Watch the LInterview
The Basics Of Starting A Nonprofit with Christian LeFer
Managing a nonprofit is a very noble move, but materializing it can be a daunting process even when you have billions of cash waiting to be used for a wonderful cause. In this episode, we learn from the knowledge bank of Christian LeFer who is the CEO and Founder of InstantNonprofit.com as he walks us through the steps of starting a nonprofit, including dealing with the IRS and lawyers. He also presents how he and his team can help anyone aiming to start a foundation or charity and presents them their 501(c)(3) package.
Read the Interview
Hugh Ballou: Welcome to The Nonprofit Exchange. It’s Hugh Ballou. We are talking today about how to set up a nonprofit. If you already have a nonprofit set up, maybe there are some things you overlooked or didn’t know about, but you’ll need to know about today. Get a notepad because this is one that you’ll want to take notes on. Our guest has a wealth of information, and he has an enterprise to help you get started. Christian LeFer, welcome to The Nonprofit Exchange. Please tell people a little bit about yourself. Tell them why you’re doing this great thing you’re doing.
Christian LeFer: Absolutely. Thanks, Hugh. Great to be here again. Years ago, when I was young, my younger sister was born about five years after me. I was five when she came along. She was developmentally disabled, we found as she got into her third and fourth year of life. Usually, kids are talking at that point. There was no apparent issues with her, but it turns out she had this issue. So I got familiar at a very young age with different nonprofits. I didn’t know they were nonprofits then. But things like Special Olympics, which she has competed in her whole life. Several years back, fast forward many years, I volunteered to start a 501(c)3 for a project. I quickly became morally outraged at how difficult it was and how long it would take to get the approval, so I set about solving that for not only myself, but many other people. We’ve done nearly 3,000 501(c)3s for organizations operating all over the world at this point through InstantNonprofit.com.
Hugh: InstantNonprofit.com is a website. You’re right. People don’t know where to go. They don’t know what to do. You have the steps to get people started. Through SynerVision, I have what we call a solution map. Where do they want to be, and how do they create the infrastructure so the people part of this, people know how to use their skills, how to be engaged, and the funders know why they need to fund you. They want to fund impact; they don’t want to fund activity. For us to look at that whole continuum of who do you need leaders, who do you need board, who do you need funders, and what will they do together.
The first thing is to be able to set it up and set it up right. Let’s take a reverse look at this, as we’re starting up. I know people will want to hear every single word that you say. In the many conversations we’ve had, I am constantly amazed at the depth of your knowledge and the completeness of your systems that make it really easy for people to do what they want to do, to get it done and go do the work. What are the top three or four things that people do wrong when they set up a nonprofit?
Christian: I would say top three things that people do wrong when they start their nonprofit. We often come- People come to us when they form the wrong kind of entity. People say, “I’ve started an LLC, and I need you to help me get tax-exempt status.” We prefer that people come to us with nothing because then we have chain of custody of all of the documentation, and we know things are done correctly.
The entity formation piece, even if you do create the nonprofit corporation, which is the proper type of entity, often people miss a step where they do not add the purpose and dissolution cause language. The state may not ask you for it; they will give you the nonprofit corporation no problem. Later on though, when you go to file with the IRS, if you do not have the proper language in those articles, you will get rejected, and that will cause a huge delay. You will have to go back to the state and amend it. That would be #1: mistakes in the formation of the entity.
#2 would be there are many, I wrote a whole ebook about this, mistakes you can make in getting tax-exempt status. When you apply to the IRS, there are certain things that you cannot do with your nonprofit and certain things that you have to have prepared. If you miss any of 26 isolated steps in filing for the tax-exempt part of it—you already have the entity, you have the nonprofit corporation—but if you do not complete the tax-exempt application correctly, you will get rejected for that piece of it.
I would say the third mistake people make when starting their nonprofit is overcomplicating things for themselves. Trying to put all of the pieces in place all at once instead of taking the necessary steps and then moving onto the next piece of the process. It can be overwhelming. The biggest problem people have is never getting started because of perfecting too much of the process to begin with, and not knowing which of the critical pieces to start with, not knowing how to step it out properly.
