Starting a Nonprofit: 9 Questions Funders Will Ask You

If you want to put yourself in the best position possible to attract funding for your nonprofit organization, you've got to be ready to answer a couple of key questions that funders are likely to ask and to answer their questions. Well, welcome back. My name is Amber, Melanie Smith, and I help aspiring change makers with tips and strategies to help you change the world and live a life of impact and purpose. I make these videos here on YouTube about weekly on topics like starting a nonprofit, creating a social enterprise, creating a social impact in other ways and more. So in this video, I'm going to talk through some of the questions I've received over the years of working in nonprofits and, um, having started my own nonprofit organization that I've received from funders when I was first getting out as I was growing. And these are also questions that I have heard other nonprofits receive from funders as well. I hope this video helps you out as you are starting your social impact journey, wherever you may be in the process. And if it does, please go ahead and give it a like and subscribe to my channel and ring that bell next to the subscription button, because that tells YouTube that you want an alert next time I post my next video. So the reason I wanted to tackle this topic in this video today is because I hear from so many amazing people who want to start a nonprofit and are hoping to get funding support in order to make that possible. But funders are always looking at the whole landscape of nonprofit organizations, making sure that they are supporting the most effective organizations, and making sure that there's collaboration where there needs to be, etc. So I wanted to talk more about what types of things funders might ask you as you are starting your organization or seeking funding from them, because if you know these questions in advance and can start preparing answers for them now, then you'll be in a much stronger position when it is time for you to ask for that funding support. So whether you're starting a nonprofit, whether you're serving on the board of a nonprofit, or trying to grow a nonprofit organization, think about these questions. There are nine questions I'm going to talk through, and I hope that they will help you shine a light on some of the infrastructure that you might need to be putting in place to make your organization sustainable, that they will kind of get you in the mind of a funder to help you with applying for the funding and getting donors on your side. Okay, so here we go. Nine questions that funders are likely to ask you when you are starting or growing a nonprofit organization. Number one. This is a huge one. I hear it from pretty much every funder ever, and that is, what is your sustainable business model? What is your sustainable revenue model? How have you planned how you're going to be bringing in donations, dollars, earned income, etc., in order to make sure that your work can be sustainable, whether or not you get a grant or other kinds of donations? This is actually something I've talked about in other videos. This was a mistake that I made early on. I did not actually plan out a solid revenue strategy when I first started my nonprofit organization, and it was really only when my board and I started to sit down, create a solid business plan, business revenue strategy, that we started to substantially grow. So if you can do this when you're first starting out in your organization, as you're filing that initial paperwork, as you are recruiting your first board of directors, do this too. This is something you need to be doing right at the And the answer isn't always just, well, we'll get donations, because you, honestly, you can't control that that much. You have no idea if people are going to donate the way you expect them to. It's not always something that you can count on. It's something you should definitely try to build into a fundraising strategy, but I wouldn't just say, we're going to get grants, we're going to get donations, etc. I would look at what your mission is and think of ways to generate revenue that align with that mission, including earned income strategies, and I would go from there. I actually have another video called How Successful Nonprofits Raise Money. You should check that out because I talk through multiple different options for ways your nonprofit can bring in dollars to keep it sustainable, and I highlight some of the ways that the most successful nonprofits have done this in the past. The second frequently asked question from funders to nonprofits is, who else is doing work similar to your organization, and how is your organization different? Now to provide a little bit of context for those who might be newer to the nonprofit sector, there's this whole conversation around competition in nonprofits and how there's limited funding and how nonprofits might be competing for dollars against one another and all that. So for the past decade or two decades, it's been a while, funders have been focused on organizations and how they are differentiating themselves from competition. And I put this in quotes because I honestly believe that there's enough resources out there for everyone that sure, in some cases, nonprofits might be competing, but ultimately it's all about the service to the community. So if there's a need and it's being met, awesome. But you know, ultimately funders just want to make sure that whatever they invest is going to make the biggest impact possible in the community, and the argument is that if there are multiple organizations doing the same thing, would it be more effective for them to just work together or for them to not compete because then they could more efficiently spend those funding dollars? It's a valid question. So when you're first getting started, I would take some time to think about this. I would look at the landscape of nonprofits serving the same community as you. I would identify if there is another nonprofit doing something similar to what you are trying to do. I would have conversations with them. I would try to identify what they're doing and what gaps are not being met by their services already. Collaborate when possible. Join up instead of starting a nonprofit if it's appropriate to just support and join what they're doing. But really know your landscape because the funders are going to know your landscape and you don't want to be caught looking