The Lifecycle of a Nonprofit: (Part 1) The Startup

Adrianne DuMond

A start-up begins when one or more people have a vision to respond to a need, formulate some strategies, engage friends in their network, and call a meeting. Many of the initial activities are done by volunteers – such as servicing needs, paying bills, managing finances, etc. Typically the Board plays a hands-on role in oversight and management, actually running the agency. Organizational structure and management systems are informal. There is little or no hierarchy and frequent communications between staff and volunteers.

But there are certain steps that must be taken for the start-up to prosper and mature. In addition to being able to attract and pay qualified staff, there are three areas of extreme importance in growing the organization. They are a carefully selected chief executive, Board responsibilities and legal obligations.

Chief Executive:

The chief executive of a start-up must be selected carefully by the Board and is often the Founder. He/She must be insightful, diplomatic, have excellent political skills to begin, what is actually, a new business with all of its complexities. These include managing finances, recruiting and hiring staff, making a budget, and often educating the Board to good governance procedures. Perhaps the biggest challenge for a new executive is managing the volunteer Board, who may have been operating quite effectively for a time, and who have difficulty giving up control. The executive is compelled to be competent, strong, and effective in the day-to-day operations, as the business matures. 

Board of Directors’ Responsibilities:

  •  Hands on skills in fundraising, financial management, marketing, and legal Issues.
  • Commitment to the mission that translates into their money and/or time to help the organization be launched.
  • Time to devote to both operational and governance challenges.
  •  Basic knowledge of nonprofit governance.
  •  Leadership and the ability to work as a team.
  •  Adaptiveness and the ability to thrive with limited resources. 

Legal Obligations

  • Filing with the office of the Secretary of State to confirm incorporation.
  • Defining by-laws so the Board of Directors can function.
  • Filing form 1023 with the IRS to apply for the recognition as a tax-exempt organization.
  • Applying for form SS-4 with the IRS for an Employee Identification Number (EIN)
  • Registering in each state where business will be conducted or funds raised.

In the beginning a start-up focuses on enlisting supporters and securing financial resources through individual contributions and membership fees. The stumbling blocks to start-up success are failure to meet program demands, staff burnout, lack of funding, and insufficient systems to sustain the organization and assure vitality. All of these difficulties must be addressed before the start-up reaches the adolescent stage — or the next stage in the Lifecycle. I will address the adolescent stage next time.

 This subject is thoroughly covered in ‘Navigating the Organizational Lifecycle’ by Paul M. Connolly.       

Author:  Adrianne DuMond, Executive Coaches of Orange County, www.ECofOC.org