As I’ve been updating my book, Starting & Building a Nonprofit: A Practical Guide for its 8th edition, I’ve had on my radar an event coming up this Friday offering a training workshop for folks in New Mexico considering starting a nonprofit. The event is hosted by SINC (Social Impact + Nonprofit Community), a New Mexico nonprofit incubator that offers support and fiscal sponsorship to other nonprofits to help build capacity and better serve their communities. Tickets are still available for the event, Community Training: Nonprofit Start-up Workshop, this Friday, October 12; go to http://sincnm.org/events.aspx for info and registration.
If you can’t make it to the workshop this Friday, be sure to check out one of SINC’s Impact & Coffee events the first three Tuesdays of each month.
Here’s a bit more from the folks at SINC on some of the common questions and issues they encounter in their work with NM nonprofits.
PP: When should a group of community organizers or activists consider actually creating a nonprofit organization? Does it sometimes make more sense to operate informally?
SINC: The requirements for receiving and keeping nonprofit status with the IRS and State of NM are daunting and exhaustive for a startup organization. This is one of the reasons fiscal sponsorship is such an attractive alternative.
We believe you are ready to incorporate as a nonprofit if:
- You have a clear defined charitable purpose. This should be reflected in your mission statement.
- You have a minimum of three board members who believe in your charitable purpose and have committed to support your efforts.
- You’ve completed a feasibility study and business plan: From these you should understand your potential revenue streams, startup expenses, sustainability and all other needs.
PP: What are the most common misperceptions you encounter among folks who want to start a nonprofit?
SINC: Many think that “nonprofit” means “you can’t make money.” But in reality, managing money is an important task for any nonprofit. It’s imperative to understand balance sheets and the need to have revenue that exceeds expenses. This is true for any organization.
Many believe that grant funding is easily accessible and all you have to do is ask, and people will hand you money. They don’t recognize the complexity and competition that exist in the nonprofit sector.
Many groups have very narrow focus areas, which limits the amount of clients they would be able to serve. We encourage them to do the research. Find the data, know who else is delivering services and figure out how they can collaborate.
PP: What is fiscal sponsorship and how can it help community organizers?
SINC: Fiscal sponsorship provides back-office support under the 501(c)(3) umbrella of the sponsor organization.
Back-office support includes accounting, financial management, regulatory compliance and insurance, at the basic level. Here at SINC we add mentoring, training, strategic planning, board development, grant prospecting and management, HR support, communication, marketing and PR. In exchange for this we take 9 to 12% of revenue.
Most local nonprofits start with a passionate individual who works on their project on the side, and probably has a full-time job. It may take years until they are able to grow to the size where they can hire an employee. With limited time and money, having a fiscal sponsor manage all compliance and financial requirements for just a small percentage of revenue gives them more time to spend on their passion project, and less time doing paperwork.
PP: For people familiar with the world of for-profit small business, how different is it to start up a nonprofit? What are some of the most important, or perhaps surprising differences?
SINC: The biggest difference is that in the nonprofit world, governance and liability of the organization belongs to the Board of Directors, not the person running the project.
Other differences include:
- Non-inurement. No individual can receive dividends, or take profit from the organization.
- Distribution upon dissolution. The assets of the NP must go to another NP.
- Public reporting requirements in Form 990. Compliance with federal and state regulations are also significantly different.
PP: How much has crowdfunding changed the field of fundraising?
SINC: The funding landscape is extremely complex. Crowdfunding is a blip on the radar, nothing more. Each category in the funding landscape has its own challenges and opportunities: foundations, corporate social responsibility funds, government funding, individual contributions, crowdfunding, earned income. Each one of these could take a 1000-word answer.
PP: Who could benefit from the Nonprofit Start-Up Workshop this Friday?
SINC: Board members, social entrepreneurs, new nonprofit leaders and staff, volunteers, and anyone with an interest in how a nonprofit works, and how it is different from a for-profit business.
Nonprofit Start-up Workshop
Friday October 12, 10am – 4pm (lunch included), $70. Reduced rates available for those in financial need.