Hugh: I find that it’s overwhelming often. When we’re doing something that can be pretty large, not knowing where to start, not knowing what to do next. It’s pretty complex. What I know about you is that you are able to give people a step-by-step process. There are some prerequisites. I always encourage people to look at what’s already available. I know that half of the nonprofits set up next year close because they find themselves redundant, or they try to do the work in an oversaturated market, or other reasons. One thing I don’t think they do well is to look at the competition. See who’s out there, and if what you want to do is already being provided for. What is your sense of that?
Christian: I can’t say I’ve run into that a lot. The reason is people say, “Aren’t there already too many nonprofits?” Yes, nonprofits do close. I don’t know that’s because there is saturation. I think what happens, just like many small businesses close, they don’t have the systems set up to maintain themselves in good standing to bring the money in they need, and they get burned out as founders, as small business owners often do as well. Sometimes they get burned out when they are three feet from gold. They just don’t have all the things put together. They take on too many different things. There is a mentor I had who told me once, “There are about 50 things you need to do to start any serious venture,” whether it’s a nonprofit or a small business or a major project. “You only need to do the top three at any given time. If you try to do the top 10, you will fail.” It’s about staying focused on the right things. But so many nonprofits are serving a unique need in a unique way that the founder sees as necessary, and they operate at a local or county level in a neighborhood with a very small niche of people that no one else is going to serve in the same way. Many nonprofits, it’s just the traction they lack, and not necessarily that there’s not a need or that they are redundant.
Hugh: Why does the community need you? What is it that you’re going to do that is unique to solve the problem? We exist because we solve a problem. We bring a solution to it, and it’s a unique solution that we can offer. When people come to you to start up a nonprofit, what do you wish they had, or do you have a way to get that information from people?
Christian: We guide them in that. We step this process out so that even inside the 501(c)3 formation and tax-exempt status process, they don’t need to think about too many things at once. We’ve created a process where they sign up on our website, choose the right package (because there are a couple different paths to a 501(c)3), and immediately get a welcome email with a link and a very short form. All they have to do is fill out that form with the name of the organization, three board members, and a very basic mission statement. It’s not the mission statement they want to put up on Times Square in lights; it’s the mission statement that will get them through the government approval process. By giving them those three simple things to start out, they don’t need to worry about all of the detail that will come after or the long list of documents we’ll provide. We will provide everything they need, every document, every policy, but all they have to do is worry about those next couple of steps. Those three ingredients are what we ask them to bring to the table when they sign up with us when they start.
Hugh: Give us a sense for what kind of documents you’re talking about. I know there are bylaws and articles and a conflict of interest. What are the necessary documents one would have to have to be successful in launching?
Christian: Absolutely. The typical ones that are brought up are a conflict of interest policy, a compensation policy, bylaws, and then of course there are elements of the application itself. Those three I mentioned are three core essential documents the IRS will want you to have. They require them.
There is another set of documents I won’t go into in detail here, but we provide a corporate governance package as well. That provides things like fill-in-the-blanks, editable minutes for your organizational meetings; board resolutions (you want to have a template for that), mostly pre-written, especially for your first board meeting; and a board recruitment form. When you ask someone to join your board, and they say, “Yes, what does that entail?” most people stutter after the yes, not before. Being able to answer that with a one-page document about what you are asking the board member to do is something our customers have an advantage with. Those are the types of documents.
Hugh: I’m going to let Russell weigh in on some of this. We are beginning to scratch the surface with what it takes and why we need these documents. Hello, Russell.
Russell Dennis: Greetings. I was late returning from a meeting. A very good one. It’s good to see you again, Christian. It’s been quite a while. Starting an organization and getting it started the right way is critical. There are so many different steps that can trip a person up. But having a system where you can just focus on one piece at a time, then the next thing, then the next thing, and making sure you can cross all your T’s and dot all your I’s is very important. There are so many things. How frequently would you say it occurs that when people are using a pen and ink system or not doing an automated type of system, how frequently do people tend to miss some steps? What does that do to the timing of the application with the IRS?
