13 Steps On How To Start A Nonprofit Organization In 2023

May 9, 2023

By: Gareth Mankoo

13 Steps On How To Start A Nonprofit Organization In 2023

It’s a selfless act even to begin thinking about setting up a nonprofit to contribute to a better world. Whether you want to help others in your community, provide a service, or give back to individuals around the world, a nonprofit organization is a great way to make a significant impact.

The whole process can be quite overwhelming, especially if you aren’t sure where to start or even what all of the steps are. We are here to help guide you through this process and teach you how to start a nonprofit organization.

How to start a nonprofit organization in 13 steps

Your idea of what nonprofit you want to start will be clear by now. So, let’s dive right into what it takes to start one that is destined for success.

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Step 1: Define your purpose and values

When starting a nonprofit, it is important to have a clear scope and purpose. There are already over 10 million nonprofits and non-governmental organizations in the world, so being unique is a challenge.

Finding your goal to motivate you and your organization can be a major hurdle. That said, often, you will already have an idea of the issue you want to help with or the goal you want to achieve before you start. If not, do some research on nonprofits both locally and internationally to find out if there’s anything missing from your community.

Well-defined values can ensure that your organization works with integrity, authenticity, and a solid conscience. It also acts as a front before donors, giving them more encouragement to be a part of your setup.

Step 2: Research competitors

Now that you have your mission and can see that there is a need, we need to know that there is a market for it. Having too many nonprofits in the same niche makes it much harder to raise money, show that your company is necessary, and provide a helpful and relevant service.

Make sure that there is something unique about your organization, preferably something special, that allows you to stand out as the “more helpful” option compared to your competition. This factor can be who you support, how you support them, who you work with or for, or any number of differentiating factors.

💡Tip: Being unique is crucial for starting a successful and useful non-profit.

Step 3: Identify the timeframe

Time is of the essence while starting a nonprofit, and you need to account for it. While the nonprofit may be set up for something that is not time-sensitive, to set up the business and register a company itself can be time-consuming.

Here’s a sample timeframe that you can alter for your nonprofit | Source: Venngage
Here’s a sample timeframe that you can alter for your nonprofit | Source: Venngage

As you scroll through the below points on how to start a nonprofit, you will realize what a potential timeline for your organization could look like. Then comes the registration, application for tax exemption, and so on.

All of this takes time, depending on which geography you are operating out of. Be patient and understand that you will not be able to make an impact right away.

Step 4: Strategize your funding

There are different ways to raise funding for your nonprofit. If you have an exclusive members-only club, then membership fees can take care of expenses. You could also organize events or fund-raisers to increase donations. Many nonprofits reach out to crowd-funding platforms or create their own donation drives.

Fundraising has largely gone online, and sites like GoFundMe do a fine job of helping you achieve your dreams.

Another effective way of raising funds is by attracting government grants. Reach out to your local authorities to find out the best way to access these grants.

In terms of how to start a nonprofit organization, this step is where you need to get the most creative. Some ideas include:

  1. Host an event to spread awareness about your organization and raise some money to host a larger event.
  2. Request donations from family and friends.
  3. Collaborate with high school kids for additional volunteers and awareness.

Step 5: Factor in the costs

Now, the most important question: how much does it cost to start a nonprofit organization?

Pulling together the finances to start your nonprofit organization is incredibly difficult, just as it is challenging to get funding for a for-profit business initially. Government grants have demanding requirements, and corporate sponsorships won’t be easy to come by.

Doing research into the many costs of this venture can grant you insight into whether or not you’re ready to take this head-on. Just always remember that kind acts of service are priceless. This may be an investment, but it’s for a beautiful cause.

Factor in the following costs:

  • Office or home-setup
  • Payments to your team members (which may not be a full salary, but a modest stipend if the work is voluntary)
  • Power and internet bills
  • Costs to conduct events
  • Paying your legal consultants
  • Organizing events
  • Printing marketing collateral like pamphlets and standees

‍There is no point in learning how to start a nonprofit organization with no money because there absolutely will be startup capital needed if you're comitted to being taken seriously as a nonprofit. According to Forbes, startup nonprofits require between $2,500 to $5,000 for legal fees and logistics.

