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So now we're going to go into the business of nonprofit. I'm setting up nonprofits because we haven't spoke about.
That, we have to. We spoke a little bit about charities with.
Derrick Ferguson, but not really in depth about how to start one because he's he's the head of a charity, but he didn't start that charity.
Now where this is you started a charity? Right?
Yeah?
So okay, what are the steps? Can you walk us through the steps of how to start a nonprofit?
Five to oh 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.
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 dollars budget or a two thousand dollars budget, you don't need the five on one.
C three that budget 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 it dependent on how much you need. So like you can apply for the five 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 to one S 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?
There's a long application. There's a long application, and you have to be organized and have everything you have to 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 youth 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 on one C three.
Is this 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 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, Yes, there's a fee. There's a fee for every application, so you have to
have some funds to get started. When I applied in twenty twelve, I think that the five on one three application was like eight hundred dollars. I'm not sure if it's increased since then, but yes, you definitely need something 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.
So you need a website, you need a marketing plan, you need a business plan.
Marketing plan. Can can we talk about that? Yeah?
Because all right, how do you now before you even go into that, Like, this is you and someone up like the co 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 like 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 boarder director. Yes, people three no negotiate, you have to.
You have to.
They have to have titles or just board 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 to end it 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 aligne 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're gonna talk about fundraising, but you need funds, So how do you 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's 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 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 the 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, 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 depend?
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 issues of 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 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 foster 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 bed time routine.
I want to go to the fact of state funded and federal funding, so like how does that work, and are their acts or initiatives that the state provides that just like you know, what I should target them or how 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 or 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 mix, sure, a.
Mix, yeah, private, public, state, federal.
And you could just google and probably find a lot as far as erners. What's up?
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Different.
Yeah, a lot of them 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. They're 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.
Sore, 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 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 vs. 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 I like, I think Ery ferguson Robin Hood 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? And 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. That's definitely our go to every year. You have an yes refall.
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 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 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 boarder directors out of their pocket, out of their pocket. Yeah, which says so much. Right, So 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.
Course 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 nonprofits, 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 operational cost, six hundred dollars should go to the proper to.
Ya right, and that the operational cost always if you have staff, which you obviously just a Plaska 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.
Obviously some stuff that we're going to take advantage of us hopefully.
Yeah.
I mean that's that's the thing with our podcast. We try to provide information for people. It's like how to manual and then from there hopefully they'll be inspired if they want to, you know, be inspired to to you know, seek more information.
But you know, it's like a it's like when your.
Kid first rides a bike and you push them, then they got to start riding on their own. But sometimes what we lack, especially in our community, is the first push, Right, so we just get on a bike and try to ride it, and then we just keep falling off because we never had momentum.
Right. So knowledge is momentum.
Yeah, So if you have the right knowledge, then that can propel you to heights unseen.
Absolutely. But even if your viewers don't want to start nonprofits, sure, a lot of people who tune in make donations, right, So there are certain things that you don't even know about giving just because it's not out there, like the FML, like the fair market no, the FMV, the fair market value of your donation. I recently produced this collaboration where Champion and Complex created this sweatshirt, this limited edition sweatshirt where one hundred percent of the proceeds went to Social works.
The sweatshirt was one hundred dollars. One hundred dollars went to Social Works. However, a donor, anybody who purchased that sweatshirt could not write off a one hundred dollars donation because they received a sweatshirt that had a value of seventy five dollars. So really you can only write off the difference. Even when you go to a fundraiser, it's a ticket is two hundred dollars. Somewhere on that invitational on the website where you're purchasing the ticket, it'll say
FMV and very small letters. It's always small because most people don't want the donor to know. It'll say the level of the experience. So if you're going to an open bar experience, it'll say your FMV is one hundred and twenty five dollars. So if you're buying a ticket at two hundred dollars, you're only able to write off seventy fives.
Depending on who's at that event, that FMV will go up obviously.
Right, No, who's in attendance doesn't matter.
