It Takes Money To Make Money and NonProfits Are No Different

3 10 2010

While nonprofit organizations fall under a separate tax category where the IRS is concerned, one area they don’t differ from for-profit businesses is the need for secure and consistent funding. Plain and simple: it takes money to make money. The lists of nonprofits who fail for ignoring this simple tenet is long – but it doesn’t mean you’re destined for the list.

When you decide to start a nonprofit, the list of challenges you face are long. One of the first is dealing with funding. A nonprofit doesn’t have the luxury of walking into a bank and asking for a loan. Instead you as the director and your Board of Directors and a few volunteers need to get creative. You’ll need to find donors and grants to keep the doors open and the lights on. But you can’t stop with one donor or one foundation. You need to find ways to keep a steady stream of cash flowing into the organization.  “Just enough” is not enough and you’ll need to get past this mentality in order to be truly effective in your work.

The main difference between nonprofit and for profit businesses is where the funding comes from. Nonprofits still need to be run much in the same manner as for profit businesses. But before you can get to that point, it’s a good idea to have good, sustainable funding in place for at least six months of operation before beginning to focus on new programs. This means, that for the first six months your doors are open, your staff should be focusing on obtaining donors and grants to provide this sustainable funding. The monies obtained during these first six months can be used for salaries, marketing and basic operating expenses. Once the funding is in place, the nonprofit can then operate much the same as a for-profit business.

Once funding is in place, the actual operation of your nonprofit will be a breeze, after all you started this because you have a passion for what your nonprofit will do. Even if you have an established nonprofit, it’s never to late to “get back to basics,” particularly if you feel you are starting to flounder financially.  Investing the time  secure the necessary funding will help pave the way for a successful first year and beyond.



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