As a consultant, I handle a lot of inquiries – by phone, via email, and in person. For example,

• Can you train our board to raise money?
• Do you do strategic planning?
• We’re dealing with “founder’s syndrome” – can you advise us?
• Can you help with our fundraising plan?
• We’re considering a merger with another organization and need guidance.
• We want to generate earned income by charging for our work. Help!
• Do you facilitate retreats?
• Do you know what “succession planning” means?

Because I have a broad range of expertise and interests, the answer to all these questions is simple: Yes.

However, when I hear the following request,

• We’re starting a new nonprofit. Can you help?

My answer is swift and firm: No thanks, I don’t do start-ups.

A big, complex universe of nonprofits

Across the U.S., we have 1.2 million 501(c)(3) nonprofits. This number doesn’t include organizations with a different tax status – there are many 501(c) categories – nor the many, many informal groups that don’t incorporate, seek a tax exemption, etc.

In some ways, it’s relatively straightforward to start a nonprofit. You can download sample articles of incorporation. Most states require a minimum of three volunteer board members – that might be you plus a couple of friends – to incorporate.

You can submit the federal 501(c)(3) application yourself (don’t forget the filing fee) or hire an attorney. Bylaws are little trickier; while it’s possible to work from a template, consider seeking legal advice.

Dealing with all this paperwork is the least of your worries. You’ve just entered a complex universe filled with rules and challenges around governance, compliance, fundraising, marketing, financial management, accountability, program evaluation, volunteer recruitment, and potential conflicts of interest. In fact, the IRS requires you to file a conflict of interest policy.

The nonprofit graveyard

Having been part of this sector for nearly forty years, I’ve experienced several recessions, economic downturns, stock market declines, and so on.

Every time the economy weakens, the pundits declare: Nonprofits will die. There’s going to be a shakeout. We anticipate a wave of mergers among charitable organizations.

In reality, the overall number continues to grow. In 2017 alone, the IRS approved 80,000 new 501(c)(3) organizations.

However, here’s the untold story. In recent years, the IRS has begun decertifying nonprofits that haven’t filed tax returns. According to the Nonprofit Quarterly, more than 450,000 501(c)(3) organizations had their tax exemptions revoked from 2010 through 2017.

Yes, they failed to file paperwork — but there’s a deeper story. Most of these groups had become inactive.

What happened?

Somebody’s great idea for a nonprofit wasn’t all that great. Somebody underestimated the amount of work required. Somebody couldn’t find support beyond their immediate circle, and the organization never reached critical mass. Somebody ignored the fact that the mission was already being accomplished – perhaps imperfectly – by someone else, and decided to duplicate existing efforts.

So you want to start something new? 

Having said all this, I honor all the people who start stuff: founders, initiators, creators.

You are agents of change. The world needs you.

Please hear me when I tell you: to create change, you don’t need to create a new nonprofit. Here are two alternatives to consider.

Option 1: Work through an existing group 

A consulting colleague talks about “projects masquerading as organizations.” This is a recipe for all the troubles outlined above: inadequate infrastructure, unsustainable funding, poor governance, etc.

In many cases, with a little effort you can identify an existing organization with an overlapping mission. Will they take you on as a project? This is more likely if you bring resources – money, relationships, credibility – into the partnership.

Yes, you’ll have less autonomy. Maybe that’s OK. In exchange, you won’t spend years building the all systems required for a sustainable, successful nonprofit.

Option 2: Fiscal sponsorship

In exchange for a percentage of your revenues, fiscal sponsors accept fiduciary responsibility, provide general oversight, and manage your money. These arrangements can vary widely based on how much responsibility the sponsor is willing to assume and how much support it’s willing to provide.

In some communities – for example, the Tides Center in San Francisco and TSNE MissionWorks in Boston – organizations exist to fill this function.

In most cases, fiscal sponsorship is a temporary stage en route to organizational independence. However, some projects have been sponsored for decades and do effective work without becoming independent nonprofits.

Would you rather follow your passion … or build infrastructure?

If you’re thinking about starting a new nonprofit, ask yourself:

• How many years am I willing to spend mastering financial management systems, legal compliance, board governance, and so on?
• What’s my passion? Am I more attracted to creating and running programs – feeding the hungry, protecting wilderness, producing plays, educating children – or building a sustainable institution?

Begin with due diligence. Explore all your options. If you can’t find a suitable nonprofit home for your idea, then by all means: create your own group.

However, for many people, launching a new nonprofit is neither the most efficient nor the most satisfying way to change the world.

With thanks to Wallace Tapia, CPA, of Tapia & Huckabay, P.C., for his input.