Step 6: Be diligent with your paperwork

The US has over a million and a half nonprofits. Every one of them has gone through stringent qualification criteria and rigorous paperwork. This is because nonprofits earn their privileges based on goodwill and a clean conscience. Ensure that you have professional help from solicitors and lawyers to draw up your paperwork.

It is important to ensure that all your Ts are crossed and your Is are dotted. Even minor discrepancies can have severe implications for your tax exemption and registration status.

Step 7: Find a motivated team

A nonprofit is nothing if it doesn’t have a good team working within it.

When looking at who to recruit, there are a few things to keep in mind. Firstly, they must be motivated. While this is true in a regular business, in a nonprofit (where the monetary incentive is lower but the social and moral benefit is higher), it is even more important.

Having members with the same goals and mindset as you is crucial for having a motivated team that works well and actively towards the goals you’ve created.

Secondly, your team should have a variety of expertise. Your board should consist of individuals with specialties in finances, marketing, and legal matters, as well as those who are comfortable asking for donations from their network and community.

You shouldn’t expect everyone to have all the qualities you want. Still, together, your team should cover all the bases.

The final step is recruiting and incorporating new members into your company. This has its nuances, but it isn't too different from a typical company and should be adjusted to your individual situation.

Step 8: Build your board

Begin small. Have a small, intimate group of board members who seek the common good of the nonprofit, share your values, and are ready to be invested in its success. Distribute the responsibility of the organization judiciously among every member and assign roles, succession plans, and bylaws.

Step 9: Create your bylaws

Having strong bylaws is critical for any organization. It insulates its board members, employees, and beneficiaries from malpractice.

Here’s a great guide to creating effective bylaws:

💡Tip: Make sure that every member of the board knows everything in the bylaws and signs off on each clause.

Step 10: Brand your nonprofit

Many begin from here. But this is not how to start a nonprofit. It is best to brand your nonprofit after you have your budgets, timelines, board members, and value system in place.

This way, you can be truer to the cause. Give your nonprofit a memorable name and logo design, register its domain, and make sure that your core values are reflected in all your outbound communication.

Just like a for-profit organization, a nonprofit requires a brand story, brand image, and a memorable customer experience. Let’s look at a few crucial components:

Organization name

This is the first point of contact that people will have with your organization. There are four main types of names: they could be meaningful (e.g., A Loving Spoonful), a name based on a celebrity or founder (e.g., David Suzuki Foundation), one that simply uses generic words (e.g., Do Something), or one that is unique (e.g., Carepath). Each of these has its advantages and disadvantages.

While it is common to lean on intuition when naming, it is important to take some time and ponder your name for a while. When thinking about a name, test it out, ensure it is aligned with your brand, and check with multiple people to get feedback.

At your convenience, you can use a business name generator for inspiration in coming up with a unique and memorable organization name. All you have to do is input three relevant keywords for your nonprofit, and the tool generates tons of names to choose from.

Our handy business name generator
Our handy business name generator

There is a lot to think about when choosing your name and just as many resources.

Logo

Crafting the logo for your brand can be a challenge. The debate on whether the brand name or the logo is more important is contested by both sides. Still, everyone agrees that they play off each other and are both important to how the public perceives your brand.

You want something memorable and compelling for your logo that clearly communicates your mission and vision.

Create a free logo for your nonprofit organization with our intuitive logo maker to save yourself the effort of making one from scratch. Starting a nonprofit is time-consuming, so save your energy and finances by getting a little help.

Click the image to customize the logo
Click the image to customize the logo

Go ahead and fully customize this nonprofit logo according to your liking and take it home for free, along with tons of logo files for varying needs.

Branding collateral

Credibility is one of the most (if not the most) important aspects of getting donations for a nonprofit. If people perceive you as a professional, trustworthy organization, they are more likely to support your cause.

