Post: Think before you leap: Four truths about starting a nonprofit

Kristin, my colleague at the Case Foundation, has some good advice for folks thinking of starting their own nonprofit: think twice. http://www.socialcitizens.org/blog/start-nonprofit

The post goes on to list some ways of partnering with existing orgs – to do the good works without having to do your own 501(c)3. With one nonprofit for every 300 Americans, that’s probably a good idea.

But I wonder what it is about nonprofit thinking that makes successful, businesslike individuals forget their horse sense. Nonprofiteers seem enamored by the dream – all the people they will help, how they will at last be able to give back. Here’s one example I’ve retold: Helping Ghana Without Reinventing the Wheel.

The reality is, as usual, more complicated. Nonprofits are business in every sense save the profits. And removing profits – and the resources that come with them – complicates things indeed. I wish for everyone thinking of starting a nonprofit some clear-eyed market analysis.

1. Not-for-profit doesn’t remove competition

You will face competition for donations. You may face competition among other providers of similar services. You will certainly face competition for attention. How is what you’re doing unique? What about your approach or beneficiaries will help you reach donors? Or, as Kristin suggests, might you be better to contribute to, or partner with related organizations?

2. Robin Hood is romantic, but it’s easier to sell to people who need you

Most nonprofits ask for donations from the rich to provide services for somebody else. In this sense, help is a luxury good. “Give us money to solve a problem that other people have” isn’t the strongest of appeals. How will you find people who share your priorities for social good? (Social media can help.) How will talk about your cause to help galvanize those who don’t?

Like Robin Hood, you may find yourself bridging the worlds of your customers who use your services and your funders. Are you ready to translate?

3. Metrics for your success may be hard to come by

In the for-profit world, your accountant helps you know you’ve failed. Not so with nonprofits. There, your long-term success depends on slipperier metrics. Did literacy levels increase among at-risk kids in urban Houston? How many meals did you serve? And how do these short-term metrics connect with longer-value impact?

4. Solve problems, don’t just create organizations

Folks like Dan Pallotta are concerned that nonprofits lack ambition for the big stuff.

In the for-profit world, it takes a product that’s 10 times better than the competition to persuade folks to give it a try. How can you be 10 times better at targeting potential donors? Or 10 times better at addressing your issue?

At the end of the day, is that ambitious enough?