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 make 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 simply 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 probably 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 solicitation
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 your 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
what 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 have 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 to 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 bookkeeping 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 anywhere 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 organization
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 newsletter 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 makes 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 on 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
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