Balancing the Mission Checkbook

How should I answer the question, “How do I start a nonprofit?” I need an answer because it’s a question I hear pretty frequently. The common scenario is a phone call to our office looking for assistance to start a new nonprofit organization. (We are the Nonprofits Assistance Fund, after all.) The person on the line feels a personal call to action to address some need in their community – tutoring for kids, beds for the homeless, treatment for victims of abuse, and many other important and urgent issues. The question, though, shouldn’t be “how do I start a nonprofit”. The question should be, “How can I help to address this important community need?.” I try to help them step back a little and consider the real problem, not the conclusion they’ve already reached. If they can think about the bigger picture of how they can add their energy and talent to a community need, the options are vast. The answer is not always (in fact frequently is not) to incorporate another nonprofit organization. Time Magazine has a terrific article in the March 5, 2007 issue on this topic, “Rethinking Nonprofits”. Dan Kadlec boils the question of whether or not to start a new nonprofit organization down to three essential questions: Am I cut out for this?, Is my idea different?, and “Is a start-up necessary?”. The reality is that starting a new nonprofit corporation requires focusing the initial time, effort, and money on the start up rather than on the important community need. If someone is absolutely set on starting a new organization, we always send them to the Minnesota Council of Nonprofits web site for all the basic steps required. Note that the very first section of the “How to Start a Nonprofit” section at MCN is titled “Alternatives to Starting a New Nonprofit”. For a longer, more comprehensive resource about starting a new nonprofit, download the publication “Get Ready, Get Set” from the Center for Nonprofit Management in Los Angeles . The guide discusses how to conduct market research on the community need and available funding, and the legal and organizational steps. The Exempt Organization Division of the IRS also has several helpful publications and a new on-line training program.

The phone callers asking about starting a nonprofit tend to fall into categories. One group are of people who are deeply committed to helping their community and they just don’t know about the alternative ways to get involved. A second group are people who are ultimately trying to create a job for themselves and they believe the myth that there are “millions of dollars in grants available for you today!.” I don’t have much patience for them. The last group are those who have already started an informal program or project and want to find a way to get some money or help to continue or survive. These calls are the most complicated and the toughest to help. I can only hope that they have put some effort into the basic research and needs review as described in Dan Kadlec’s article. Otherwise they will confront the harsh reality of funding, boards, and the steep learning curve of a start up.

What do I mean by the “mission checkbook”? It’s that balancing point that every nonprofit organization needs to find. The point where the focus stays on the mission and community while also assuring that the right resources are available and used as effectively as possible. In my role as the executive director of a nonprofit organization that works to build the “business” side of other nonprofit organizations, I find myself at an interesting juxtaposition of nonprofits, philanthropy, and business. This affords me a pretty broad perspective of the way that nonprofits work – from starting up to growing their programs to struggling and facing very hard decisions.

There are plenty of opinions and experts about how nonprofit organizations “should” do their work and keep the books balanced. I agree with some, disagree with several, and get confused by others. There are a few things I am sure of. First, balancing the mission and money of a nonprofit is hard. It’s also an essential responsibility of executive directors and board members who want to be sure that the community will be served not just this week but also in the future. Secondly, leading a nonprofit is not just like running a for-profit business. While there are some common elements, I see marked differences every day. I came to this work after more than twenty years in community banking where I worked with businesses, entrepreneurs, and the bank’s board of directors. I understood marketing, financial analysis, and management. In my six years leading a nonprofit and working with hundreds of others I’ve learned about the additional complexity and dynamic that comes from balancing community needs and funder requirements, volunteers and paid staff, board members and executive directors, and demands for public accountability, transparency, and measurable results.

My hope for this blog is to expand on the conversations I have with executive directors, staff and board members of nonprofits, with foundation program officers, and with bankers and other businesspeople. Beyond the technical answers to many questions – how to create a budget, read a financial report or build an operating reserve – there are larger issues that impact all of us in the nonprofit world and our larger communities. I’ll be posting about these broader issues from my own viewpoint and with links and summaries of news and research. I’ll also share some of the day to day conversations and lessons we learn together about looking for that balance. You’ll also hear some of my opinions, so be prepared. Please share your own opinions, ideas, thoughts, resources, and questions to the mix.