Branding collateral raises the visibility of your nonprofit organization to potential donors and fosters a favorable view of your advocacy. They effectively communicate crucial information about you and your nonprofit with a single glance.

This is where the Brand Plan comes in.

The Brand Plan features for a steal
The Brand Plan features for a steal

Our Brand Plan is your brand-building best friend. For only $10/month, you have instant access to:

  • Unlimited logo edits
  • Business card maker
  • Email signature maker
  • Custom design tool (Stitch)
  • Brand showcase
  • Brand guidelines
  • Perpetual brand backup

Oh, and all of them are pre-set with your new nonprofit logo. Say hello to instant convenience and results!

Create mission and vision statements

While these statements may seem fluffy and sometimes disingenuous, done properly, they are both helpful and important for fully understanding how to start a nonprofit organization.

When building these, it is good to think about their purpose. Creating mission and vision statements allows you to share, solidify, and express your goals. Your statements should be easy to understand and unambiguous.

💡Tip: Avoid buzzwords and expert language when making your mission and vision statements. Keep it clear, concise, and educational.

Website

It is the 21st century, and you are reading this on the internet, not an old piece of paper. It should go without saying that you are going to need a website. Just as commonly known are all of the great website builders (we’ve all seen the ads) that can help you get started with this; WordPress, Wix, Weebly, and Squarespace, to name a few.

There are a few things to keep in mind when building your website:

  • Have a great homepage with a call to action, statistics, and communication that gets the visitor emotionally involved with your nonprofit. Also, make sure to put any upcoming events, news, email list sign-up, and some pictures on there as well.
  • Put an About Us page where people can find your story, mission, vision, and board members.
  • Put a Contact Uspage with a means of communication for any questions and a Join us page for volunteer positions, staff positions, board member positions, and anything else.
  • Make sure to have a clear Donation Page with information about donating, the tangible impact of a donation, and a donation form (this could also be linked from your home page).
  • There are a few other pages that you can have but probably should only add as you expand and as needed. Some ideas are Resources, Members Only, News, Events, and Future Expansions.

With these four pages and a home page, your website will be a fantastic asset for spreading awareness about your nonprofit organization and receiving donations.

A website is a fantastic way to share your vision and purpose and will be the first port of call for intrigued donors, both big and small. Because of this, it is crucial that your website reflects your goals and is built to the standard of the rest of your organization.

💡Tip: Be mindful that you aren’t overpromising and underdelivering. Also, avoid spamming potential donors.

Step 11: Create a business plan

Now that you’re fully equipped to ‘go-to-market’ with your nonprofit, it's time to draw out your business plan. Identify quarterly, half-yearly, and annual goals. Fix a date for your annual meetings with the board to assess reports and results. Make this information public to win the trust of donors.

What goes into a nonprofit business plan? | Source: Aplos
What goes into a nonprofit business plan? | Source: Aplos

A nonprofit organization isn’t that different from a typical business, especially regarding the operational side. The main difference is that the profits are reinvested into the company, helping others rather than being moved into shareholders’ pockets.

Having a good business plan can help you organize your work, recruit volunteers correctly, and estimate realistic short and long-term goals.

While some founders recruit volunteers first, having a business plan in place will allow everything to go more smoothly and be more organized. Investing time early on will pay off later.

Do your research, create a plan, and set up flexible goals for you and your volunteers to achieve over a designated time window. This will help you establish yourself successfully and stay organized and focused.

There’s nothing wrong with planning your nonprofit’s business like a profit-driven corporate business. Be aggressive and bold. Find partners in similar causes, influential people, and organizations who can prop you up in your early months. DonorBox has a useful guide to getting started.

Step 12: Gather donations

Gathering donations can be a major stumbling block for many who are looking at how to start a nonprofit organization.

As a nonprofit, it is common to run into financial issues as you often provide a service or product to individuals who can not or will not pay for it. Because of this, you rely on others to provide the finances for your organization to survive.

