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Want to Start a Nonprofit? Five Facts That Might Change Your Mind

Starting a nonprofit sounds like a great opportunity for a lot of people -- you can do good, leave a legacy, or take control of your own work life. For many, the very idea encompasses the "best of all worlds" scenario. Unfortunately, launching a successful nonprofit is not as easy as it seems and provides very little, if any, payback to the person who sacrifices so much to get it off the ground. If you are thinking that starting a nonprofit is the right decision for you, consider these five factors before you commit your time and resources.

1. It's Not Yours

The very definition of a nonprofit corporation makes it not yours from the day it is launched. Nonprofits are owned by and operated for the benefit of the public. The law surrounding nonprofit organizations is intended to ensure that no single individual benefits from or wields complete power over the nonprofit. For that reason, a board of directors is handed the reins of the organization from the moment the papers are filed.

2. 501(c)(3) Status is Not a Money Magnet

Securing 501(c)(3) status from the IRS is no cakewalk, and even once you have it, the cash doesn't automatically start rolling in. Over half of all new nonprofits fail, most for a lack of funding to continue. Sustainability is a key to success, and an effective sustainability plan includes a well-run, transparent organization, solid marketing, and a good mix of funding sources.

3. Grants Are Not Waiting for You

Everyone sees the emails and ads claiming that grant money is just out there waiting for somebody to snap it up. Unfortunately, those folks are usually just trying to sell you something. The reality is that grant funding is available but it is limited, and there is an awful lot of competition for it. Startup nonprofits are particularly poorly placed to receive grants -- the grantmakers have established criteria to qualify, which usually includes a solid track record and a clear, workable plan for sustaining the programs after the grant money is spent.

4. It's Not Easy

The paperwork and planning required to develop and grow a nonprofit is significantly more complicated (and just plain more) than in a for-profit business. And, finding the resources to support even the best nonprofit idea is far more difficult than selling products or services for profit. At least that way, your customers are receiving an immediate, tangible benefit for their cash. With a nonprofit, you have to work to convince folks to part with their hard-earned cash with just the good feeling of philanthropy in return...a much harder endeavor than you might think.

5. There's no Big Payoff for You

As mentioned above, the laws of nonprofit organizations ensure that no individual gains a personal profit through their work with a nonprofit...that means the founder as well. While it is possible to develop a paid executive director position in the nonprofit you found, remember that the position is a low-paying, thankless job and that the board is responsible for overseeing that position -- hiring, firing, and setting the salary are all under the board's purview.

So, what to do with your philanthropic desires? If you are undaunted by these facts, move forward with starting a nonprofit organization. Consider using fiscal sponsorship, if it is appropriate for your idea.

If these facts turn you off to starting a nonprofit, consider starting your own for-profit business. An LLC based on a viable business idea really is the best of both worlds. You can balance your own needs with providing good for others. Whatever your passion, there is already a nonprofit working to improve the world that would be eternally grateful for a percentage of your profits. Social entrepreneurship does not require that you sacrifice everything to do good -- running a socially-conscious for-profit can both improve your own lot in life and give you the ability to support the causes closes to your heart.

About the Author

LaunchX.com is dedicated to training entrepreneurs to turn their good ideas into great companies. The LaunchX System provides step-by-step education in the mindset and skill set entrepreneurs need to succeed. Our program includes intensive seminar training, key business software, and specialized workbooks that teach you the fundamental skills you need to achieve your financial and worklife goals through entrepreneurship. Register today for our introductory course and see what LaunchX can do for you!