How to Start a Non Profit Organization

How to Start a Non Profit Organization

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How to Start a Non Profit Organization

If you’re looking to start a Non Profit Organization, you’ve come to the right place. Since we’re going to show you exactly how to do it.

We’ll start with key Non Profit Organization industry fundamentals like how big the market is, what the key segments are, and how revenues and profits are generated.

Then we’ll discuss keys to not only starting a Nonprofit business, but succeeding in it!

And don’t forget to look at our nonprofit business plan template if you need a plan to start or grow your onprofit organization.


Defining a Non Profit Organization


How Big is the Non Profit Organization Industry?

According to Guidestar and the National Center for Charitable Statistics, there are more than 1.8 million active Nonprofit institutions in the US, with a combined revenue of $358.4 billion.

Where are U.S. Non Profit Organizations located?

The map below shows non-profit organizations by state in the United States.

non profit locations

What are the Key Segments of the Non Profit Organization Industry?

Non Profit Organizations can be segmented into service categories:

  • Education organizations include booster clubs, PTAs, PTOs, and financial aid groups. These organizations receive the highest proportion of private contributions.
  • Health organizations include those dedicated to research, medical care, and the provision of healthy foods and physical activities to children.
  • The remainder of industry revenue is split between human services organizations, society benefit organizations, arts and culture, environmental agencies, animal and international affairs initiatives, science and technology projects and research, and a variety of other causes and organizations.


What External Factors affect the Non Profit Organization Industry?

A number of factors affect the performance of the Nonprofit industry. These drivers include:

Public Confidence and Transparency – An increasing number of nonprofits are working to gain public trust by making their finances transparent and undergoing annual ethics audits.

Purchased Fund-raising Lists – Donor lists are often bought and sold between players in the industry. Brokers and list managers are getting more sophisticated in building lists that are more relevant to individual organizations.

Favorable Demographics – Older people represent a significant portion of the industry’s donor base. The 65 and older age group is the fastest growing segment of the population, which represents an opportunity for the industry.

Internet Donations – Online giving is becoming a larger part of Nonprofit’s fundraising efforts. Though this is not expected to replace traditional methods such as direct mail, it is quickly becoming an indispensable fundraising method.

Who are the Key Competitors in the Non Profit Organization Industry?

The U.S. industry is fragmented: the largest 50 organizations account for about 25 percent of industry revenue. The Mayo Clinic is the top-performing Nonprofit in the US, with annual revenues of $8.5 billion. The Bill and Melinda Gates Foundation is in second place, with annual revenues of $6.9 billion.

What are the Key Customer Segments in the Non Profit Organization Industry?

The key customer segments in the Nonprofit market are, by far, Individuals. This is followed by foundations, then, Bequests and Corporations.

What are the Key Costs in the Non Profit Organization Industry?

The key financial metrics in the Nonprofit market are as follows:

Profit – Profit in this industry is low, and is generally used for growth or as emergency funds.

Wages – Wages for officers make up 3.5% of industry revenue.

Advertising – Advertising costs are low in this industry, and absorb an average of 0.5% of industry revenue.

What are the Keys to Launching a New Non Profit Organization?

  1. Define the mission. A nonprofit will need to be sure its mission is compatible with a 501 (c)(3) status.
  2. Identify the organization’s core activities and whom they will benefit.
  3. Write a business plan. A business plan will help detail how you will achieve your mission.
  4. Develop the board. The board is a nonprofit’s governing body, and is critical to the company’s long-term success.
  5. Draft governing documents. Nonprofits are required to have Articles of Incorporation, Bylaws, and a Conflict of Interest Policy in order to file for 501(c)(3) tax-exempt status.
  6. Legal considerations. Nonprofits are required to incorporate before filing for 501(c)(3) tax-exempt status. Check to see if your state has charitable solicitation law requirements. Finally, a nonprofit needs to ensure ongoing compliance with all state and federal requirements.


Nonprofit Basics: History, Types, Considerations, Fundraising, Program Development, Staffing


What are the Typical Startup costs for a new Non Profit Organization?

The one-time costs of starting a Non Profit Organization include:

  • Legal fees
  • Tax-exempt status filing fees
  • Fundraising expenses
  • Branding and logo
  • Equipment
  • Salaries

The ongoing costs of running a Non Profit Organization:

  • General and Administrative costs such as salaries for admin and support staff, rent, utilities, technology, and legal costs
  • Fundraising costs
  • Program costs

How much do Non Profit Organizations make?

Nonprofit CEO salaries range from$53,555 to $206,709, with a median of $102,910.

Helpful Videos

Creating a Nonprofit Business Plan that Works

Launching a New Nonprofit Organization: Your Road Map to Resources

TEDxClaremontColleges – Allen Proctor – A Vision for Successful Nonprofits

Additional resources in the Non Profit Organization

For additional information on the hedge fund market, consider these industry resources:

 

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