Christian: It’s hard to say with any reliability how frequently people miss steps. But really what we’re talking about is how do we reduce the obscenely long time that even a properly completed 501(c)3 application takes. If the budget is $50,000 per year projected in the first three years, and we have people who fall on both sides of that line, it gets immensely more complicated. Part of the reason that the IRS’ average approval time is 12-14 months is because outside of absolute mistakes and errors, omissions, major problems like that, it’s very difficult to format the information that is needed and requested by the IRS, or even to know what they are requesting. It is as much to me a mistake of putting not enough information or putting too much information so that it’s not a mistake, but it’s a deficit from what we consider an ideal file. That is why the IRS’ average takes so long. The IRS has made their own problem. They have made the process so complicated that people don’t know what to give them. They either mail them an encyclopedia or omit other things that are actually needed, causing a back and forth with the IRS agent. It’s like a mortgage that never closes because the underwriter just wants that one more document, and one more, and one more.
We’ve created a process whereby we create something called the Love Letter to a Bureaucrat. It’s the ideal file that has not too much information, not too little, like the Goldilocks file, and also very systematically presents that information, like you would see in a well-organized book. A table of contents, separator cheat sheets that are like chapters, so when that person opens that file at the IRS, they know exactly what they’re going to get and exactly where to find it, and they can check all the boxes and punch out lunch early, which is what every guest worker wants to do.
Russell: It’s almost like an automated audit technique guide. The IRS publishes audit technique guides, and most people don’t know this. What that does is it outlines the typical procedures for an entity of a specific type that a revenue agent would actually take in doing an examination. It’s step by step. When you know how to put information together in a way that the service looks at it, you can get that auditor out of your office the same way. You’ve created something that’s automated, that is not for an audit but for application purposes. When you make it easy for them to do their jobs, things are so much faster, so much smoother. You’ve done tons of these. What has been your typical turnaround rate for an average application on these?
Christian: I would say the average large-format, larger-budget organization, if the average at the IRS is 12-14 months, we tell people 3-6 months. Our target is actually to cut down that delay time by two thirds. This is the IRS; we are not in control. But this is our average. The IRS recently put a policy in place that you are not allowed to call to request any information on your pending file within 180 days. They will refuse the call. They send you a letter now that says, “Don’t bother us for 180 days.” The good news is we are getting word back that the file is approved prior to that in most cases. It’s better to have the only news you get be good news on that front. We are saving an average of 7-9 months in that case.
For the smaller budget organizations, which are the majority of charities filed in the U.S. and the majority that we do, end to end, 7-8 weeks, you will have an approval in your hands. When people are about to sign up, we encourage them to stop thinking about it and start taking action. Sign up with us. We want to get that file in prior to the holidays. Get it incorporated at the state level before Thanksgiving. We want to get the IRS application in way before Christmas so they can have that fourth quarter fundraising opportunity that we all know about. Most nonprofits will raise more in the fourth quarter than they do the rest of the year.
Russell: Giving Tuesday is coming. I have a couple of campaigns to work on. As a group, are you finding that you have larger entities or smaller entities approaching you? I know that you start with a number of other things besides filing those applications. Are you finding organizations of all sizes are approaching you? Or does it vary?
Christian: It runs the gamut. We just got off the phone with someone in Europe who is well-connected to celebrities. They are doing a large environmentally-oriented nonprofit. They’ll crowdfund and bring in some good donors and a few dollars times a million people through social media. Their funding sources will be all over the place, and they’ll raise millions certainly.
I also have a nice woman I spoke with in the state of Washington who helps get animals rehomed, who are either stray or have been abused, etc. She needs the status so she can continue to get donated veterinary care, dog food by the Walmart or various supermarkets in her area. They don’t want to give those services to her without her having 501(c)3 status. She probably won’t raise $5,000 in a year, but she gets significant in-kind donations to help these animals. All shapes and sizes.
