October 25, 2013
It has been tough times for for-profit and nonprofit businesses alike since the recession. However, while a sluggish economy has slowed down new business growth, entrepreneurs continue to chase dreams and start new companies. This also holds true for nonprofit ventures and the two groups face many of the same obstacles.
While nonprofits and for-profits have one obvious difference in their business models, they also have many similarities. Because of this, they are met with the same successes and failures and usually flourish under similar minds.
Lizzie Bildner, founder and president of Sharitive, described the early goals of her nonprofit startup with with Forbes:
"In order to ensure Sharitive's successful transition from beta to business, I need to bring on a team that has experience in sales, growth strategy and implementation, nonprofit management, mobile payments, and design and product development. Most of all, I need people who are creative, flexible, and passionate about Sharitive's mission. A real passion for what Sharitive is doing trumps the rest because at this stage passion and commitment to the idea is what gets you out of bed in the morning."
While passion is at the core of nonprofits, it is also the case for for-profit startups. While revenue may be the driving force as opposed to a mission, it still takes dedicated people to get any startup off the ground. The early stages often require staff that can wear many hats and help to quickly grow the business.
It is no different for startup nonprofits. Founding members should surround themselves early on with employees and volunteers who believe in the mission, but also understand the business. Even with the help of volunteers and the benefit of tax exemptions, nonprofits are not impervious to failure early on. While the mission of a nonprofit may sound great, founders should prepare for as many scenarios as possible before taking their idea from beta to the real world.
Nonprofits shouldn't underestimate early financial security
Startup organizations should also familiarize themselves with the nonprofit landscape as quickly as they can. Tax exempt is a general statement and nonprofit leaders should be aware that they will incur costs they may not expect.
While nonprofits are exempt from federal unemployment taxes, that is not the case for state unemployment taxes. This is because while FUTA taxes are used to pay administrative costs, SUI are used directly to pay the cost of benefits paid to unemployed workers.
Nonprofits are required to contribute to unemployment insurance but they also have the option of becoming a reimbursing employer. There are a few options for nonprofits that choose to opt out of state UI tax pools to save money and startups should familiarize themselves with those options early on. Groups such as First Nonprofit Companies can provide nonprofits with advice and membership in an LLC to help lower UI costs.
First Nonprofit also offers financial services that can help organizations develop fundraising plans, review financial statements and develop financial data. Financial data can help nonprofits react more quickly to budgetary and funding variances.
Like any business, nonprofits that can begin utilizing cost-saving measures early on stand a greater chance of success down the road.
Ready to chat? Get in touch today to request a no-obligation savings evaluation.
First Nonprofit has saved us so much money over the state’s program. We had one little glitch with the state recently and we contacted FNP immediately. FNP staff called us back immediately and moved to remedy the problem.
First Nonprofit has been a great partner. They have helped us saved hundreds of thousands of dollars! They have awesome resources for our nonprofit organization. Thanks for the partnership.
Life is certainly busy these days but having business partners like First Nonprofit has made some of the process hassle free. We have worked with this team for years. When we changed payroll systems, they outlined every step. I think this team is terrific and I know they get the job done! Thank you, Cruz, to all the team at FNP.
FNP has helped our agency to save thousands of dollars every year on our unemployment coverage. The service is phenomenal, and we are thankful to their team as our partner. My experience working with Marshall on the advocacy around UE for nonprofits was also a highlight as someone who teaches advocacy and lobbying for nonprofits. Really, your whole team is top shelf, so thank YOU!
Chicago Children’s Theatre has greatly benefited from our partnership with First Nonprofit, and I have always enjoyed working with the staff on our filings and any complicated questions. I would not hesitate to recommend First Nonprofit to fellow nonprofits. We’re very happy customers.
FNP is a great resource for Daniel Kids. To have a TPA that we can count on to take point on not only managing our unemployment claims, but to support and guide any protest hearing, is invaluable. All the professional support staff we have worked with have been excellent, very knowledgeable and responsive. We are grateful for the help and support, thank you.
When I first began in my position at my organization, I hadn’t had experience working with a company like FNP. The staff was so patient and helpful in helping to explain the benefits of First Nonprofit. Anytime I reach out with a question I receive a quick, clear, and thorough response. I’m so thankful that we decided to partner with FNP. Their excellence in customer service, coupled with their variety of packages frees us up to truly serve our staff and community with a peace of mind knowing that our organization is protected against unanticipated unemployment insurance expenses.
First Nonprofit gets an A+ in my book. You are so easy to work with & very knowledgeable! Whether it is my quarterly correspondence with Kim or my random interactions with Dawn about a bond … I am so pleased that I get to work with such a helpful company. Thank you!