep up with social, with access to free courses and articles that cover the latest trends, strategies, and tactics. Join the parties.
Speaker 2 (02:58):
Welcome. You're on air with Amber Wynn, your resident Philanthrepreneur. I fuse all of the passion and commitment with proven business practices for long-term impact and sustainability. Before we went to commercial, I was sharing with you that nonprofits start, nonprofit leaders start their organizations with misinformation because they have the passion and drive because they have been misled to think that starting a nonprofit is easy. You just started and all these grants flow in and that's not the case. And so today, I just want to hit home really quickly and share with you five reasons why you shouldn't start a nonprofit. There are plenty more, but I'm just going to hit the top five. The first one, the first reason why you should not start a nonprofit is because you don't have starting capital. You cannot start a nonprofit without any money. A nonprofit is a business and businesses have business expenses from filing fees to things as simple as a website telephone service, like you have to have money to start a business.
(04:16):
A nonprofit is a business with a philanthropic purpose. If you Google how to start a nonprofit with no money, it's going to rank high because people think, oh, it's a nonprofit. There are grants out there to help me start a nonprofit. No, sir. No ma'am, certainly not. You know why? Because a nonprofit is a business and a funder is not going to give you a grant to start a nonprofit because in their minds you're starting a business, so you have the capital that you need to run your business. They're only going to give you money for programs. So who's going to cover the salaries? Who's going to cover the overhead? You, because you're starting a business. It's just that you choose to focus on altruistic things. So the first reason why you should not start a nonprofit is because you don't have starting capital. If you are broke, if you have no money, then you should not be starting a nonprofit.
(05:15):
How much should I have? You may say, Amber, at the bare minimum, you should have 25,000 safely. You should have 50,000. If you don't have that my love, do not start a nonprofit. Secondly, if you believe that grant money is there, if you're starting your nonprofit because you think the grant money is going to come quicker or faster, I have people say, well, I'm going to start this nonprofit so that my constituents don't have to pay, or I'm going to start this nonprofit to cover these programs, or I'm going to start this nonprofit to buy this building. If that is why you are starting a nonprofit because you think that there's all of this grant money waiting to cover the costs of you running an organization or it's going to make it easier for your constituents, don't start a nonprofit. Don't do it because that is not the case.
(06:12):
As a matter of fact, only 17% of the revenues that funds most nonprofits come from grants. Do you know what the highest source of revenue is? It's from individuals. So a lot of people think, oh, this grant money is out there. It's not. And here's the other thing I want you to consider. There's so many people starting nonprofits that the pool remains small, but the competition remains big. So you've got more people coming into the space starting all these nonprofits competing for this 17%. Okay, are you getting the picture? So if you're starting your nonprofit profit because you think you're going to be able to get all of this grant money to cover the fees and costs, don't start the nonprofit. Don't do it. Reason number three, you think that running a nonprofit is easier than running a for-profit? Nothing could be further from the truth.
(07:11):
When you run a for-profit, you don't have to worry about a board. You have a board, but the board isn't as involved as it is in a nonprofit. When you have a for-profit, the revenue that you generate can go directly for salaries or back to your investors. That's not the case for a nonprofit. When you start a nonprofit, it is to benefit the public good. It's a public charity, so the revenue that comes in has to go back into your mission. Can you get salaries? Yes, but generally speaking, funders will only allow you between eight and 25% of that grant to go towards salaries, and most of the time it's 10%. So if you get a grant for $250,000, only 10% of that or 8% of that can go to salaries. How much money must you get in order to cover your salaries? A whole lot.
(08:12):
And because grants are not guaranteed, that's a whole lot of work versus if you start a for-profit, when you get the revenue, you do with it what you want. So starting a nonprofit is not easier than starting a for-profit. So if that is the reason why you're doing it, then don't do it. You shouldn't because you will be struggling because you're going to be like, I just need to get a grant. No, you need to get a whole lot more money in diversified ways because a grant will not grant a nonprofit cannot support off of grant revenue alone. It is impossible. I'm just letting you know. Reason number four, if you have no, none, if you don't have any nonprofit experience, then you should not start a nonprofit.
