What are the steps? Can you walk us through the steps of how to start a nonprofit? Five toho one ced three yep?
Okay, So the first thing is you don't have to have a five on one C three.
Can you just explain what a five oh one C three is?
So a five on one C three allows you, according to the IRS, to be tax exempt, which then allows all donors to write off anything that they contribute to your organization. It's very important if you need large amounts of funding. If you don't and what you're trying to do can get by on like a fifteen hundred dollar budget or a two thousand dollars budget, you don't need the five oh one C three.
That budget be monthly or annually annually.
There's you know, it just depends on what you're budgeting for. You know, some people have a plant project and they just want to plant things a couple times a year. It just depends on what you're doing.
Yeah, I was told something like that. The process is very long, like in dependent on how much you need. So like you can apply for the five O one C three if you're making if you're anticipating having ten thousand dollars or less, yeah, that's the initial one, but if you're planning more that that process takes a lot longer.
It does, and I actually so we incorporated the organization and then we filed for the five on one C three at the same time, and it was about three or four months later I planned our first annual fundraiser because we needed the funding to really get started on what we were trying to accomplish. And in my mind, I'm thinking, if you look online, it tells you you can get approved for a five on one C three
between two to twelve months. So of course I'm always thinking, I'm always being optimistic, and I'm like, well, three to four we might make it. We didn't, so we did the first fundraiser, and of course people are going to get very minimal amounts because they can't write it off, and it's a it's a huge incentive for any donor to know that not only am I helping this cause, but I can also it'll help me with my taxes. So we didn't get it approved in time, but we ended up getting it a year later.
So, all right, what's the process to get a five on one C three, Like, what do you have to do together?
There's a long application. There's a long application, and you have to be organized and have everything you have to answer with as many details as possible if you want to get approved without questions first from the IRS. So mission statement. You need a mission statement, You need the name everything that you would need to do to start a business. You have to be very clear about what you're doing. And when I say mission statement, it's funny,
I'm remembering this now. We the IRS actually came back and said that our mission statement was too broad and that's why we didn't get approved the first time around. I think the initial mission statement was to help foster and homeless you self comfort, that could mean anything. So then we had to go in and revise the mission, apply with the state to change that and then resubmit the application for the five oh one C three.
Is something that you did yourself or did you have lawyers involved?
I hired help. Yeah, definitely hired help. And I would recommend if anybody doesn't already have that experience in the nonprofit sector, hire where you need, especially when it comes to accounting. Get the support so that the first time around you're not making those mistakes.
So when you had the narrow value mission statement, like what was your revised mission statement?
So now the mission statement is helping foster and homeless youth self comfort by providing comfort items for bedtime and programs that inspires them.
To self soothe.
And that was okay, all right, So you have that.
You have to set it up as a business like you have like.
An LLC setup, not an LLC. But it's the same steps of like having to you don't have to trademark, but I highly recommend it because the work of a nonprofit easily inspires someone else to want to do similar work, and they can They can take your name and do it in another state if they want to, so trademarking, I highly recommend filing for the setup for the nonprofit the same way you would with the LLC for your state, and then applying for that five on one C three
early if you expect or if you want to receive.
Large funds, and it's like a fee for that.
Yes, there's a fee. There's a fee for every application, so you have to have some fund to get started. When I applied in twenty twelve, I think that the five on one SET three application was like eight hundred dollars. I'm not sure if it's increased since then, but yes, you definitely need something in order to get started.
Okay, so you do the application, you get well as the five oh one C three is going through the process because they could take up to a year. What what else do you need to get off the ground to start the actual charity?
Everything?
Explain that.
So you need a website, okay, you need a marketing plan. You need a business plan.
Marketing plan? Can we can we talk about that? Yeah?
Because all right, how do you before you even go into that, like this is you and someone up like the COVID, Like who.
Else is doing this?
So the co founder was my mother, but no she she was living her best life in Florida. So my mom was not involved in, you know, actually getting the organization started. I was doing this on my own with the help of friends who believed in me and the organization. So that's the next step in and I'll get back to marketing. But you need you need a marketing plan, you need a business plan, you need a board of directors, you need people that are going to hold you accountable,
which most people don't know. So when you're applying for this paperwork. You can't just put your name on it. If people are giving donations, the IRS wants to know who else is tracking these dollars to make sure that you're not out here spending these these funds in the wrong way. So when I first started, and I think most people when they start nonprofits, it's usually people that are very connected to you as well as the mission,
and so they'll sign on to support you. And that's usually how the board starts, and then eventually it grows.
You have to have a board of director, yes, how many people?
Three?
Non Negultimately you have to you have to they have to have titles or just board a director.
Yes, and they need titles. So you need a president, you need a treasurer, you need a secretary.
And that's New York State's the end of a federal New York state.
Okay, so all right, you have those three people. Those people have to actually be active.
They should be active. So here's the thing. It's like it kindly recommended because they're putting themselves on the line by signing that paperwork. Right, So if you have someone signed as a secretary and it's your cousin, but they're not actually doing the work. If you get audited or there's an issue, they're going to come looking for you and your cousin. So everybody should understand how serious it is when they are signing that paperwork.