like you have no idea what you're talking about coming in, not being aware that other nonprofits exist in the same geographical area that are doing the same thing, and not being able to talk about how your work is different in some way. Whether it is serving a different target population or takes on a whole new approach to providing the services that may be more effective, you want to be able to know how you are differentiating yourself from similar nonprofits. The third question, and this is very important also, totally valid question, is is your starting a nonprofit meeting a need based on valid, sufficient research? Now I've said this in other videos. I come across a lot of people who say they want to start a nonprofit because they have a cool idea or they've always wanted to start a nonprofit or something like that, but you shouldn't start a nonprofit based on an idea that you have or a personal desire to. You should start a nonprofit based on the need in your community. So these funders are trying to ascertain if that is what you have done, if you have done your research, if you've identified a true need in the community, and if starting a nonprofit to tackle that need truly is the best, most effective way to do so. And here's an important point I want to make about that too. It's not just that it might not be the most efficient or effective approach to solving a community issue by not doing sufficient research. It's that you can actually harm a community by not doing sufficient research in the beginning. If you come into a community and you think you have an idea for how to solve X problem that that community is facing, but you're wrong, you could not only waste your precious time and resources spinning your wheels with the incorrect solution, you could be causing damage to that community. You could be taking away their opportunities or jobs or whatever it might be. So you really have to study this issue, whatever the issue is that you're interested in tackling through a nonprofit, become an expert in it, build relationships with those in the community that you're trying to serve, better yet, be a part of that community, and then you can start an effective nonprofit journey. There are lots of ways to make sure that you are doing sufficient research. There's academic studies out there, there's stats you can look into. I also recommend doing surveys of the community that you're trying to serve, focus groups, just having conversations, and recording all of these things to make sure that you're building a case for why a nonprofit that you would like to begin is needed. The fourth common question that funders might ask someone starting a nonprofit is, how are you going to measure your outcomes? Now, not outputs, but outcomes. And I've talked about this in previous videos as well, but an outcome, as you might remember, is how the world or the community has changed from when you started to now. So an output, contrarily, is like the product or quantifiable service you provided the community, like number of meals served is an example I've used before, or how many acres of trees you've planted, etc. That's an output. That's a thing that your organization produced. But what you really want to know is how has producing that thing or providing that service changed the world? Is, you know, the impact of the meals served broader than just someone having a meal? Have they been able to save money that they can now spend on paying their rent because they saved money on the meal? That kind of thing. So what are the other changes? How has the world changed as a result of your doing this work? I personally think this is really important because if I'm going to go out and spend my time, my money, my resources, my talent on starting a nonprofit and putting all this energy into it, gosh, I want to know if it works. I want to know if I'm truly making the difference that I hoped it would, because that's why I started the organization in the first place. And if it's not working, I want to know. And I want to know why it's not working so that I can tweak things and perfect things and do things differently to help improve our outcomes. So part of this question, another thing funders might ask, is how are you tracking these outcomes? There are lots of different ways to track outcomes, surveys, focus groups, tracking metrics in a database, stuff like that. Surveys are, I think, pretty effective because you can measure the before and after. You can ask a group of people, well, how did you feel about this? Or how was your life before you started this program? And how is it now? And they will tell you how they felt. So as long as you design that survey effectively, you should get some pretty good data out of that. The fifth question funders might ask you is who are you as a founder? What is your experience, your background, what's your story? It's this whole question of why you and why now? You know, why isn't someone else starting this non-profit? They want to know where you've come from, what your experience, your qualifications are, your connection to the particular issue that you're trying to solve. You might have heard it been said in the past, you know, people don't fund organizations, they fund people. And I found that this is true for all sorts of fundraising situations. People want to trust you, they want to know who you are, they want to know what is in your heart, and they want to know if you've got the skills and the qualifications to effectively pull off what you're trying to with a new non-profit organization. So be prepared to tell your story, to talk about what things have happened in your life or what skills you've acquired that will lend themselves to making you an effective leader for this organization. A sixth question that funders may ask is what are your values? You know, as an individual, as a founder, or a board member, whatever your position in a new non-profit may be. And how do those values play out in the organization? We are living in a time where there's so much misinformation out there, there's so much confusion, and it's really important to be able to have principles and live by those principles. And putting them out there on paper and talking to funders about them will be an amazing way you can align and inspire and connect. So what is your why? What are the philosophies and belief systems that drive you? Transparency, accountability, good treatment of your staff, you know, all of these things are things