What Are the First Steps to Starting a Nonprofit Company?

There are many aspects to starting a nonprofit company. However, perhaps the most important question is what to do first. I would submit that having a great idea and knowing people who are interested in implementing it are not enough. The first thing that needs to be done is to prepare a formal business plan.

The business plan should be in writing and prepared in the standard format. There are software packages that guide one through this process. However, I would suggest that a good reference website or book on the topic is probably enough to give one a basic idea of how to prepare it. Indeed, the IRS application for 501(c)(3) status basically requires much (though not all) of the same information as a business plan.

A non-profit business plan includes the standard items one might expect: a list of proposed revenue sources (donations; grants; etc.); expenses; personnel; and so forth. However, it also requires a market analysis of the “competition.” In the case of a non-profit, the competition is competing for donations and grants. It is important that one see if others have already formed a charity that tends to the same needs. If so, is that charity going to be seeking contributions from the same donor base? These sorts of questions need to be answered at the outset.

In sum, although it might seem overly formalistic, it is a particularly good idea to have a business analysis of the proposed non-profit company set out in writing before proceeding. An extensive business plan is a particularly effective way of doing this.

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