Starting a company is hard work, but if the business you’re interested in launching is a charity or nonprofit, you may face some unique challenges. From fundraising to all of the paperwork required to secure nonprofit status, there are extra steps ordinary startups don’t have to consider. Below, we’ll cover some of the common challenges nonprofit founders face.
Dealing With Deeply Rooted Problems
When people think about entrepreneurs, they often think about smart young people developing novel technologies or other innovative products. They deal with new, exciting solutions to today’s problems, streamlining business processes and enriching the lives of their customers. For nonprofit entrepreneurs, the goals of the startup look a lot different. Rather than marketing a shiny new product, charities are generally diving into old, deeply rooted problems in a community or society as a whole. Devising solutions to these problems is a significant challenge, and convincing potential donors or clients that your solution is viable may be difficult.
Challenges Quantifying Results
Where traditional startups can easily measure success but considering quantifiable metrics such as net income, the number of sales, amount of expressed interest, and more, quantifying success is much more difficult for a newly established charity. Community impact can be slow and subtle, and it can be challenging to secure funding if you cannot demonstrate results. It’s important to maintain careful documentation and carefully think through your pitches and presentations to ensure you are communicating your nonprofit’s impact clearly and effectively.
Lack of Financial Motivation
After their initial success is established, many startups get bought out by larger companies. For nonprofits, that isn’t really a possibility. While most nonprofit founders probably aren’t in it for the money, it can definitely have challenging moments when the workload is overwhelming and there’s no tangible reward or end in sight. It’s crucial to remain focused on your organization’s mission and remember the impact your work is having, even when it can feel like a thankless profession.
Navigating Paperwork and Constraints
Paperwork and technicalities are a reality for any startup, but there is extra paperwork and policies to consider for charities. Gaining tax-exempt status as a 501(c)(3) corporation requires a lengthy application process and subjects your organization to several constraints from the IRS. These are essential steps, and you can likely find someone who has gone through the process before to help walk you through it, but it can be challenging to jump through all of the hoops to make sure your organization is operating legally.