Part 1: Infrastructure Pillar, Management Area
We have been talking about the Build a Nonprofit Framework. Today, we are diving deep into the Infrastructure Pillar, Management Area of that framework. There are nine steps that fall into this pillar and that is the topic for today’s article.
The nine steps were born after I tried Googling “start a nonprofit” and found tons of information on the actual steps to create a nonprofit and nothing about what happens once you have your 501(c)3. I hear the same thing over and over from Founders too. There is a sentiment of now what. It was out of my frustration that I sat down and researched why new nonprofits fail the first year. My research showed over and over that lack of infrastructure and lack of funding were the two main reasons nonprofits fail. A recent study found that 9 out of 10 startups fail. This is a staggering number, and it’s no wonder why so many people are hesitant to start their own businesses. But what about nonprofits? How often do they fail?
According to one report, 60% of all new nonprofits fold within their first three years. This number is alarming, and it’s clear that if you want your nonprofit to be successful, you need to put a lot of thought into your infrastructure. In this post, we are going to dive deep into the first step of the Building a Nonprofit Framework, the Infrastructure Pillar: Management Area.
Step #1: Build the Infrastructure your nonprofit needs to receive funding
There are nine steps in this pillar and we will dive deep into each one.
Your nonprofit needs to be set up for funding. You need to make sure your 501(c)3 is set up for funding. The best way to do this is to start with your nonprofit’s board.
In this article, I’ll discuss the nine steps you need to take to build the infrastructure your nonprofit needs in order to receive funding.
Infrastructure Pillar of the Build a Nonprofit Framework: Management Area
The Infrastructure Pillar of the Build a Nonprofit Framework
The first area of the framework is management and it all starts with your Board.
Build Your Board
You cannot do this alone so get your Board together. Odds are you have your necessary three members of your Board because that’s the minimum you need to get your tax-exempt status. But you probably have more than three in your bylaws. In that case, you need to start with your Board and get them on board. They have to be committed to your success.
Your board is your nonprofit’s management team. It’s the people who make all of your decisions. They are the ones who are responsible for your success. They are the ones who decide where your nonprofit is going to go and how it’s going to do it.
Your board needs to be able to dedicate time to your nonprofit and be willing to work with you.
Now is the time to start expanding that Board to start getting all of the Board members that are in your bylaws.
Let’s talk about the importance of your Board by starting with their responsibilities. If you’re really new to Board work, then you probably don’t know or understand what your Board’s responsibilities are.
Steer the Ship: Put Together Your Strategic Plan
Their primary goal or responsibility is to steer the ship and by ship, I mean the organization. They’re going to do that by putting together a Strategic Plan. The way I teach Strategic Plans, I have the Founder put together the first strategic plan simply because that’s something you can do while you’re waiting on a full Board or while you’re waiting on some other things. You know the organization better than anyone else at this point.
So by a Founder putting together the Strategic Plan right now, I think that is a good use of time. And then what you will do is once you have your Board, you will be able to present that Strategic Plan to the Board and say, this is what I’m thinking. What, what is your input? And then you would approve the Strategic Plan at some point.
So but then going forward after that first strategic plan, your Board should be involved. Making that plan. So that’s why as part of steering the ship, your strategic plan is your roadmap, right?
Set the Overall Goals for the Organization
The next thing that is your Board’s responsibility is to set goals for the overall organization.
That would need to be something that you would do probably once a year. Setting the goals and objectives for the organization is usually done at budget time.
Set the Roadmaps for the Organization: Fundraising Plan, and Program Development, and Strategic Plan
The Board needs to provide a roadmap and we have three different roadmaps that Founders should have in a new organization.
We’ve talked a little about it above and get into it deeper in the next section.
The second one is your fundraising plan. You should have a fundraising plan in place. It is the map of how you are going to get funding for your organization.
The last roadmap is your program development document. This document will lay out your program.