It is estimated that the majority of nonprofit startups do not survive beyond five years. Of those who do, a third are in financial distress. For this reason, you should try to retain existing donors, but what if you don’t have any yet?

In order to stay financially afloat, you have a few revenue streams that you can potentially tap into:

Organize fundraising events

These work well as people may pay to attend, companies may sponsor certain parts of the event, and you can run fun games or activities that raise money. Some places allow you to conduct games of chance, such as raffles and draws, while in other places it is illegal. Make sure to check what you can and can’t do!

Solicit donations from individuals

While this is the simplest method, it can also be limited in its success.

Receiving donations from people who are not emotionally connected or invested in your organization is difficult, and getting people invested at a 1-on-1 level is incredibly time-consuming. An easy yet important option is to include a donation button or page on your company website and link to it on social media posts!

Obtain corporate sponsorship

This works well when organizing an event or once your organization has grown into a large player in the market. It is helpful to have a set pitch to approach businesses and multiple aid levels that they can choose from.

Provide value

This method depends on what type of organization you are. Some examples of this are collecting membership fees, selling merchandise, event fees, and more. This is similar to how a for-profit business would generate revenue, but in this case, the profits are simply rolled back into the organization.

Get government grants

This can be a lot of work but are also immensely helpful. Your government almost certainly has incentives for non-profit organizations in the form of grants, which you can apply for. Check out your government’s website to learn about the eligibility requirements and how to apply.

Create a marketing and content plan for donations

Creating this will allow you and your organization to simultaneously achieve more exposure and increase donations. Having a rewards plan for donations allows for a more structured sales pitch to companies and will make it easier for them to choose a reasonable level at which to support your organization.

Finally, it would be a good idea to set up recurring donation options for both individuals and companies. Incorporating this onto your website would be a great way to create a steady, reliable cash flow foundation to help run your organization.

Using a combination of these methods and keeping costs low, your organization should be in an excellent place to stay financially healthy.

Step 13: Check your compliance

Always check if you are compliant with the law. It is best to have a consulting lawyer on-board or as a consultant. You may also add a cookie consent banner to ensure that you're complying with all kinds of data compliance regulations.

Make sure that your income is transparent and available in the public domain, as are your expenditures for the nonprofit. No good deed should end up being punished.

Backup plan: What if the nonprofit doesn’t work out?

After all this work, you must consider if starting a nonprofit is the best option for both accomplishing your mission and helping those affected. Sometimes, because of the demographics, the competition, or any number of other reasons, starting a nonprofit may not work for you.

If that is the case, you still have many other options to consider for helping a cause:

  • Organize an event or fundraise with friends and family, and then donate the proceeds to another nonprofit.
  • Join another nonprofit as a staff member or volunteer to serve on the board of another organization.
  • Set up a for-profit business to help support other nonprofits
  • Start a new chapter of an existing nonprofit. This can either be done when a nonprofit is actively expanding, or you can approach one and suggest setting up a new chapter.

When looking at how to start a nonprofit organization, sometimes not setting up your own but instead supporting others around you can be the best course of action.

What are the different types of nonprofit organizations?

There are three broad types of nonprofit organizations. There might be more or less, depending on the region you dwell in.

1. Charities

These are the most common kinds of nonprofit organizations and fall well within the classical definition of the genre of business. They could be charitable, religious, scientific, civic welfare, educational, healthcare, or any kind of organization that focuses on bringing good to a community or the general public.

Doctors Without Borders is one of the best examples of a charitable nonprofit | Source
Doctors Without Borders is one of the best examples of a charitable nonprofit | Source

It takes passion and dedication to achieve your goals for a charity. To make an impact, you'll need to attract sponsors, contributors, and volunteers to help you.

2. Associations

When a group of people with a common thread of interest come together for the good of the larger collective, it can qualify as a nonprofit organization.

AMVETs is a volunteer-led organization that is exclusively open to over 20 million American veterans and works towards their welfare | Source
AMVETs is a volunteer-led organization that is exclusively open to over 20 million American veterans and works towards their welfare | Source

Associations include women’s rights groups, support groups, veterans’ welfare organizations, and associations for the differently-abled, to name a few.

