Starting a nonprofit organization requires taking a good look at your projected operational costs and your potential fund-raising income before you offer your services to the public. Knowing what to expect financially before you start your organization is the key to long-term success. Potential donors are more likely to donate to a group that appears to be well-run and organized. A sound fiscal basis and detailed planning is the key to ensuring your nonprofit’s future.
Determine all of your monthly fixed costs. Include the amounts for rent or mortgage payments, heat, signage, electricity, Internet and telephone service. Ask the previous tenant for copies of heating and electricity bills to get an idea how much you need to budget for fixed costs.
Decide if you will hire paid employees or use volunteers. If you will hire employees, determine how much money you will pay them. If your employees will be paid on an hourly basis, you are required to pay them for any overtime hours worked.
Add the fees you will have to pay to open your nonprofit organization. You’ll need to file an application with the Internal Revenue Service to be declared a 501(c)(3) organization. Section 501(c)(3) is a tax law provision that recognizes your group as a nonprofit organization and exempts you from paying federal income tax. You still have to pay employment tax and other federal taxes. You may also need to pay local zoning and permit fees if you plan to renovate your office space.
Include costs for contracted services. Look at things such as trash removal, maintenance, cleaning, lawn care and legal and accounting services. Even if you plan to handle your organization’s finances yourself, it may be worthwhile to consult an accountant on an occasional basis.
Find out how much insurance will cost, both for your building and vehicles and for any services that you may offer. If you will be hiring paid employees, determine how much it costs to provide health insurance coverage.
Investigate how much a computer network will cost. Include computers, printers, modems, routers and any wiring needed. Don’t forget to include the cost of a support contract. Sooner or later, something will go wrong with your computer system, and it makes financial sense to have a contract in place. Don't forget about the cost of office equipment, such as copiers and postage meters.
Prepare an advertising and fund-raising budget. You need to let people know that you have started your nonprofit and need to solicit donations. Smaller newspapers offer less-expensive ad rates, although they also reach fewer people than the major newspapers. Decide if costly TV and radio advertising is within your reach. Add the cost of Web design if you plan to pay someone to prepare a website for your organization. If you plan on hiring a fund-raising consultant, include these costs.
Make a rough estimate of fund-raising income, but be prepared to operate with little income until your group is more established. Decide if you will obtain funding by holding special events, sending out fun-raising appeals, applying for grants or directly approaching potential donors.
Factor in the cost of vehicles and insurance if you will be using organization-owned vehicles. Include a provision for gas reimbursement for employees or board members who will use their personal cars for organization business.
- A businessman calculating expenses at tax time image by Christopher Meder from Fotolia.com