Okay, can we talk about marketing?
Yeah?
So how do you put together marketing plan for a nonprofit? Or it's because it's different, right, Like we're marketing. Let's say we want to market our podcast, right, or you're marketing a product. Right, it's a little different than marketing for a nonprofit because it's charity. Yeah, so it's like, you got it. It's kind of in my opinion, it's it's a little delicate because you don't want to make it seem like you're selling something. But obviously you need funds.
We don't talk about fundraising, but you need funds, So how do you how do you do that? Like how do you market for a charity?
I think the two most important things to consider when marketing is who is your target audience? And then also what are your donors need to see and understand in order to give. So the more your donors know, the more they will give. Period making sure that in everything that you do, whether it's just utilizing social media, that every image, every caption, every meme, everything that you're sharing explains the mission clearly. Transparency is the number one thing,
and trying to solicit donors. Marketing, so making sure that you are marketing towards the people that you need to do the service. Right. So when I started this organization, I wanted to market this towards people who run the foster care agencies in New York City as well as the homeless shelters, So figuring out what do they need to see in order to understand what our services are and that sometimes it's simply putting together a kit that
explains and breaks everything down. Here's the mission, here's our values, here's our logo, here's our one year plan, here's the program that we can provide or the curriculum, just depending on what you want to do and ironing all of that out so that they can understand it and then they choose whether or not they want to work with you.
So you're pretty much I mean, you're not selling in the sense of an item, but you're selling your vision and your passion.
Yeah, in a sense, right, yeah, and making it clear. I mean, there's another nonprofit friend of mine runs an organization called Kicks for the City. It's a very simple mission. They give shoes to the homeless. So when all of their packaging, they're showing photos, images of sneakers, images of homeless. So people can just simply connect the dots. Here's the mission, there's a value, and here's what it looks like if you give.
It's easy. So all right, So the biggest part of charity nonprofit organization is that you have to have money. Right. It's actually a business. Right. That's something that people need to understand too. If you think about running a nonprofit successful now, yeah, is that you have to run it like a business because it is a business. Right. So we're going to talk about funding. So nonprofits get majority of their funding from donors. Right, how do you really depend what's the other ways?
Yeah, it depends. You can get a majority through individual donors, through state funding, through federal funding. Those are the three main ways.
Yeah, let's let's let's talk about donors. Yeah, how does how is some what's the one on one blueprint to attract individual donors, real the men so.
That they understand the cause and make sure that you are speaking to people who care about that mission, that specific mission. So with Precious Dreams, I had to find a way how do I connect the issue a fostered homeless youth and make it relatable to someone who's never been in those shoes. So the first thing that we did was target parents, because parents understand the importance of comfort items. So I remember my first year, I would have meetings and one of the first questions I asked was,
do you have kids, what's their bedtime routine? Do you read to them? What do they do? They sleep in pajamas And it immediately brings them to this happy place of thinking of like what that looks like for their kids and how important it is to them. And then I would help them vision what a typical night looks like in a homeless shelter, or what a night looks like.
For a far earners.
What's up?
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Poster kid who's sleeping in a room with five other families on a mattress that's on the floor, and immediately they feel connected, you know, and then they want to give, They want to save someone because they can't understand how someone else could be lacking what their child has or what they have that they were taking for granted because they just did never thought about the person who lacks.
It's a commonality, like we were all children at some point. Yeah, and we probably all have gone through some experience as a child, whether it was like somebody putting you to bed or the bad time routine. I want to go to the fact of state funding and federal funding, so like how does that work and are there acts or initiatives that the state provides are just like you know, what I should target them or how do you go about it?
It depends on what you're doing. Again with the nonprofit, So if you're providing a service for schools or for educators. It's very easy to go after state funding. If you are providing sneakers to the homeless, it's a little harder to get those grants approved because they might not see the importance in that work. So yeah, it just depends on what you're doing. But those applications are available online.
There's a full list of the state money that's available, federal money that's available, and you just have to see whether or not you fall along.
So okay, So how important is grant writers?
Grant writers are very important. They're very very important, especially if you don't have relationships with a lot of individual donors, because you need one of the other grant writers. And also researchers are another a whole other animal because a lot of times, and we learned this the hard way, I thought, you know, let's let's find a grant writer. You find the grant writer and they're like, okay, so who's doing the grant research because that's a whole nother job.
Yeah, I'm not even heard of that side. What's their job to do to research everything?
Yes, and it takes hours because there are so many grants available, But there could be one small thing in that grant one requirement and your organization just doesn't fall under it. So making sure before you waste anybody's time and they're writing this full proposal that you fall in on all of the requirements that are listed for that one specific grant.
And most of these grants government or private, or like a mixture.
Of a mix. Yeah, private, public, state, federal.
And you could just google and probably find a lot as far as different causes.