(09:05):
You shouldn't, because starting a nonprofit is more than business experience. People are like, oh, I've got an MBA. Yes, that's good, that's good. But there's so many nuances to running a nonprofit that sometimes if all you have is business experience, you may get your nonprofit into trouble because you're running the nonprofit solely as if it's a for-profit, and it's not. There are so many rules and regulations because it is a public charity and it has been given tax exempt status, meaning there are certain things that you can do and you cannot do. But if you're running it solely as a for-profit business, you're going to put that tax exempt status in jeopardy. So if you have no nonprofit experience, you should not start a nonprofit. Does that mean you cannot learn? Yes, but I'm going to suggest, I'm going to recommend that you learn first and then you start the nonprofit because otherwise there's this heavy lift.
(10:07):
You've got things that need to happen every day and you may be making decisions that's taking you down the wrong path. That's what generally happens. 40% of all nonprofits close their doors. That's backwards. Yes. No, 40% of all nonprofits close their doors within two years. Why? Because they can't figure out the secret sauce. So if you have no experience about nonprofits, you don't know what the board is supposed to do, what they're there for, you don't understand the regulatory requirements. You don't know about funding, diversifying your funding streams. You don't understand about building and infrastructure. You don't know about volunteerism if you have no clue. I mean, you just are like, I'm going to start a nonprofit, and you've never even volunteered in a leadership role. So you understand all that it entails. Then I am going to say to you, do not start a nonprofit.
(11:05):
Go volunteer. Sit on a board, work for a nonprofit, get some nonprofit experience. I'm telling you, people will literally just one day wake up and start a nonprofit and never, ever have any nonprofit experience that is irresponsible, but it happens every day, and it's why nonprofits falter. Reason number five, you think when you start this nonprofit business that you own it. Oh, I'm going to start this nonprofit. Oh, my nonprofit. If you are a founder, you will forever be a founder. This will forever be the organization that you started, but you don't own it. Never, ever. No person, no group of people, no entity can ever own a nonprofit because it is a public charity and it is governed by the IRS. It says, so in your bylaws, if you have to dissolve the organization, and I don't care if you've put money into it, 20,000, 40, 50,000, when you dissolve that organization, the assets have to go to another 501C3 tax exempt organization.
(12:08):
You know why? Because you don't own it. If you dissolve a business, the assets are yours. That is not the case for a nonprofit. But if you understood how nonprofits work, you know that goes back to the last one. So if you think you're going to start this nonprofit and you're going to pass it down to your children, this is how you're going to have generational wealth and don't start a nonprofit because it is not true. You can never, ever, ever own a nonprofit. So there you have it. There are five. These are the top, like I said, there are more, but the five reasons why you should not start a nonprofit is one, you have no starting Capital Two, you think that grant money is going to cover everything. Three, you think that running a nonprofit is easy for you have no nonprofit experience in five, you think you'll own the nonprofit.
(13:06):
If any one of those five reasons or the reasons why you want to start a nonprofit, don't do it. Don't do it, beloved. Because what's going to happen is that you're going to get stuck in this whirlwind of stress and frustration and overwhelm because you can't figure out why it's not working. You can't figure out why you can't get funded. I can help you of course, but what I'm saying is there are other ways to impact your community. I've covered it on the podcast before. Six Sexy Alternatives to starting a nonprofit. In the next session, I'm going to talk about why you should start a for-profit instead of a nonprofit, you can make an impact in your community. I am going down this path because I would rather for you to expend your energy supporting another nonprofit that could use your talent and your skill, and that's going to help them grow and make an impact in a community rather than you starting another nonprofit floundering for three, four years only to close your doors.
