Why Not to Start a Nonprofit

Do you have a business idea nobody wants to buy, or a world changing idea?

As a nonprofit consultant, I get a lot of inquiries from people who want to start a nonprofit. “Oh! You’re a nonprofit consultant? Cool. I want to start a nonprofit that does [fill in the blank here].” Almost always, I hear someone describe a business that might exist for a socially beneficial reason, but that is not necessarily a candidate for full-on nonprofit status.

Here’s the thing: nonprofit status is not something to be approached lightly. Almost always, the business ideas I hear are potentially viable (though we won’t know until we test it, will we?). The prospective founder is usually so entranced with their vision, that they are resistant to even the idea of a board of directors. Well...they are resistant to the idea of a board of directors that actually does its job of leadership and governance of the organization.

Some people have asked if they can just make a board of themselves, their spouse and their best friend. Well...technically? Yes...but, is that going to accomplish the work you intend to do in the world? Is a board of directors and all the red tape of nonprofit-dom really worth it to you and your dream? Is there another way you can accomplish similar goals without going all in on a long-term special relationship with the IRS?

So, if you want to start a nonprofit, ask yourself these questions:

  • If I had unlimited resources and time, would it be possible for me, alone, with no support or involvement from another human, to accomplish this work?

  • Is nonprofit status attractive to me when it comes to this venture because I feel uncomfortable with the idea of sales?

  • If a board of directors were in place, and they challenged my assumptions and vision, would that tick me off? Would I be able to tolerate someone else’s leadership and guidance on this idea?

  • Is it possible to generate revenue with this idea, and would the revenue itself be enough to sustain the vision, once it gets to scale?

Here’s a secret tip: If you answered “Yes” to any of the questions above, you might reconsider going for nonprofit status. It might be smarter for you to consider launching a small business or social enterprise instead.

The reality is, if you can accomplish the work of your “nonprofit” idea alone, without involvement or significant leadership from someone else, you don’t need or want a board. If you want to do what you want to do, do it. A board will only slow you down with process and Robert’s Rules of Order. These are good things when we’re talking about what is essentially a publicly owned entity (a nonprofit); it is not a good thing when you are a visionary founder who has some stuff to do and you want to just go ahead and do it.

If you are uncomfortable with the idea of sales - you feel weird promoting yourself, your ideas, your product, your work - to the people who will buy it, or to third parties who might subsidize it - what makes you think you will be OK with fundraising? Fundraising is sales. Shocking, I know. Sales and fundraising alike provide an opportunity for someone to get a benefit - whether it’s a product, service, or altruistic sense of purpose - people are going to buy what you sell. If you can’t sell, you can’t raise money either. If you think grants will solve this problem, you are super, super mistaken, and are in for a world of annoyance and irritation on the grants front too. Don’t get me started on grants. They are wonderful for venture capital for organizations, and they do not, ever, no never, work as a long-term, sustainable solution to funding your ongoing operations. Don’t think grants are the key to your viability. They are certainly not.

If you feel that getting a board of directors together - a real one, not made up of your closest friends and lackeys, plus you - will cramp your style because you might be challenged or questioned - you should not start a nonprofit. Stop considering it right now, because this is not the right direction for you. Boards of directors, when they are operating appropriately, will take responsibility for the strategic direction, financial management, compliance, and organizational culture. If you want to be in charge of that stuff - or at least, in some way have ownership of it - do it yourself. Get an advisory board together if you want advice. You can take or leave the advice of an advisory board. It’s informal and totally voluntary. With a nonprofit, the board of directors is a real, legally bound entity, and they must be treated as such, whether you love their direction or not.

If you can generate enough revenue to make your vision and mission sustainable when it gets to scale, by all means, go for it. This doesn’t preclude your nonprofit hopes, though. This is just to say, if you can generate enough revenue to keep this mission going, and you can do it without the hassle of running a nonprofit, and that is appealing to you, just start a business. It is infinitely easier, faster, smoother, and less political. You can start a business in five seconds after you read this article. That said, if you can generate money to sustain the mission and you think it is bigger than just you, and you are willing to gather and defer to a board of directors, and you can raise funds without fear, and you are ready to handle the back end management of nonprofit compliance with IRS rules and guidelines and filing deadlines and the like, start the nonprofit.

Just, do me and the rest of the world a favor: don’t call it “my nonprofit.” It’s not yours. It’s ours. That’s the point of a nonprofit. It’s a corporation run by a board of directors, who are to guide the nonprofit’s direction, steward its resources, and accrue benefits to society (that’s you and me and everyone we know, baby!) while reinvesting in the mission of the organization. This is not something you can own. It is something you can birth and foster and love deeply - but it is not you, it’s not about you, and it, ideally, should continue long after your involvement has ended.

Sarai Johnson1 Comment