Thinking of Starting a Nonprofit? What Founders Wish They Had Known

You are thinking of starting a nonprofit: you have passion, expertise, and perhaps even a small group of supporters. What challenges will you face as you launch this new organization? Researchers at Syracuse University provide insight into that question in a survey of some 1,000 nonprofit organization founders.

The founders identified three primary challenges during the first years of operation: (1) fundraising, (2) institutional complexity, and (3) effective board development. My suggestion to you is that with planning, foresight, and open conversations with your potential board members, you can overcome those challenges.

Let’s start with fundraising. Like any organization, a nonprofit needs revenue to survive. I’ve found that founders often don’t appreciate the costs involved in starting up an organization—to say nothing of the costs of running mission-related programs. In the survey, the typical new nonprofit reported start-up costs of $5,000. That’s not an exorbitant amount, but founders need to have a plan for how those start-up costs—as well as the ongoing operational costs—will be paid. In the early years, that plan typically relies on private donations. Even if the long-term goal is to pursue grants or program-related fees, nascent organizations usually need private donations at the start: 37% of new nonprofits reported that private donations were the most important source of funding. That’s in addition to contributions by the founder herself: 28% of founders contributed financially to their organizations and 20% reported taking on personal debt.

Because funding in the first years is typically supplied by a relatively small group of supporters, founders need to explicitly discuss contribution expectations with potential board members. All too often a founder and an initial board have different, unstated ideas about what type of support the board will provide. Well-established nonprofits are clearer in conveying the expectations for personal giving. BoardSource reports that 80% of surveyed nonprofits require a contribution from their board—with larger organizations the most likely to have an explicit expectation. In contrast, the Syracuse researchers found that a mere 26% of new organizations required board contributions.

Sooner rather than later, every organization needs to improve on the percentage of board members who give. Founders should have that conversation at the outset to secure the initial board's commitment and to avoid the difficult, and often painful, necessity of later rectifying those mismatched expectations.

Frank discussions can also help meet the other challenges mentioned by founders and avoid the fate of so many other organizations, in which the board and executive director fail to optimally work together. A survey of 241 executive directors (conducted by researchers at the University of Chicago-Illinois) found that, overall, board involvement fell short of directors’ desires on each of ten measures. Prepared and competent boards can help navigate the complexities in running and governing a new organization and lay the foundation for a board that evaluates and improves itself. Those early conversations sow seeds for board-founder relationships that promote the viability of the organization.