Starting a Nonprofit: Startup Costs to Budget For

If you are starting a nonprofit organization, what are some costs or expenses that you might expect for the first year or two of your operations? how do you know what to put in your budget or to plan for for the future in this video I will talk about ten common expenses that you should really consider when starting a nonprofit organization welcome back my name is amber Melanie Smith and I am a non-profit founder executive director and speaker on social impact leadership nonprofits and more I mak

e these videos here on YouTube every week sometimes more often to help aspiring changemakers with tips and strategies to help you change the world while living a life of impact and purpose now I started a nonprofit organization many years ago with absolutely no money in the bank when I was getting started so starting from scratch and I realized looking back that we could have grown a lot faster had we known to invest in a couple of key things earlier on so I'm really hoping that in this video I

can help you learn from what I made mistakes on and hopefully not repeat those and learn to accelerate your organization's growth when you are just starting out also there are just a couple of things that you really need to know to account for when you are planning what it is going to cost you to start and grow a nonprofit from scratch okay so let's get into these costs and expenses I have divided this into two categories we've got the must-haves and the good investments category there are five

must-haves that I have in this video and I'm going to describe what they each are and I'm also going to say the approximate cost for each of these you can kind of get a sense as to what you are in for just a quick side note that I'm talking about 501c3 tax-exempt public charity nonprofit organizations in the United States some of these things might be different for international NGOs or other organizations so just keep that in mind the first must have cost for starting a non-profit is quite simp

ly your lethal paperwork in order to be a 501c3 tax-exempt public charity in the United States you have to be recognized by the IRS and often your state institutions as such so there are some documents that you have to file in order to do so now the cost for these can vary I believe you could probably take care of all of the filing costs for around 800 to 1200 dollars but that is not necessarily including any legal fees if you choose to hire a lawyer to help you out I think that you could probab

ly do these forms without a lawyer assisting you if you feel confident enough to do so but if you would like a lawyer there's going to be an additional cost for that that I have not accounted for here so we're talking about your initial legal paperwork when you are just starting a nonprofit organization so things like you are federal 10:23 paperwork your state Articles of Incorporation if you're going to be doing fundraising which you most likely are you're gonna probably need a charitable solic

itation license in the state that you're operating in and then each year there might also be filing costs for doing the tax paperwork for your organization - another must have expense for a newer organization is your insurance so I'm specifically talking about general liability insurance insurance that will cover your volunteers and board member and officers insurance that will protect them from any kind of legal recourse should something go wrong with your organization these types of insurance

hope protect the fiscally responsible board members from legal repercussions now it's unlikely for a new organization to have staff right away but if you have staff you would also be looking at other types of insurance like workers compensation etc the costs for liability insurance and board of directors and officers insurance depending on your organization size could range anywhere from one or two thousand a year two five or six thousand a year and that's annually the third must have cost for y

our new nonprofit organization is of course for a website it is 20/20 you really can't get by without a website these days so you're going to be investing in that and I'm talking annual hosting costs as well as if you need or lack the skills to do so yourself possibly some web design and development talent now if you're feeling confident there are many tools out there available for people who are able to just create their own websites so you could possibly design your site yourself and that's wh

at I did and I think it's awesome if not you will be looking at hiring a web designer and depending on the complexity of the website you're trying to design an each page and if you need any graphic design support as well you could be talking about a fee of anywhere between a couple hundred to several thousand dollars it widely varies as for hosting you could be talking about five ten fifteen twenty dollars per month and then your domain cost that's about the same but per year the fourth must hav

e cost for starting a nonprofit organization and getting off the ground is some costs associated with your fundraising mechanisms so that could be selling items or products or services or hosting events whatever the case may be there's going to be some cost for doing that fundraising there's also costs for thanking the people who are supporting you so even something as small as thank you notes or stamps to send the thank you notes there's going to be a little bit of a cost for that but if we're

talking about hosting a fundraising event you've got a lot of different costs to account for there you probably will have to rent a venue you might have to have caterers or bar services you might need to be paying for some kind of online platform to accept ticket sales or registrations so the fundraising costs are really going to vary but if you're smart you can hopefully account for the costs that it will take to do the fundraising itself into the net profits that you will be gaining from that

fundraiser so that you're not behind the fifth must have cost and expense for your new organization is the whole reason you'd be doing fundraising in the first place and that is to run your programs so depending on your programs and there's going to be some huge variation in this depending on what the mission of your organization is but these programs will carry a cost if your program is to feed people there might be a cost for the actual food the plate where to serve the food on the materials t

o package the food in there could be any number of costs for that if you are looking to house people there will be costs for that property that you need to own to houses people but it this is going to be very very varied and you're gonna really need to plan carefully and determine your specific goals for the year in terms of how many people you're going to be able to serve when you are just starting out based on a smaller budget okay so on to the next section the following costs and expenses for

a newer nonprofit organization are what I would call good investments these are the things that if you can afford to or figure out how to pay for these things earlier on your organization will grow much faster and you will be able to grow your impact potentially have staff it depends on what you need but you're definitely gonna be able to scale up faster if you make investments and things like the following the first good investment expense his an accountant or bookkeeper I did my organization'