(14:10):
We need to make a difference in our community. We don't need to keep starting nonprofits that take away from other resources of other nonprofits really doing the work. So think about in your heart, and I know your heart is good, why you're starting your nonprofit. Take that energy and put it into a space that's already been cultivated and then help that organization grow. That's what I'd like to see. We don't need another nonprofit started. We really don't. We need more board members. We need more quality staff members. We need more volunteers to help create more robust nonprofits. That's what we need. All right, so we're going to pause for a minute, but when we come back, we're going to go in to ask Amber where you get to ask me your most pressing questions. Be back in a minute,
Speaker 4 (15:00):
Calling or texting all small business owners and nonprofits. Did you know 95% of text messages are read and responded to within three minutes of being received? Nothing is more direct or immediate, and that's just one reason to add SMS capability to any constant contact plan. Another, it's smart marketing, really smart with all of your digital marketing tools in one place, constant contact makes sure you are connecting with the right people at the right time in the channels they prefer, so you can reach, engage, and keep more customers. Whether you're promoting a sale, announcing an event, or encouraging donations, adding SMS to your digital marketing strategy just makes sense and a lot of dollars too. Constant contact.
Speaker 2 (16:00):
Welcome back to On Air with Amber. Today we are covering the five reasons why you shouldn't start a nonprofit, and right now we're going to go into a session where you get to ask your questions of me. It's the Ask Amber, and today our question is coming from North Carolina. Dana asks, hi, Amber, I'm feeling overwhelmed. Is there a Cliffs Notes or Reader's Digest version of how to start a nonprofit, like a five steps to starting a nonprofit anywhere? Hi, Dana. There is a lot of information out there, so I completely understand why you might be confused, but I just want to reiterate since this is the topic that we're talking about, that starting a nonprofit is starting a business. And if you think about it, if you go through SCORE or SBA or whatever, starting a business is not simple. It's complicated. They want you to provide a business plan.
(17:02):
They want you to do research on your competitors, do market research, provide financials. It is complicated, and that's what you're doing, and you're adding an additional layer because not only are you starting a business, but you're starting a nonprofit business. So to answer your question, yes, there is a simple version. If you go to my website, www dot Amber Wynn, that's with amberwynn.net, I have for free two resources. One is a dashboard, and the dashboard shows you 10,000 level feet, what it takes to build a successful nonprofit. There are five columns and it says incorporation infrastructure expansion. So you get to see all that you should have as a high functioning nonprofit. That's just a visual. But then I also have how to start your nonprofit the right way in 90 days calendar. And that calendar actually walks you through every 30 days, the first 30 days, week one, what you should be doing to start a nonprofit.
(18:09):
So you get the what at the high level with the dashboard, and you get the what in details with the calendar. So go to my website, download it. I also have some other resources. It's called a resource bundle that will give you more information on what it is you should be doing or focusing on when starting a nonprofit. Thank you, Dana. I appreciate your question. Now we're going to move to my favorite part of the episode, and that's when I get to focus on the nonprofit. It's called the Nonprofit Spotlight. A lot of times my amazing founders are so busy rolling up their sleeves, doing the work that they really don't have the time to market. And visibility is extremely important for the lifespan of a nonprofit, not only because people need to know that these resources are out there, but funders need to know as well. So here's my contribution. I am going to focus today's nonprofit spotlight on the National Forest Foundation. The National Forest Foundation was chartered by Congress and engages Americans in community-based and national programs that promote the health and public enjoyment of the 193 million acre national forest system and administers private gifts of funds and land for the benefit of the national forest. Let's take a look at the National Forest Foundation.
Speaker 5 (19:42):
Somewhere there's a river rushing through the woods while someone rushes through their day. There's a mountain looking up at the sky while someone looks down at their phone, a trail waiting to be walked while someone waits for a latte. This is the way it is because these somewheres, these rivers, mountains, and trails can feel so far out of reach. But the truth is somewhere has always been closer than you thought. Somewhere is 154 national forests and 20 grasslands covering 193 million acres of this sweeping nation. It's a TV episode's worth of time in the car to go half the time of your life. It's a matter of just saying yes to an experience that will really matter and making a day out it or a night. They call these the hardest working public lands in America because even when you're not with them, they're with you providing drinking water to millions, improving the very air we breathe through millions of trees planted and giving back 13 billion to the economy every year. So we need to give our time to these places. We need to understand them, appreciate them, and protect them at all costs. It's okay to keep washing through our days, looking down at our phones and waiting for lattes. That's life. And that's all right.