And if you use my program development template, you have the 10 common grant questions answered in that template. When you get ready for grants, which you aren’t right now, but when you get there writing that proposal is going to be so much easier because you’re going to have all the information you need right there.
Boards are responsible for being the leader of the organization.
Boards should be the leader of the organization. They’re going to lead with their experience and expertise.
Boards have a financial responsibility to the organization.
They should be the leader with their wallet too. No one wants to follow someone that is asking them to do something they aren’t willing to do themselves.
So they have to be willing to give. If they are asking others to give, they have to be willing to give and have to be able to tell people why they give.
Legal and Fiduciary Responsibilities of the Board
Legal Responsibilities: Duty of Care
Board members have a legal responsibility to serve the organization in a similar manner than any other reasonable person of legal age would behave.
They have to do it in a way that is not reckless. For example, misuse of funds voting themselves a bonus after a profitable Fundraising campaign. That is a misuse of funds. So they have a legal responsibility to make sound decisions.
Legal Responsibilities: Duty of Loyalty
They also have a duty of loyalty. This means each member separately, and as a group of the Board has a responsibility of loyalty to the nonprofit. The way that a Board member demonstrates his or her commitment is not by personally gaining from the access or information they obtain.
That’s an example.
Legal Responsibilities: Duty of Obedience
All Board members have a legal responsibility to remain faithful and obedient to the organization’s mission, vision, and goals. Nonprofits are tax-exempt and Boards are entrusted by society to ensure the financial integrity of the group.
Board Action Steps
Here are some action steps to protect the nonprofit.
- Annual Board training and onBoarding. This is so important. Many times I find Board members don’t really understand what they’ve gotten themselves into. So by doing an annual training, Doing onBoarding as they come on will definitely help in this respect. So what are some of the things that you would want to train or onBoard your members?
- The Board member needs a copy of the bylaws. They need to have read and understand the bylaws. There’s the strategic plan and goals. If you already have those things on paper and in place, they need to know them. Other things Board members need are:
- The mission of the organization,
- the vision for the organization,
- the fundraising plan,
- job description, especially if they are officers,
- the expectations of the organization for their Board members,
- a code of ethics and
- To make it easy for nonprofit founders, you have free Board training at Nonprofit Founder’s U.
Tax Liabilities for Individual Board Members
There are some tax liabilities that board members will have. And so let’s talk about that just a little bit too. This is important. So board members can incur tax liabilities in certain circumstances.
So if the IRS takes a look at your organization and finds that the pay for the nonprofit team is excessive. This might not apply right now, but it will. Individual members of the board can be held liable. The tax law even has a provision that hits charities with an excise tax of 20% on compensation above $1 million for a nonprofit’s top five highest paid employees. It is just one of the tax liabilities the Board can take on, but for more information consult, your tax professional may not apply right now, but you need to be aware of these things. Because like I said, being on a board is not something to take lightly.
A Board is Required to Report Financials
The board is also required to report financials on local, state, and federal levels.
Not doing this can make you lose your tax-exempt status at best. So these are things that your Board needs to be doing.
How Does Fundraising and the Board Connect?
Fundraising begins with the Board and the Fundraising Committee, Board members lead by giving. People don’t like to talk about this, but it has to be said, Board members should be getting in donations and/or giving themselves. It’s what leaders do.
They should help execute plans, especially if you are a working board, which if you are a new nonprofit, your Board is a working board. This might mean participating in fundraising or rolling up their sleeves and doing the work when you are a new nonprofit. They should also not think small, like a civic organization, they will help you think of fundraisers that will bring in larger amounts of money.
So no more events of the month. I was actually part of the board of a new nonprofit where this was a problem. When Board members came up with fundraisers for the nonprofit, it was the fundraiser of the month. One month they would say, oh, so-and-so is doing a 5K. We need to do a 5K next month.
