Perhaps there is a particular cause that is close to your heart. Maybe you’ve seen a need in your community. Or perhaps you learned from an acquaintance about a movement they’re involved in, and you think you can help. Whatever your reason for starting a foundation, our useful guide breaks down the process and helps you get on your way.
A foundation is a type of non-profit organization (NPO) that helps fund other non-profit organizations. These may include institutions or groups, and the money could be used for scientific, cultural, religious, or educational purposes.
We recommend thinking of your foundation as though it is a business. This helps strategize and incorporate ideas for fundraising, operational procedures, and budgetary strategies.
Read on for everything you need to know about starting a foundation.
First things first:
Embrace an entrepreneurial mentality
Although foundations are non-profit entities, you will still need to have your entrepreneurial framework to keep the foundation up and running. By keeping a business mentality, the foundation will be more likely to be successful.
Learning about, establishing, and managing a foundation is a long-term process.
The best way to go about this is to start with a solid plan, set out specific goals, keep track of your metrics, and keep evaluating and tweaking your operations.
If you’re interested in learning about non-profit management and its future, have a look at Dan Pallotta’s book, Charity Case. It’s an easy read and is full of great information. Here you can find other books that will help you tap into your inner CEO.
Draft a business plan
While not obligatory, this is a must for those who want things to run smoothly. A well-designed plan for a foundation means that you have taken the time to really reflect on business operations. Here are 5 steps to writing a useful business plan:
- Define your mission. As a foundation, your ultimate goal is to help people who are in reduced circumstances. Of course, your non-profit cannot realistically be of aid to everyone in need, so you need a mission statement to clearly define who your foundation is helping.
- Create an outline. A business plan is a map, essentially. Like any good map, yours will need to have checkpoints and ways to get from A to B. Unfortunately, there is no ready-made, one-size-fits-all business plan outline. You need to consider all the areas that your foundation will need in order to be fully functional, and create an outline for each one.
- Services. Foundations donate money to those who need it — but where do these funds come from? An important part of your plan is to include the services your non-profit will offer to gain funds.
- Financial and marketing plans. As is true for all other companies, the finances of a foundation must be transparent. Setting up a financial plan ahead of time ensures clarity every step of the way. Additionally, you will need a marketing plan to help spread the word about your foundation within your community. You should aim to make a marketing plan 6 months to 1 year in advance and include all the important dates and events in your area’s social calendar.
- Impact plan. Your foundation is — hopefully — going to help lots of people if you run it properly. You should also consider the impact you want your foundation to have on society as a whole.
For an in-depth look at writing a business plan, this blog post explores the topic.
Research and refine your foundation’s ethos
The goal of foundations is to donate large amounts of money. To do this, they need not only to manage donations but also to generate funds. Foundations are not-for-profit, and use any monetary gifts and donations to both fund activities and make grants to people or other organizations in need. The monetary value is the asset of the foundation.
Private foundations are the same as public charities. However, being private entities, they operate under unique systems and regulatory structures. They also have specific steps for establishing and managing them.
First, determination of the framework and directions of the activities is key. As you will need to incorporate your foundation into the country in which you plan to operate, start by drafting the articles of incorporation. This will later help when appointing a board that will lead the organization.
Second, a mission statement defines your charitable intent. It states plainly what you’re trying to achieve and gives you a focus that will benefit all other operational aspects of the foundation. A mission statement is a big part of your foundation and of attracting donors.
What will you call your foundation?
Every business needs a name, and this is no different for foundations. A good idea for a foundation name is one where there is a proper description of the cause. It’s also possible to create a foundation in someone’s memory. This is why full names are a common choice for foundation monikers.
If you are not going to name your foundation after a person and are looking for inspiration, we have an excellent tool to help you narrow down the options: our business name generator will ask a few simple questions and then generate a list of suggestions for you.
Recent research has shown that there are over 1.5 million non-profit organizations in the U.S., many of which are in competition with each other to raise money. If your cause is similar to another foundation’s, it is important to show donors why they should give to your foundation.
Can you afford the first year?
Before taking your first official steps, we recommend that you already have the money raised for initial capital. This should total at least a one-year period of operating contribution.
Starting a foundation without starting capital will make it difficult to accomplish your mission and, frankly, is a bad idea. In the case that you have no option but to start your foundation in debt, treat every dollar as if it’s your last, and only spend what you have to.
Let’s get started! An important thing to establish is your web presence. Everyone has a website these days, and this includes foundations. Aside from increasing visibility, they also make organizations appear more trustworthy. To make a sizeable online impact, you will need to have a well-designed website that describes the activities and mission of the foundation. Remember that all marketing works best when it is consistent across materials. The fastest way to increase the effectiveness of your materials is to have a website domain name that mirrors your foundation’s name. It’s simple, it’s easy to remember, and it’s professional. This domain name generator can help you find one that suits your foundation’s brand to a T.
Aside from information about the foundation’s mission, the website should also have the capability to receive charitable donations. An effective call to action on a website can help foundations substantially increase donor giving.