Yeah, a lot of the are very public. Some are invite only, which are harder to apply for. But so there's a lot of private, especially like family foundations, where they've set up to give finances annually to different organizations, but they don't want to have thousands of applications coming in. There are over one point five million nonprofits in the
United States. So if you are a very small, like three or four person run organization where you're trying to just simply give out twenty thousand dollars a year, you don't want one point five million people applying. And so what they'll do is they'll restrict it to a certain county or a certain state, and people will have to
know someone in order to get in. It's kind of like, like, I don't want to say mafia, but like you have to know somebody in order to even figure out what their application process is to get in the door.
So where does your funding come from?
Most of a majority of our funding comes from individual donors, and that is a gift that I've been able to receive because of the work that I've done, so in having that that history, that job history at places like Madison Square Garden, where I've been able to develop relationships with the one percent in New York City, or you know, the athletes and artists that come through and they're invited to sit courtside at our games, the gary Ves of
the Internet, like all of those people I developed great relationships with by them seeing my work ethic but then also my character, seeing that I am someone who is responsible but kind. And so when I approach those people about giving to my nonprofit, the answer is yes more than no.
So do you have because like I think, Deary Ferguson Robin Hoood Dinner is like five thousand dollars minimum, It's like five thousand dollars per plate to end. Yeah, and it sold out. You can't get in and so that's crazy. But like how do you price? How do you ask for money? Like do you do it in galas? How do you know how much to ask for?
There's so many ways to fundraise, so many ways. So one thing that's very important we talk We go back and talk about boards, right, your board of directors should be very diverse and they should have a network far beyond your reach so that they can go out as ambassadors and promote your organization to receive funding from anyone that they're connected to. Then you can utilize social media. There's a lot of ways that you can raise money
on social media. There's a lot of platforms like get smart. Dot com is a platform that you can pay for where you can set up fundraising pages. But then it also gives you text numbers, so like the Text to Give where you can send out a number and say, if you text this number, you can donate twenty five dollars instantly. That's a platform that allows you to do it. Galas are very important. Selling a ticket to provide an
experience for somebody is the easiest way to fundraise. Who doesn't want to come to an open bar experience or to see a performer to go out to have a good time. So galas are honestly probably one of the biggest, the biggest ways that nonprofits are able to generate funds, especially for precious streams. It's definitely our our go to every year. You have an annual gala, yes, every fall.
So on the business side, how do you know? All right, you run an organization, not you, but just anybody, right, and that's your job. So you have to make a living. You have to you know, provide for yourself, right, So how do you know or what's the rule of thumb? Like how much money should you be taking for your own personal It never really seems like it's right because it's like a charity you don't want to take, but it's still a job. But you're doing something, you know,
and you've got to get compensated for that obviously. So yeah, especially like when you're the owner of it, because it's up to you, Like how do you determine, like how much money you take from that as your personal salary?
So I think the most important word when it comes to thriving in the nonprofit space is transparency, and annual reports are important. An annual report is more than just the nine to ninety which you need to fill out every year so that the government knows how you're spending your money. But an annual report will break down exactly how much money went to operational costs, to programming, to
office supplies, to everything. And a lot of times big donors want to see where every dollar went last year, and if you can show that, then they will give more. Like I said earlier, the more the more that a
donor knows, the more they will give. So we always make sure that we're very transparent about what we give, but then also making sure that they see the numbers that they that they that they'd want to see, right, So like, if I'm giving a dollar, I want to know that at least seventy five cents of my dollar is going to go to the wards the ch children and the images that you're showing me in this deck,
to that program and so a precious dreams. It's interesting because I kind of mimicked an idea that I saw from Usher's Foundation. So Usher has the new Look Foundation, and I don't know if they still do this, but years ago their board was covering one hundred percent of the operational cost and so they marketed on the website that one hundred percent of your donation goes to the programming, and that will reel anybody in. So I went to my board. This is actually how I was able to
get approved for a salary. I went to my board and said, this is what I saw, and I think that this is a great approach. And because we're only still at like the sixty thousand dollars annual level, would you guys be willing to put together a cost so that this is this is how much would go towards operational costs, and then this is how much that you give to the organization every year. And they voted, because voting is another thing that must happen on your board.
They voted, it was approved, and they actually cover my salary. So when people donate to Precious Dreams, none of that money goes to operational costs. My board, my board of directors, they out of their pocket. Out of their pocket, Yeah, which says so much, right, So, like the highest level, the highest level of leadership at my organization believes in this mission so much that out of pocket they pay for my salary.
So if rule it thumb, like, if we're starting a nonprofit, what would you say that percentage would be for a nonprofit to have an operational.
Cost they're recommended accorded to according to like Charity Navigator, would be forty percent should go towards operational costs and anything outside of programming, everything else should go towards programming. And then if it doesn't, they would they judge you. There's a lot of like grading systems online for profits, so you you will get graded on a lower scale if you are taking that money and putting it.
So we have if like a million dollars comes in, four hundred thousand should go to the operational cost, six hundred dollars should go through the product.
And then the operational cost always if you have staff WI you obviously just Applaska fall in that list too. Yeah.
And also it's like just accountability and being smart about how you spend that money because there's no rule that says that you have to. But if you get an audit from the I R S and they look at how you're spending, they can pull that five on one C three at any time.
Okay, all right, that was good. That was a lot of good information.
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