You don’t put together a 5K in a month. Can’t happen, but that’s what they wanted. Or, you know, let’s go sell donuts. These are small thinking fundraisers, and they’re not going to get you very far. So your Board needs to start thinking on larger scales. A Fundraising Plan will help you do that.
How Do You Find Board Members?
Figure out what skill sets you and your organization need.
Don’t stack the skills. I see this on so many Boards. What do I mean by stacking skills? Stacking skills happens when you have too many people with the same skill set, you will have a large gap in what you have and what you need.
An example would be having two or three marketing people, but no one with bookkeeping or organization skills. So don’t stack your skills, make your list and contact people once you know what skill sets you need. Make a list of 20 people, have your Board help you make this list, and make sure when you talk to these people, you are sharing your vision and your passion because it will be contagious.
When you’re making your list, you start with people you know, and then you ask your Board for people they know.
Create a Strategic Plan
The strategic plan will help you decide who you are as an organization and where you want to go. Do not skip this step.
Here is the table of contents for a strategic plan.
You’re going to have an executive summary, an organization description, your mission statement, your vision statement, your value statement, and your goals and strategies. That is a very basic and simple strategic plan. And that is the outline for it.
The free Nonprofit Founders Club, the Facebook group, has a template for a strategic plan available to its members. So if you want the actual template, join the Nonprofit Founders Club free Facebook group. The paid membership Nonprofit Founder Society has a lesson that walks you through the process of writing your Strategic Plan. If you want a little bit more hand-holding you can join the membership and get that lesson to walk you through the Strategic Plan.
You can now get just one lesson at a time as a Pay Per Lesson.
Think big picture on this step. It should be a five-year plan. Where do you want to be in five years?
This is truly a 30,000-foot view. It has milestones for each goal, but that is as far as a strategic plan goes. Think of it as a zoomed-out view of Google maps. It has a pin of where you are and a pin of where you want to be and a line connecting them. But no other information.
You will need to attach a five-year strategic plan when you start applying for grants in a few years. So this is really an important step. Some examples of things you may want to accomplish in the next five years may be a physical location, a program to further your mission to raise X amount of money, or to be grant ready in year three.
Create Your Tactical Plan and Budget
The tactical plan is a step-by-step action plan to your five-year goals. Now, going back to my Google maps analogy, this is when you put in your location and your destination and click directions. So you’re going to write out each goal in your strategic plan and ask yourself, what will we need to do this year towards the goal?
So an example would be a strategic goal- be grant-ready in three years.
Then the action steps would include deciding what project you would want to fund through grants and measuring outcomes for two to three years. It would also include getting the documentation together that grants require. Right now, you’re going to write a budget to go with your tactical plan. This will become your yearly budget.
It’s also called your general operating budget. I will add here that your fundraising committee can be working on the fundraising plan during this step. They will want to add their budget to your general operating budget.
Create Your Grant Ready Program
The program you develop now will be your signature program.
It will be the program that is deeply rooted in your mission and known in the community. I have a template that helps you create a program that will be grant ready. So let’s take a closer look at a program. So we start with establishing the background of the program.
This will help keep you away from the “because we’ve always done it that way” mentality. Keep in mind that programs have a lifespan, and will eventually evolve or need to be dropped. Putting on paper the purpose for the program will help your organization make the decisions to evolve or discontinue the program.
Next, you will want to record the need and how you discovered the need in the community that led you to start the program. Some organizations will commission a needs assessment. Sometimes it can be as easy as serving your clients or potential. To see which needs are most important to your ideal client.
Last, you will get into the nuts and bolts of the program. You will want to establish a budget for who the program serves, how services will be delivered, the staff needed and how you will evaluate the effectiveness of your program. Grants are a key funding source for nonprofits. However, the process of applying for and receiving grants can be daunting. In this article, we’ll discuss the basics of grant seeking and provide tips on building the infrastructure your nonprofit needs to receive funding.
That’s all for this part of the Framework. Next week, we will look at Infrastructure Pillar: Policies and Procedures Area.