Russell: You mentioned in-kind donations. That’s important. That’s actually a revenue source: pro bono work, in-kind donations. How many people do you speak with have considered that?
Christian: It depends on the type of nonprofit. There is more in-kind with social services, people who are feeding or clothing people, where goods can come in handy, and with animal-related nonprofits. Nonprofits that have don’t that kind of focus where they are provisioning people or animals tend to deal with hard cash or online donations.
Hugh: Christian, the average nonprofit, it varies, but somewhere around 70% is the income that keeps them open is donors. We teach there are eight different streams. How do you prepare people for getting funded? When can they start taking money in?
Christian: They can take money in as soon as they are incorporated. The IRS’ official policy is to back-date the date of tax-exempt status back to the date of incorporation. When they get that letter from the IRS, at the top is going to have today’s date. In the letter mentioned as the date of tax-exempt status will be their date of incorporation as long as they get tax-exempt status within 27 months of incorporation, which most people do. That is such an outlier, I don’t even usually mention that.
We provide a memo to our customers. Until they get that letter, explaining and quoting the IRS’ actual policy of backdating. That is why we immediately incorporate for our customers so they can open a bank account with the EIN and the articles and start collecting tax-deductible funds. If anyone asks, “How am I going to write this off?” if you don’t have your IRS letter yet, they provide this memo.
Russell: That is a good tool to have in your toolkit as they are trying to collect donations.
Christian: It’s so important at the beginning.
Russell: It solves the problem of coming up with a fiscal agency arrangement, which can be challenging if there is a misalignment. It’s complicated. It can take some time. Not knowing how long the application is going to take and having it take place quickly can also create some issues, too.
Christian: We do U.S.-based 501s. This person is in Europe and is working with celebrities across LA and Hollywood. He asked about fiscal sponsorship. When he found out how much time delay we eliminate on the IRS approval side, he realized that it’s probably not going to be necessary to go to the trouble of getting a fiscal sponsor. When you have money going through any fiscal sponsor, they will take a percentage right off the top, usually 5-10%. It will delay you getting those funds. If there is a misalignment of purpose, and asking the donor to write a check to someone else’s organization can cause a misalignment of trust. It’s best to say this is what I’m doing, this is what I presented to you.
Hugh: We can behave better and be more efficient if we are a culture where everyone trusts everybody.
Russell: There is also an opportunity to introduce confusion into an already confusing process when you are talking about regulatory compliance. There is enough to do with bringing everyone on board and getting everyone aligned. Technical aspects can be daunting.
Christian: You want to have a frictionless process as possible, especially when donors are involved. They want to have no brain damage and no trouble to write that check.
Hugh: Christian, say I want to start a nonprofit, which I don’t. I already have one. I came out of an audience that you were speaking in and said, “I need you to help me start a nonprofit.” What are the things that people have to pull together? I know they need to have the three board members, and it’s never too early to start getting people’s commitments.
Christian: Most of the people who come to us do have those three board members. But if they do not, since most states take some time, 2-3 days to 2-3 weeks depending on what state you’re dealing with, there is some leeway where they can start as a single incorporator with us. Most states, except Nevada and maybe others, only need a single incorporator to start. We incorporate in that state with that individual. Then we allow them that intervening time to get the other two board members. They need the board members.
They need a basic mission statement. We provide a simple formula, especially for the smaller organizations, to come up with your mission statement. It’s basically we provide or we do X. We provide X fill in the blank, a product or service that helps people to a specific group. You fill in that blank so they can then fill in the blank for the outcome.
Our mission with this company, and we are a for-profit, but we help a lot of nonprofits and we have a nonprofit alongside this company. “We help would-be nonprofit founders,” people who desire to start a nonprofit, “by providing a seamless, end-to-end, done-for-you service so that they can get their nonprofit off the ground while staying focused on their mission.” That is where I use our three-step formula.
Hugh: That is really hard for entrepreneurs to chase the shiny object syndrome, isn’t it?
Christian: They want to write something big and elaborate. They are welcome to do that, but we help them dial down to close to 140 characters.