3. Clubs

Nonprofit organizations can also include setups that are created for general pleasure, recreation, sports, and more.

Trout Unlimited is a nonprofit that brings together fishing enthusiasts and conservationists | Source
Trout Unlimited is a nonprofit that brings together fishing enthusiasts and conservationists | Source

These are generally closed groups and allow a finite number of memberships, which are distributed without discrimination. However, there are a few basic criteria that have to be met in order to be part of the collective.

The perks of starting a selfless business

While everyone sees the problems in the world, only a benevolent few have solutions and want to work on them to make the world a better place for others.

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Other than good karma, putting your time, effort, and resources into starting a nonprofit organization has its perks:

1. A sense of satisfaction

There are few joys that can match the joy of helping. Your beneficiaries often know who you are, and bringing them relief gives you a sense of fulfillment. It’s also wonderfully wholesome to see a problem that was nagging at you being solved or addressed, at least.

2. Tax exemption

Several countries, including the United States of America, offer tax exemptions for nonprofit businesses. As a result, even if you follow a classic business model, you can ensure that all the money you earn from goodwill and donations isn’t taxed, giving you more freedom to use it for your causes.

3. Become a community figure

Those who work for the good of the community are acknowledged by everyone around them. This isn’t for a claim to fame, but to be more than just your individual self, who seeks only the good of your family. As time goes on, you can use the social influence you gain to help even more causes.

4. Break away from your regime

Your 9-to-5 job may pay your bills and help you afford a nice car, but chasing profits isn’t always fulfilling. Identifying a cause close to your heart and extending your job skills to do the community some good can have intangible yet gratifying rewards.

Frequently asked questions: 3 popular FAQs about how to start a nonprofit

What are some commonly asked questions about starting a nonprofit organization? Get your questions answered with these three FAQs.

1. How long does it take to set up a nonprofit?

Depending on the state, getting your Articles of Incorporation approved by the state government could take several weeks.

After that, you must apply to the Internal Revenue Service (IRS) for recognition of its 501(c)(3) status. The IRS processing period ranges from 3 to 6 months on average, but it might take up to 12 months in some situations.

⭐️ What you need to know: With approximately 1 million registered in the United States, public charities are the most common type of 501(c)(3). Nonprofits that do not fall under 501(c)(3) are divided into several categories, including 501(c)(4) social welfare groups, 501(c)(5) labor and agricultural organizations, 501(c)(6), and 501(c)(7) leisure clubs, among others.

2. How much does it cost to start a nonprofit organization?

A nonprofit organization can be established with as little as $750 and as much as $2000 in funding. In general, your expenses will be separated into the following categories:

  • Incorporation fee: $0 to $250, depending on the state
  • 501(c)(3) fee: $275 to $600
  • Website: Approximately $15/month
  • Domain registration: $10 to $50
  • Insurance: At least $500/year
  • Office space: At your discretion
  • Team stipends: At your discretion

3. How to start a nonprofit organization with no money?

A fiscal sponsorship is one approach to forming a nonprofit without spending any money. A fiscal sponsor is an established 501(c)(3) corporation that will take a new group "under its wing" while it gets started.

It is not necessary for the sponsored organization (you) to be a formal corporation. It can be in any stage of development. However, this connection is especially for start-ups with limited to no financial resources at the outset.

The fiscal sponsor's tax-exempt status is effectively "borrowed" by the sponsored organization. The agreement, which should be in writing, can include back-office functions, meeting space, guidance, and any budgetary functions, including fundraising and loans.

Over to you

As time goes by, you will gradually gain more traction and your organization will earn more respect. Your assets will begin to swell and your actions will see positive results.

It takes ample patience, especially in the early months, when you’re getting things into place. If you are operating in a cluttered category, you may need to find a distinguishing characteristic that makes donors and members look at your nonprofit more favourably.

How to start a nonprofit is one thing. How to ensure it thrives is another altogether.

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