Starting a Nonprofit is the Easy Part

I was never a big Judy Garland fan, but recognize that she had an incredible voice. But her classic, “Let’s put on a show!” comes screeching into my head every time I hear of someone wanting to start a nonprofit For reasons that are beyond fathoming, I would think, to anyone who has been in this sector for more than several years, people think operating a nonprofit is a cakewalk. And truth be told, it is not.

Starting one, as I’ve said before, is the easy part. Sustaining one, hard before the current economic situation, has become exponentially harder. (And, as we all know, just because the “recession” is being labeled as “over” by financial experts, it ain’t over for the nonprofit sector. So far, I’ve made reference to movies and dance, so why not sports? It ain’t over ‘til the fat lady sings, and she won’t be singing for the sector for at least two to three more years.)

Two “stories” that I heard today just have me scratching my head. First, is the misleading headline from the news story on centraljersey.com: WEST WINDSOR: Township mulls nonprofits to ease tax burden My immediate thought was that West Windsor has gone the route other jurisdictions have been toying with: let’s pull the property tax exemption for nonprofits. Well, I was wrong . This article is about West Windsor’s Township Council considering whether it should create a nonprofit to fundraise for the Township in order for the Township to reduce the tax burden on the citizens of the Township. (There was also a presentation to the Council that somehow nonprofits could be used as a source of income to help defer the tax burden from the citizens to the nonprofits, but this idea was not fully explained.) It appears that West Windsor, like so many of its sister townships around the country, is having a hard time covering its expenses, and rather than simply raise taxes and put the burden on its citizens, it is looking for alternatives. So, naturally, nonprofits came up. Let’s put on a nonprofit, compete with the other nonprofits in the township for raised dollars, and sprint to the finish line of raising an easy $600,000 to 5 million annually.” Development personnel, are you jumping out of your seats yet?

So, let’s now switch gears to another story. We get a call from a founder of a young nonprofit that is financially floundering, and she wants free help and guidance. Her proposal is that she merge with a for-profit, the owner of which is very supportive of the nonprofit’s mission. For a variety of reasons that are unimportant here, we suggested that that is not the best route, and she should consider instead merging with another nonprofit that has a similar or complimentary mission. We even go so far as to suggest a few organizations she should consider approaching. She gets quite angry with us, saying she thought we were going to help her. Well, we thought we were helping her. She’s done the easy part of nonprofits—she started it; now she’s at the hard part of nonprofits—sustaining it. And that is exceptionally hard to do with a nonpaid staff of one and a board of four.

Nonprofit organizational performance expert Paul Light said at the end of last year, that due to current economic conditions, we would see 100,000 nonprofits close this year. He has now recalibrated his prediction: we will not see a “winnowing” of the sector but rather a “withering”. Tough economic times or not, the sector would benefit from a winnowing. But unfortunately, pride, arrogance, emotion over reason—and I could go on—seem not to have withered, and as such, the sector will neither wither nor be winnowed.