They need three board members. They need a mission statement. If they are a larger organization, there is a second set of steps where we get granular about the activities and how they are going to conduct the activities, where they are going to do it, how they are going to fund it. Smaller organizations don’t really need to get into as much detail and provide a budget. Larger organizations do. We have a systematic formula and a formula-driven spreadsheet that takes what the IRS doesn’t communicate in English, and we translate it into English so it’s simple, and then we put it into the format the IRS wants for the customer. That’s how we get these great results.
Russell: Building a budget is challenging, especially an initial one. As people go in and build this budget, are these tools they can keep using to handle their budgets?
Christian: Yes. What we’ve done with our tool is we’ve provided what looks more like a normal budget for them to plug numbers into. We have an uneditable task that spits and aggregates all of those numbers into a format the IRS likes for the application. But what ends up happening is the customer walks away with an asset for them. They have what they built as a budget when often they don’t have that prepared yet. It gets those juices flowing. How much money do we need to raise to make this? Where will that money go? If they need guidelines, we have that for them as well. How much are employee benefits? That may come up. Typically, they don’t want to spend more than a certain amount on fundraising activities because people start to wonder if you will do any good if you are spending too much there.
Hugh: Russell, I heard him mention an e-book a minute ago. He slipped that by. Should we explore that with him? He has some how-to guides. What do you think?
Russell: How-to guides are great. They are simple tools that explain how to do things. It just takes some of the sting out of it and gives people manageable steps. If something is not easy to access, understand, and use, it will collect dust. Tell me a little bit about some of these guides you’ve written. These are new, yes?
Christian: Yes. We have a new Resources page. If you go to InstantNonprofit.com/Nonprofit-Resources, we have 20 downloadable resources that people can go onto their own computer, edit for their own use for such things as how to run a board meeting in 30 minutes or less, what does a conflict of interest policy look like, and many others. We also have on our blog a 25,000-word set of posts that correspond and augment that resource page where we have written about 25 posts all of the different steps to start a nonprofit. You can get that in a PDF as well. That’s a 72-page e-book that is available on our site. It’s pinned at the top of our blog.
Hugh: I don’t think you can find this exact mix of all of these documents of how-to’s in any one place. That’s what I remember from last time we talked. You thought through all of the components that people didn’t know, and they didn’t know where to go for the rest of it. It sounds like you have hundreds of documents, and it’s a lot of work. Set me straight.
Christian: That’s why we have a fairly open-handed manner of providing information to the level they want it. If you want to do this on your own, or you are missing a conflict of interest policy, download it. What people often find is after going through 72 pages of posts about all the elements of starting a nonprofit, or they realize assembling all these individual resources is a major job in itself, they would probably be better off spending that time with a life skill. You will only form a nonprofit once in your life, maybe a couple of times. Why become an expert in that when you could invest that same time and pain and learning curve into something like fundraising or studying Hugh’s course on bringing eight streams of revenue into your nonprofit? That is a life skill that will pay off forever. So we present the option of having us do the 501(c)3 formation, putting all these resources together for you, and you can focus on the mission and deliver the food to the children or the literacy or raising consciousness or helping the environment, whatever it is. That is your unique gift. Filing papers is not your unique gift; that’s why we exist.
Russell: It’s a marvelous set of tools. There is a lot in there. Yes, spending the time to create strategies, that’s what we work with people to do. You have tools to help people stay on track once they form, don’t you?
Christian: Absolutely. We have Hands-Free 501(c)3. What we do there is we file your annual 990-N, provide your annual report, and your charitable solicitation registration, which are three minimum requirements to keep your organization in good standing year over year as you move forward. That compliance is essential. You don’t want to lose your tax-exempt status as over 200,000 organizations did around 2011. Consistently, organizations lose their status every year by the tens of thousands because they fail to maintain those documents. Why worry about that going on when you are trying to sit down with a donor who is probably asking you how your corporate governance and compliance are going, when you can just have a turnkey solution? We do provide that as well.
If they need to register nationwide because they are raising money in all states, we can help with that as well. If you’re raising money in every state in the country or any number of them, that’s a good problem to have. You do need to be compliant in 40 out of 50 states.