Keep the focus on the foundation, not its website
A website increases awareness, helps find volunteers, and extends the direction of the foundation’s activities. However, development and content creation should neither be complicated nor expensive. Otherwise, the website will drain funds from the foundation which it could otherwise use to further its good cause.
Many hosting providers have specific services that aim to help small businesses or organizations. For instance, Bluehost has an easy one-click WordPress installation tool to help you host your website. In order to grow your business and attract organic traffic, you can also create a blog on your website. Use it to discuss current and future charitable events, and keep this up-to-date! This is important, as it’s a simple way to optimize your website to score higher in search engine rankings.
Market your business
Online marketing is a fantastic option for foundations, because it’s economical and can easily target the right audiences.
Digital marketing means:
- Creating a high-quality website and filling it with relevant content.
- Mastering SEO (Search Engine Optimization) to direct traffic from Google and other major search engines.
- Harnessing the power of social media marketing platforms like Facebook, Twitter, LinkedIn, Instagram, and YouTube.
- Displaying advertisements on appropriate websites.
- Email marketing, live streams, and webinars with the goal of increasing incoming funds.
Along with digital channels, scheduling events and seminars are important initiatives for foundations. They ensure direct contact with possible donors and make it much easier to spread information. The same applies to billboards, flyers, and branded gifts and products. These help organizations become household names at a low cost.
Set concrete goals
Whether you’re starting a foundation, training for a marathon, or studying for a degree, the important thing is that you give yourself attainable goals at regular intervals. Breaking big jobs down into smaller tasks makes even the most complicated projects approachable.
A good way to do this when starting a foundation is to identify and track your top key performance indicators (KPIs). KPIs let you follow the progress of individual goals simultaneously, which helps you target areas for improvement. KPIs include:
- Donors and gift sizes. The size of donations is a very important metric. Many donors with small donation amounts can add up to a lot, but it’s important to mix in large-sum donors as well. Analyzing the make-up of your donor base keeps you ahead of the game, and knowing where to solicit.
- Fundraising ROI (return-on-investment) information can tell a story about how your money is being spent, and if it’s being spent well. It can help you decide whether you need a different approach.
- Donation growth. Contrast the sum of donations over a 12-month period with the sum from the previous year to see the progress of your foundation.
- Determining the percentage of gifts given online, in person, as bequeathments, etc.
- The timing between the first and second gifts is a good data point to have on repeat donors.
Budget, budget, budget
A funding guideline will show the approximate times when you are going to receive gifts, and how best to distribute these gifts. The guidelines should show: grantees that will receive funding, application process, grant ranges, and the calendar year during which such financial contributions will take place.
You also need a very strong plan for finding interested donors. In this plan, state who you are, what your foundation’s goals are, how donations are going to be used, and any entities already involved with your foundation.
Because foundations can also offer scholarships, award programs, and other charitable programs, a budget can quickly get out of control. All financial activities need to be scheduled into the foundation’s calendar in order to keep tight control of spending and income.
The nuts and bolts of foundations
Aside from a name, a goal, marketing and a detailed plan, your foundation has a few more necessities to ensure its success.
There are numerous steps to registering your foundation in the beginning. If you plan on having employees (more on that below!), you will need to apply for an Employer Identification Number. Remember that foundations have tax-exempt status, so you will need to contact the local taxation authority for some information about how to apply and receive this status. Filing fees may also be subject to legal requirements based on where you register your foundation. You can start to see why your initial capital is so important!
Accounting and bookkeeping
Financial accountability is the most important thing in a business, even if the foundation is a non-profit entity. Accounting firms and freelance bookkeepers can help ensure regulatory compliance within the foundation. If you invest in accounting software, you will also be able to more easily manage many aspects of receiving and distributing funds.
Many processes can be subcontracted. However, as your foundation grows, consider staffing possibilities. You will need some people with longevity, as these become valuable team members. They may include fundraisers, communication experts, volunteer coordinators, or event managers. Also helpful are professionals who already have a legal background, project managers, and people who have finance and administration experience.
Establishing an advisory board
Ideally, people with non-profit experience should be available as resources to you until operations are up and running. This board should then expand to include significant donors, potential donors, and people with significant fundraising contacts.
The board should neither get very large nor become populated with big egos, which can destroy the organization. A good board size is around twenty people. Keep in mind that ideally, board positions should be unpaid.
Take your time in order to help the maximum number of people possible. A foundation can only expand at a rate that is supported by fundraising. Every organization started somewhere, but they are what they are today because of discipline, responsible money management, and great marketing.
Start slowly, but start
Anyone wishing to run a charity entity can expect to invest significant amounts of time and energy, with great satisfaction as the only reward. While it may feel like an overwhelming challenge lies ahead, if you follow the steps we’ve outlined above, you’ll see that it’s simpler than it seems. So feel confident in starting your foundation, and start making the changes that will make the world a better place.
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