(21:33):
Let's just make sure our national forests are all right too, our somewheres. So we'll plan on seeing you somewhere sometime soon because somewhere would sure love to see you. The National Forest Foundation,
Speaker 2 (21:58):
You're interested in finding out more information about the National Forest Foundation. You can visit them@www.nationalforests.org. Yay. All right. We're going to keep it moving now. We're going to move to a segment called Mindset Minute, and it's when I share with you some things that have just been on my mind, things I want you to consider today's topic is why you should collaborate. A lot of times I have nonprofits coming to me and they're just working in silos. The challenge with working with just yourself in a silo is that you miss a lot of opportunities, right? The opportunity to build your network. So there's this balance that needs to happen with nonprofits where you understand that other organizations are competitors, but at the same time, you need to collaborate because you share shared missions. For example, you may be a youth serving organization and you have a strength that your competitor is lacking, and so it makes sense that you come together and submit a proposal whereby both of you share in the revenue because your area of focus is not theirs.
(23:23):
So it makes sense for you guys to collaborate. Right? Now, there may be other nonprofits out there doing the same thing, and those people are your collaborators, but what funders are looking for, and they put it out there on the applications, who are you collaborating with? Because what research has shown is that you'll have multiple nonprofits in the same community doing things that if they were partnering, would make them both stronger. So collaborations can help you create new partners, people who can step in and do the work, meaning if you have a gap in services, then you don't have to worry about hiring people to do the work. You just subcontract them out to do the work that's going to save you money. That's going to save you revenue. But what it also does is it opens your organization up to potentially new referrals. So if you have people coming into your organization, then they get to see the work that you're doing, and then you may get more clients, you may even get more resources, because when a funder sees that they're partnering with other organizations, then they see that other organization. It also, like I said, saves you money. If you are not hiring staff to do everything and you're just subcontracting out, then that's money that you save.
(24:47):
It also increases your reach. When you collaborate, you learn about other people's partners, you learn about other people doing other things. That's the whole beauty of collaboration and networking. You're like, oh my gosh, this person works with this grant writer. Now you've extended that network. This person works with this accountant. Now you've extended your network. If you just work in a silo, you'll never be exposed to all of the resources out there. And then finally, you build community. It's important that you have community, because what happens is people who've been around or people who are tapped into different resources can share them with you. I have been in community, and I'm telling you, people say, oh, did you know about this grant? No. Oh, did you know about this opportunity? No. You can only have access to community if you're in the network. So collaboration helps to strengthen your organization, both financially, resources, capital, all of that.
(25:50):
So collaboration for the long-term sustainability of a nonprofit is extremely important, and that's why you should collaborate. Alright, so we're going to wrap it up today. We covered the five reasons why you shouldn't start a nonprofit. And listen to me if in your heart, after all of that, you still want to start a nonprofit. I got you. I just don't like for people starting nonprofits for the wrong reasons, because it ends up being a heavy lift and a struggle. Nine times out of 10, if you can't figure out that secret sauce, you're going to end up just shutting your doors. And we don't want that in our communities. So if after listening to all of this information, you still want to start a nonprofit, start by visiting my website, or you can reach me at any of my social media channels where I have lots of resources for you that's going to you strengthen your organization. But start with my website, www.amberwin.net. I'm also very active on LinkedIn. I'm active on Instagram. Get some free resources until you're able to generate revenue and then do it the right way, because when you do it the right way, you have a higher likelihood of long-term sustainability. And remember, people, I'm your girl and I'm here for you. That's all we have for this week. I'm looking forward to seeing you next week. And until then, make sure you take care of yourself, like you take care of your community.
Speaker 1 (27:24):
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.