that not only funders but the whole community will want to know. And putting those out there will help you attract those who feel the same and can get behind your message. Seventh is what ethical policies do you have in place or will you put in place to keep your organization accountable to the public that it serves? Now remember, when you get that legal non-profit status in the United States especially, you don't own the organization. The public owns the organization. It becomes a public-serving, publicly owned organization. Even if you're the founder, it belongs to the public, which means that you've got to be accountable and trustworthy to your community. Not just because it's the right thing to do, but because it will also help you maintain funding and ensure that you can get funders behind you. Nobody wants to support an organization that is not accountable to the public, that does not have ethical policies that it lives by and works by. So what are the types of policies that I'm talking about? Okay, there are several. Some examples might be a non-discrimination policy, a whistleblower policy, or conflict of interest policy. You can find templates for these online if you want to review and write your own for an organization that you're a part of, but it's a really good idea to have these policies, to link them on your website for your organization, and to make sure that funders know that they are in place and that you're living by them. The eighth question, and it ties to one of the earlier questions, is what are other organizations doing in your community and how can their work complement, supplement your work? So in this case, I might be talking about organizations that have a similar mission, but I'm also just talking about all sorts of organizations. It could be similar like other non-profits, it could be local government, it could be faith-based groups, schools, businesses, etc. All these other institutions in your community. How are they able to partner with you? How can they support your work? A strong, sustainable, non-profit organization is going to have a lot of ties to its community. It's going to be leveraging the time, the talents, the resources of other institutions, and it's going to be giving back to them as well. So when you're first starting out, I recommend taking some time to map out the assets in your community. Who are the other organizations out there that might complement your work? The businesses that might align with what you're trying to do? The schools that might provide volunteers? The local government agencies who might want to provide some type of funding? Really take some time to understand the community that you're in and all of the different resources available out there. For example, in my community, there's a great organization that provides clothing to kids in need, but that organization recognizes that clothing might not be the only thing those kids and families need, so it has formed partnerships and collaborations with other organizations that might serve the same families. For example, they partner with an organization that provides furniture to those families' homes. They partner with schools to get referrals for those kids. They partner with Habitat for Humanity to make sure those kids can have access to housing opportunities. They have identified that the target population they serve might have other needs that are beyond their particular scope, but that are needs that partnering organizations can serve as well. Doing this is really important, and it shows funders that you are community-minded and thinking about how to leverage the assets in your community. And very importantly, it shows recognition that no non-profit can solve every problem by itself. And a ninth question that funders may ask new non-profits or growing non-profits is, have you set up or what is your plan to set up ethically and legally compliant non-profit accounting practices to manage the funds that they might give you? Personally, this is my least favorite part of the non-profit world. I am not one for accounting or math or things like that, but it is a necessary part of running a non-profit organization, unfortunately. You have got to have these accounting practices set up. You've got to have your checks and balances set up to make sure that your non-profit can effectively and legally manage any funding, donations, etc. that it gets in because you might be audited at any time. It can happen. This also helps instill trust in your donors and funders, so be sure to go check out non-profit accounting basics or raise some funding so that you can hire someone to do this effectively for you if you are not someone with the expertise or time to learn these things. There are lots of wonderful accounting software options out there for you. I've used QuickBooks before, I like that, but there are lots of different options that you could check out of varying costs, possibly even some free ones. Remember, your organization still has to file their 990 tax forms every year and, depending on the state that you live in, might have to renew other sorts of solicitation or legal licenses to operate as a non-profit. So you really want to make sure that you're knowledgeable, at least about the basics of this stuff, so that you don't get caught not in compliance, so you don't get in trouble, so that you can manage your funds effectively, and so that you can make sure that your funders and donors can trust you. So those are the nine questions that funders are likely to ask you if you're starting a non-profit. I hope that that's helpful for you in thinking through some of the things you should be putting in place as you get started, but also I want to hear from you, you know, if you've applied for funding, what are some of the questions they've asked, what's something that surprised you that they asked, and what were your answers? Share with the community in the comments below. We'll learn from each other. Once again, I'm Amber Melanie Smith and I make these videos here on YouTube about non-profits and all sorts of things, so please don't forget to subscribe and give this video a thumbs up if you liked it and found it helpful. Oh, and if you are on Facebook, don't forget to check out my group, Change the World or Bust, where myself and other change makers are just having conversations about our struggles and our victories and all sorts of things. So come check that out. Thanks so much. I hope to see you next time.