Yeah, I'm just thinking like, if I know, right, if I have Kanye there, right, then.
If he's performing, OK, Yeah, that's what I'm saying. So if there's a performance, there's a value to that. If there's food, there's a value to that.
And then go up to the sales that they're doing from their shows.
Yeah, And the nonprofits job is to be transparent and let their donors know ahead of time what they're going to get out of that experience, and then what is the difference of what they can write off education.
I didn't know that. I'm a financial vise. I never knew that.
My understanding, I thought, whatever you get the charity, you just write off and it's.
One hundred percent.
A lot of people do that, and a lot of people also don't even realize that they're not right. You know, you're filling it out that you're writing off that much money. With the IRS does a lot of checks.
So if you ever get ordered at the IRS, they can come back and say you.
Absolutely wrote off.
One hundred dollars for the dinner, but really you only get a twenty five dollars because the dinner was worth seventy five dollars. But it's up to the charity to tell you to inform you on that. If the charity doesn't inform you on that, can that fall back on them?
It can, But the thing is most people don't know that they're being informed by the small print. It's the same way as you look at a website. I mean on a commercial, you see that fine print on the bottom that is not their responsibility if you don't read it.
It's like the back of a ticket, like nobody ever looks at it, but nobody nobody reads well, nobody looks at the back of either.
It's it's like I'm here, here's my thing.
Yeah, Facebook, when you sign up, there's like a whole thing. We'll take it information will salt.
Or the Apple update. It's like eleven pages wrong. Nobody is going to read it.
But what are you not going to do it?
Yeah, exactly. You can quit the alternative your charity. You can have Apple. What are you going to say, No, I'm not gonna have an iPhone?
Yeah, and I hope I'm not discouraging people to give, but definitely pay attention.
To good information.
Appreciate that because, like I said, that's one of the things with the podcast is that you know, even I learned every single podcast, I learned something from the podcast. So that was something that I was not aware of and I learned something. So yeah, but any other form of like charity in the in the regular form, that's one hundred percent write off.
Right, as long as there's nothing received in exchange. And that's why every receipt usually says that at the bottom of the letter.
What about if you give close? If you give close, it's like the value of the close.
It's not the value of when you purchase it, unless it's still brand new and it has a tag on it.
It's the value of what it is now, Like Salvation Army, like they give you like a.
Like what's it worth?
All right, that's all self taught, right, you have to go through experience learn, yes, and that plays in attack.
It's all all this stuff intertwined, so that plays into taxes as well as a tax play. And that's why a lot of balthy people, you know, start foundations also, right.
Yeah, can you talk about that briefly? We wasn't. I wasn't really playing on talking about that. I just thought about that.
A lot of athletes, specifically, and and entertainments and stuff, they start foundations because it's it's a way for them to lower the taxable income.
It's attack shelter, right, m about that, Yeah, yeah, absolutely, it's also a way for them to it sounds terrible. It's also a way for athletes to have their name on something that someone else is funding. You know, there's a lot of there's a lot of basketball clinics that happen, and just because you see that particular celebrities name on the clinic doesn't mean that there's not ten other sponsors
that are coming in and actually paying for it. So of course you're going to get more support when you have that big name. That's why a lot of smaller organizations, grassroots like like my own, will look after We'll seek ambassadors and celebrities to get behind our stuff because we know when people see that name, they give more.
So how does that help them personally as far as they start a charity, how does that help them?
Write offs? It's a write off for them personally. Yeah, it's a write offs. But so there's two parts to it. They get the write offs by giving financially on their own, but then also it's a great marketing tool, you know, like I not only do this, but I also care and you don't have to be there to do it. So Usher, I'm just gonna throw that one out there again, Usha's New Luck. I've worked with that organization about three
times now. We've partnered on different things. I've never worked with Usher, but every time that we do anything and they post anything and it goes on the website, it says Usher's New Luck.
My graduates from my school being forced back drop drop, Mike drop backdrop.
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