While most NPOs are established for the right, sound and moral reasons (such as a person or a group of people being so moved, so outraged or so hurt about people or animals suffering or environmental degradation, that they ‘do something about it’), not all organisations are established in response to such emotions and real needs. It can and does happen that people (often just one person or, effectively, business partners) establish non-profit entities for the ‘wrong’ reasons. 

The most common: a business venture (to earn an income for one or more people) for which there is no start-up capital. Sometimes money-making concepts are structured as non-profits as it is believed that this will fast track the establishment, extreme hard work and nail-biting first year or two that most genuine entrepreneurs are likely to endure, often without being able to give up their day jobs. 

A variation of this theme is when a product or service is either aimed at the poor or, if broadly targeted, the business plan shows that the poor are not able to afford it. The next step is to try to get others (donors) to fund their concept and thereby either assure themselves of jobs and/or a substantial and reliable demand for their products or services. This group is often the hardest to dissuade from their venture that they believe to be the solution to low-cost housing, illiteracy or food insecurity. The acid test here is to ask whether they would be prepared to hand over the product or concept (often patented or copyrighted) to an appropriate capable non-profit entity and receive no financial reward. Most won’t. 

South African legislation to govern and enable social enterprises is still to emerge, despite decades of lobbying and outstanding models functioning around the world. Social enterprises are businesses doing good, while also making money. Unfortunately, as the government has been so slow to enact encouraging legislation (and despite many businesspeople doing amazing work describing themselves as social entrepreneurs and more and more NPOs referring to their income generating initiatives as social enterprises), aside from the dated co-op concept, all that we still have in the country are for-profit businesses and not-profit organisations.

Many new non-profit concepts fizzle out and close . . . it may simply be that those involved have no idea of the workings, ethos and tough challenges of the NPO world.

Many new non-profit concepts fizzle out and close. Even though their initiators may not intend running a money-making entity, paying themselves high salaries and/or royalties or assuring their for-profit businesses a steady source of income, it may simply be that those involved have no idea of the workings, ethos and tough challenges of the NPO world. Irrespective of how pure or otherwise one’s motives for considering starting an NPO, the following are just some of the reality checks that few know up front and others learn along the way, and that cause most people to abandon their ideas.

The legal registration processes of non-profits can be slow and it is not unusual to take up to two years as three different government bodies are involved.

The founders of a not-for-profit usually do all the work voluntarily (sweat equity) and fund the start-up costs themselves and the trustees or board members carry fiduciary and legal responsibilities from the outset.

Donors prefer to fund established organisations. Catch-22 as it is, few donors will provide (risk) their money to an unknown concept or new entity. The founders’ CVs and strength of the idea or concept are rarely sufficient to cause strangers to part with substantial money. 

Running costs, of which salaries are generally the largest amount, are rarely funded by companies or trusts. The requirements of both major sources of funding are generally that their money is spent on project delivery (with only an extra 10% of project costs going towards core expenses).

With thousands of organisations competing for the charitable or developmental rand, it is not a simplistic process of registering an NPO, asking for money and being funded. There are many processes, much very hard work and a good dollop of luck betwixt ask and receipt. 

These tips are not aimed at dissuading anyone from starting an organisation, but rather at causing one to think clearly and unemotionally about whether their anticipated NPO is really needed, as to whether they are really up for what starting one from scratch will entail and to ensure that the same concept does not exist, nearby, where they could serve the greater good by joining forces, pooling resources and support an existing organisation.

Extract from Fundraising for Non-profits, by Jill Ritchie

Available from Papillon Press.