Russell: Fundraising registration, this is something that needs to be done right upfront, yes?
Christian: It depends. It depends on the nature of the fundraising and the amount that you’re raising and the way that you’re raising. Some organizations couldn’t afford to do that at the outset. Rather than folding and not starting anything because we can’t afford to do everything all at once, we help them step their way into that based on where they are getting traction and where they are raising money. Every state has a different procedure. Some states say, “If you’re raising money in our state, file within 90 days.” Other states say, “Don’t even have a Donate button” like New York. Every organization has a Donate button. Most of them are not registered in New York. Most of them are your local cat rescue in your neighborhood; they are not going to register with the state of New York no matter what you do or what kind of laws there are. It’s simply cost-prohibitive for many of these organizations that are small. Their exposure is so low that it’s something to be considered in our opinion unnecessary, even though it’s required, and I wouldn’t advise somebody not to do it if they believe they are required to. However, it’s simply not practical for the very small organizations, so we help them step into that.
Russell: It’s a process of growth and keeping the most important things front and center as far as compliance goes. You did mention a number of entities actually lost their status. One has to be careful. One revenue stream we talk about is mission-based revenue, where they are actually providing services for people doing what they do at a commercial rate. How many organizations have you seen that got tangled up differentiating mission-based revenue from unrelated revenue? Have they actually lost their status as a result?
Christian: I haven’t really seen any organizations lose their status. But what happens typically is they will get letters about that. Russell mentioned something called unrelated revenue versus related revenue.
Unrelated revenue is something that is absolutely not related to your mission. For example, if a church has a coffee shop, which most big churches do, where they sell coffee instead of donate coffee, that is unrelated revenue. That is essentially a profit-producing arm or effort inside their entity. That is unrelated revenue. If your unrelated revenue becomes too big for a 501(c)3’s activities for income generation, you will end up paying a tax on it. They won’t necessarily revoke your status, but they will make you pay a tax.
If that same revenue is related, if that church is selling books, but not through the bookstore, but selling books for a marriage course, and people are paying money to take that marriage course, you pay $44. That covers about $20 worth of book fees and $25 to sit in a room and do the other things. Those are examples of related revenue, which are in line with the mission. They are not swag or T-shirts or completely unrelated. That won’t be taxed and generally is not a problem.
Many organizations, a huge percentage of organizations exist entirely off of fee for service. They are out there. Maybe they are helping felons to rehabilitate. There is a fee to go to those classes. That might be their entire revenue stream is fees for classes, but they are at a cut rate, they are for a specific type of community, and the purpose of that is to better people’s lives. It’s an exempt activity. It’s a fee for service. So that is related revenue.
Russell: Everything goes on a case-by-case basis. It’s something that is part of that mix that should at least be considered as part of the growth plan.
Christian: Absolutely. Some organizations start little profit centers here and there that may not be related to build funds or do a capital campaign. Something that comes to mind is I have seen organizations that fix used cars up for single moms. Hopefully single dads, too. They might do some paid-for repairs on the side, where the mechanics donate their time, the customer is paying $60 instead of $120 an hour for that mechanic work, and that is generating hard cash to go into the ministry or the organization. Those are great business hybrid organizations that are smart, and they are doing whatever it takes to serve that community, which I think is wonderful.
Russell: That brings Christian Brothers to mind. You’ve seen some of those around here. They are conscientious. I met some of those guys. They do similar work.
Are you starting to see any decrease in the number of applications coming through?
Christian: It seems pretty steady right now. It’s about 60,000 per year. There was a high of 84,000 in 2013/2014. Since then, it’s stabilized to about 60,000. There are one million organizations in the country at this point.
Russell: The last data book I looked at was 2014/2015. They had the number of entities opening. I haven’t seen a recent stat on a closure rate. Have you seen one?
Christian: I haven’t. All I know is that the number of organizations is building year over year. So it’s probably like the small business cycle. You have a certain number opening every year, and maybe half of them don’t make it. I don’t know what the stat is in nonprofits. There is a growing number of organizations year over year.
