How to Start a Foundation

Everything you need to know about starting a foundation

Research & Refine your Business Idea

Starting your own private foundation is a good idea if you’re regularly donating large sums of money or generating funds for charities or causes of your choosing. Private foundations are usually not-for-profit entities and their assets are called endowments. Endowments are used to fund activities and to make grants.

Private foundations are similar to public charities but they typically operate under different codes and regulatory frameworks. The establishment and management steps are also specific to this kind of organization.

In order to set up your own foundation, you will first have to determine the structure and the exact scope of activity.

You have to become incorporated in the state or the country where you plan to operate. Articles of Incorporation – the legal document that guides the operations of the foundation will also have to be drafted in advance. When you do that, you’ll have to appoint a board that will govern the organization and handle the management processes.

There are additional documents and legislative steps you’ll have to handle but we’ll take a deeper look at those later on in the guide.

Next, come up with a mission statement. If you’re in the US, for example, you will be required by the IRS to have a statement that specifies your charitable intent. The document will provide added benefits. It will give you a much clearer vision of what you’re trying to accomplish and a focus that will have a positive impact on all other aspects of getting the foundation to be operational.

Creating your Business Website

Foundations are heavily dependent on generating funds to fuel their operations and to provide grants to the charities that they aim to support. For the purpose, a foundation will need to work on increasing its popularity. Digital communication channels provide excellent opportunities and they should be fully harnessed.

To make the biggest online impact, you will need to work on the development of a personalized, well-conceptualized website.

Your foundation’s website should shed more light on the activities and the mission that fuels all of the entity’s operations. Since a foundation isn’t a corporation, you benefit from a lot more freedom and flexibility in terms of selecting the right format, multimedia and design.

A foundation’s website can also be used to receive charitable donations. You need a good call to action and a simple button that will prompt interested parties to move forward and contribute funds.

Foundations can also use their websites to increase awareness, find volunteers and extend the scope of their activities. Professionally-created content will enable the accomplishment of all these goals. The good news is that website development and content creation do not have to be complex or costly.

Setting up a website isn’t as hard as it may sound, in-fact, many hosting providers have tailored their service around small businesses who may not be tech savvy. We suggest going with BlueHost to host your website as they have a easy one-click WordPress installation tool, you can get 60% Off hosting and a free domain name here.

Additionally, creating a blog on your website is also a great way to attract organic traffic and expand your business. Checkout our full guide on the best and easiest way to setup a WordPress blog here.

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Marketing Your Business

Foundations need to generate a lot of buzz in order to ensure a sufficient volume of donations.

Online marketing is a great choice because of its cost-efficiency and targeted nature. Most of the digital advertising opportunities simplify the process of reaching the right crowd that ideally consists of qualified leads.

A few of the digital marketing approaches that foundations should consider include the following:

  • Creating a high quality website and filling it with relevant content (increased reach and excellent reputation establishment)
  • Search engine optimization to get traffic from Google and other major search engines
  • Social media marketing in relevant channels like Facebook, Twitter, LinkedIn, Instagram, Periscope, YouTube, etc.
  • Pay per click (PPC) and display promotion in relevant websites
  • Email marketing (especially if you already have several lists of subscribers based on interest or the type of interaction you’ve already had)
  • Live streams and webinars aimed at increasing awareness

Apart from relying on digital channels, you should also consider scheduling events, galas and seminars. While costlier, such initiatives ensure direct contact with interested parties and they make it easier to spread the message.

Billboards, flyers and branded gifts/products can also be utilized to increase brand recognition and invest in the future popularity of your foundation.

Setting Goals and KPI’s

Identifying and tracking the right KPIs will give you a much better idea about marketing effectiveness, the reach of your reputation establishment programs and fund raising efforts.

Foundations and non-profit organizations will have to track quite a few similar KPIs. A few of the top ones include:

  • Average gift size: the number of donors and their retention is very important. The size of donations and gifts, however, is an equally crucial metric. If you see that you’re attracting many new donors but they’re contributing very small sums, chances are that you’ll need to modify your communication strategy.
  • Fundraising ROI: you will be investing money in communication efforts, events, marketing and other activities aimed at reaching new donors. The fundraising ROI shows you how effective you are and whether you’ll need to consider alternative, more cost-efficient approaches.
  • Donation growth: it’s very important to make sure that year on year donations are growing. Take a look at the gifts secured and add all of these together to come up with an annual figure. Compare this one to the annual figure for the previous year or for an older period of time to see the evolution of your foundation.
  • Online gift percentage: if your website enables online donations, you will have to determine what percentage of all donations is coming from this channel.
  • Time between first and second gift: this metric applies to long-term donors. Statistics show that only 19 percent of first-time donors will make a second donation and often, a large period of time will be required to accomplish the second milestone.

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Plan your Finances

Foundations don’t raise funds like corporations. You need to come up with funding guidelines that will shed light on how you’re going to generate gifts and how these will be distributed.

Your funding guidelines should outline the grantees that will receive funding, the application process, the grant ranges and the calendar year during which such financial contributions are going to be made.

The more detailed your guidelines are, the easier it will be to control the money streams and determine the amounts that will be required to fulfill the mission of the foundation.

As far as generating funds, you need a solid strategy for identifying donors and raising money.

For the purpose, you should communicate clearly who you are, how donations are going to be used and which entities are involved with your foundation already.

Foundations can raise and distribute funds in a few other additional ways apart from searching for donors and distributing grants. They could provide loans to entities that will be making repayments to the foundation. They could also set up scholarships, award programs and comprehensive charitable programs.

Adopt an Entrepreneurial Mindset

Regardless of the fact that foundations aren’t for-profit entities, you will still need to adopt the entrepreneurial mindset and apply it to the management of the organization.

Know what your goals are and set accomplishable milestones. Keep track of progress and analyze the right metrics. The more you focus on current performance, the easier it will be to introduce operational improvements in the future.

Learning about running and setting up a foundation is a continuous process. You can get started by accessing the right materials right now. Books like So You Want to Be a Philanthropist: How to Choose, Set Up and Manage a Successful Family Foundation and Charity Case by Dan Pallotta will give you the basics.

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Legal Requirements: 

The regulatory steps you’ll have to go through in the very beginning are numerous.

These vary from one country to another so it would be best to consult a local corporate law attorney about the specifics.

Usually, foundations will need to apply for an Employer Identification Number like most other companies. Unlike businesses, however, foundations usually have a tax-exempt status. Getting in touch with the local taxation authority will give you some information about how to apply and receive this status.

Keep in mind there will be filing fees you’ll need to take care of. Thus, you’ll need some initial capital to use for the very first steps.

Accounting & Bookkeeping:

Regardless of the fact your foundation isn’t generating profit, you will still need to ensure financial accountability.

Hire an accountant that has sufficient experience with foundations or non-profit organizations. There are accounting firms and freelance bookkeepers who know what it takes to ensure regulatory compliance.

While your accountant will be taking care of most documents, you will still need to ensure some level of financial accountability in day-to-day operations. Accounting software will enable you to manage many aspects of receiving and distributing funds. There are various solutions development for the needs of foundations. It’s typically best to opt for specialized software that’s created for the management of donations and grants.

Hiring Employees:

Many processes can be outsourced upon necessity to professional teams in the very beginning. As your foundation grows, however, you’ll have to consider staffing possibilities.

Fundraisers, communication experts, volunteer coordinators, event managers, professionals who have a legal background, project managers, program directors and people who have finance and administration experience can all become valuable foundation team members.

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