s taxes for the longest time and I hate it but anyway it's not my area of expertise I'm not an accountant you know I took nonprofit accounting classes but it's really not my strong suit so if you can afford to delegate this task out to someone whose expertise it is you will not only be happier but you will be able to spend the time that you would have spent doing those things on something more important for your organization like fundraising or running your programs so to do your annual bookkeep

ing or taxes you might expect to cost to pay maybe around 800 to a thousand for smaller organizations for someone doing your annual taxes at the very least I highly recommend getting some kind of accounting software like QuickBooks or some other solution and for that you can expect to pay anywhere from twenty to fifty dollars per month the next three things that I'm going to talk about that our good investments are also types of software and for each of these you might expect to pay between anyw

here from twenty to a hundred dollars per month depending on the robustness of the software that you get and how big your organization is when you're just starting out so the next good investment that is software is fundraising software we're talking like a CRM donor management software having this software early on will allow you to keep track of donors and make sure that you're thanking them on time that's going to make them continue to donate it's very important that you do that it's going to

be able to track your meetings and conversations with donors that you know about the most recent time you talked to Bob who wanted to give you $1,000 you know keeping on top of all of these things it's really important to stay organized and it's really also going to help you track your goals so if you know that you need to raise $50,000 this year you're going to be able to see at the click of a button how close you are to reaching that goal and perhaps even use that and for to create a sense of

urgency for your donors to help you meet the rest of your goal the next good investment that a software is volunteer management software there are some solutions out there that combine volunteer management and fundraising and if that works for your organization more power to you some organizations have too complicated of volunteer roles to be able to combine those types of software so it really depends on what your organization is doing with volunteers and whether the software that serves your

donor management purposes will also serve your volunteer management purposes but volunteer management software can help you schedule volunteers so they can sign up for specific shifts with your organization if that's what you need you can attract volunteers with specific skill sets they can fill out a volunteer application they can consent to a background check if your organization requires that let's say they're working with vulnerable populations like kids or the elderly you want to make sure

that you are vetting volunteers properly so software like this can help you really manage all of the people coming in to serve by giving their time and it's also just a great tool to communicate with volunteers so you can usually collect their email obviously that's how you communicate with them but you can continue to send out progress updates impact that your organization is having thanking them for their great volunteer work and even encouraging them to also become donors for your organizatio

n because many many donors were once volunteers or current volunteers for your cause the next good investment that is the third kind of software that I want to talk about is outreach or mailing list software so something like Constant Contact or eye contact or there are million solutions out there something that can help you do the communications to a mailing list for your organization and your mailing list is important because it helps you get the word out to potential people who might want to

in the future become volunteers or donors by joining your mailing list this person is willing to you that they're interested enough in your cause to possibly invest in your work at some other way so you want to be communicating with them regularly my organization sends out a monthly newsletter and then other newsletters and mailings in between depending on what's going on and people can opt out at any time but it's a great way to kind of cultivate the list of supporters and see who out there is

interested in your work and track your communications with them there are many companies who offer this technology who also donate these services and the platform used to nonprofits so definitely check that out I would highly recommend checking out an organization called tech soup so I think it's techsoup.org they will help nonprofits find either discounted or sometimes even free technology so all of the things I mentioned from fundraising CRMs to volunteer management software to mailing lists n

ewsletter software all of that stuff even accounting software if you join TechSoup as a member nonprofit they might be able to help you find a discount or even get something for free so check that out too the final thing that I believe is a good investment for a small nonprofit organization is if you can afford it is to bring on a staff I can tell you that my organization just exponentially grew our impact when we were able to devote people full-time to the work of the organization I mean this m

akes a certain amount of sense right you know you're going to make a bigger impact and reach a lot more people if you are spending 40 hours a week on it than if you are spending just a couple hours a week on it so the math really does work out and it turns out that it's better in return on investment even though you're spending money on staff the amount of impact that you're going to be able to make is going to vastly outweigh that cost so it's going to be worth it in terms of making an impact o

n your community so investing in the infrastructure by having staff early on will make sure that your programs can be delivered with quality and consistency many organizations first hires will be their executive director followed by per either a program manager or a fund Development Officer the first things that an executive director should be focusing on within the first couple of years of your new organization is fundraising and developing those systems for fundraising raising awareness about

the programs doing a lot of outreach if you're wondering how much you would need to budget to bring on an executive director as a new or nonprofit organization GuideStar has a great nonprofit compensation report that they put out annually that shows benchmarks across nonprofits of different budget sizes so I looked it up if you are a newer organization with a budget of less than 250 thousand dollars per year then the average salary for an executive director is around $45,000 per year so that is

what you'd want to account for at least you know maybe some more than that if you want to make sure that you can bring on someone and and be competitive and your hiring process so making sure that you're able to budget for that in your first couple years if your intention is to bring on staff I really hope that this has been helpful to you if you are starting a nonprofit organization or just in those beginning stages and starting to grow and thinking about what kinds of expenses are you going to

need to budget for in order to get to the next level I hope this has been helpful for you thank you so much for checking out my youtube channel and watching this video and please don't forget to subscribe give this video a like and a ring that bell to get alerts when I post my next video I post videos here on YouTube once a week if not more often than that so I hope to see you next time if you are on Facebook don't forget to check out my Facebook group change the world or bust where myself and

other change makers are talking about the different ways that we can make an impact in our communities and how we can learn from each other thank you so much for watching and I hope to see next time