Hugh: I find that it’s consistently difficult for people to get those initial three board members. Do you have any tips for how they should ask? That’s what takes time: finding the people to put on the application.
Christian: They can go to InstantNonprofit.com, click Resources, and get a Board Recruitment form so that it can be easier for them to propose to that person and be ready when someone asks what it entails. They can slide a one-pager asking that person for their commitment. Most people I think make this more complicated than it needs to be in board recruitment.
You are initially recruiting your founding board of family and friends. They don’t need to be an expert in any capacity. They don’t need to know how to do books. They just need to trust you and be able to ask you questions that will help bolster and help you find any blind spots in your overall high-level activities. Their three jobs are to show up for one board meeting per year at minimum for small organizations that don’t have a ton going on; to review the budget at a high level; and to review the activities at a high level. If they can do those three things, then they are a suitable board member.
Your founding board will look very different than the board of an evolved organization that has grown in its capacity and scope over time. Instead of putting big road blocks—I need to go find somebody important, or I need to get somebody with money—or putting these additional burdens on yourself, go get two friends who trust you and believe in the mission. Build from there. From there, once you have an entity, it’s much easier to ask people to get involved with something that is real than something that is a concept. People struggle with concepts. If you say, “I have a nonprofit. I am incorporating it now. I need you to sit on the board,” that is the best way to go. You can always add more board members later.
You should have an odd number. You need a minimum of three. The odd number is so that you don’t have a voting deadlock. There are no shareholders in a nonprofit. It’s entirely governed by the board.
Russell: Having an odd number on the board so you don’t end up with deadlock. Philosophically, you really want people to be on the same page. From a compliance standpoint, having an odd number of people makes that impossible. You certainly don’t want to have a 4-3 or a 5-4 type of thing going on with something you’re making a decision on doing. You’d love to have more buy-in than that to be effective. If you’re in a position where you’re having these kinds of close votes, that could be problematic, especially over the long term.
Hugh: I think it’s an indication that you have the wrong board. We teach that we build consensus. If you have a deciding vote, that means you are making the deciding vote. There is a better way to approach that in building consensus in decision-making. If we are that close on the vote, maybe we shouldn’t vote on it because you have people divided on an issue. We do have nonprofits that have conflict. We want to try to build in some synergy and decision-making as we do that.
We are at the end of our time together. People struggle with this kind of information. I wanted to have you on here today so people who want a nonprofit could realize, No, it’s not as hard as you’re trying to make it. I want you to have the last word and give people a parting thought or tip or challenge.
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Christian: What I would say is don’t let the complications of starting a nonprofit get in the way of exploring starting a nonprofit. Often I speak with people, and we have people on our email list, who have spent years thinking about things while the problem doesn’t go away, the feral cat problem or literacy, or maybe they are in a dangerous neighborhood. They are going to be the ones to make it safer. I often hear regret in the voices of people who say, “I should have called you three years ago, but I was busy, and my car broke down, or I had an issue of some kind.” This is something you can start on a very simple basis. You can move forward as you’re able. You can learn by doing, which I suggest. It’s not expensive at all with our system to start a 501(c)3.
What you can do is get your message out there. You can have people rallying around something that exists rather than having an idea bouncing around in your head, which is hard to get people to support you. I have been shocked at my career of raising millions of dollars from very small lists of people, with a one-page memo initially and an idea. The amount of outpouring of belief and checks that came in for some of these ideas that I’ve had or some of the things I’ve supported other people by fundraising for them was amazing. You will never know until you try. Try to keep it simple and get some expert help. Don’t try to do your own plumbing because you will end up with a basement full of stuff.
Hugh: Russell, I think you should close it out by inviting them to join the community. That’s where they learn.
Russell: I’d like to thank you for coming by. It’s good to see you again. You’ve given us a wealth of information here. The key is to get started. Go to InstantNonprofit.com. You can do this in a systematic way without having to think of every little step because the system is designed to take you step by step. Christian and his team are there to help you through that.