Over the past few years, the Washington Nationals drafted Baseball Jesus I (Stephen Strasburg) and Baseball Jesus II (Bryce Harper) to deliver them from the cellar in the National League East. This year the Redskins drafted Football Jesus, RG-III, to deliver them from.........RG-I (Rex Grossman). Coach Mike Shanahan so believeth in RG-III that he drafted another quarterback, Kirk Cousins, in the fourth round so that he shall not perish as a coach, but have everlasting life, if RG-III can't quarterback any better then John Beck. So much for believing in your plan A. I don't know how to segue that into my topic for this installment except to say that I am starting a non-profit support group for Redskins fans called, Save Our Skins (S.O.S.). Please give generously. Operators are standing by.
Your business is going well, and you feel the warm fuzzy glow of success. That might just be one vodka tonic too many, or it could be a genuine urge to help those less fortunate and brilliant than you are. Your next thought is ,”I'd like to give back to the community by creating a non-profit foundation to cure the world of compulsive nose picking.” You know from World Health Organization statistics that nose picking is the leading worldwide cause of congenital grossness, and you are determined to do something about it. What better way to serve your fellow man than eliminating the scourge of public nose picking?
Last week I had a meeting with a man whom I had assisted a year ago in forming just such a non-profit. I helped him complete form 1023, which is the I.R.S. form you use to apply for non-profit status. Completing, and having the I.R.S accept, the form gives you the ability to accept tax deductible donations. You are what is known as a 501(c)(3) organization.
Completing from 1023 is a daunting task. You list the names and addresses of your board of directors. Yes, you have to have one of those. If you are a new organization, you submit a budget out three years into the future. You also get to answer a few million questions about your organization structure and policies. For instance, you need a conflict of interest policy and must include it with your application. After you complete the forms and compile a six inch high stack of supporting documents, you ship all of this to the I.R.S. people in charge of granting non-profit status. Then you wait.....and wait....and wait a little longer.
Finally the I.R.S. responds. What you are hoping for is an envelope that is, in size, the exact opposite of what you hope your kids receive when they apply to colleges. A thin envelope, in this case, is good news. A thick envelope means the I.R.S. wants more information before accepting your application. A thick envelope is the norm. I'm not certain who appointed the I.R.S. to be gatekeepers to the philanthropic world, but they take their appointment VERY seriously. I once talked to an I.R.S. employee, concerning an application, who wondered aloud if the world really needed another – insert your type of organization here-. I don't know what sort of training I.R.S. employees get in making these deep judgments about the worth of an organization's mission, but I suspect it doesn't involve sitting at the feet of Mother Teresa.
After a little difficulty, we succeeded in getting my client's non-profit application accepted. Nearly a year passed, and he called urgently asking to set up a meeting. We met in the middle of an afternoon a couple days later.
When he came in, I asked him what we would be discussing. He told me, “I am dead broke, totally out of money. I don't know how I'm going to pay the office rent in a couple weeks. I need your advice on how to raise some money.”
I called up, on my computer, the budget we had presented to the I.R.S. a year ago. Then I replied, “So you're telling me your revenue isn't meeting what we expected a year ago – correct?”
“Well sort of. There hasn't been any revenue.”
“Back then, didn't we discuss that you would be able to bill Medicaid for nose picking prevention services?”
“Yes.”
“Do you have a lot of unpaid bills from Medicaid that you are trying to collect?”
“No. I haven't billed them at all. I found out they didn't support that type of service. Flatulence prevention has sucked up all their funding.”
After I got over my moral outrage over Medicaid denying nose picking coverage to the indigent, I asked where he thought his revenue could come from. He didn't really know. He asked me if I knew any grant writers who would work on contingency. In other words, he wanted someone, who would work for free unless she wrote a grant that brought in money. From my experience, the success rate on grants is about 10% with a competent, motivated grant writer. In other words, one out of ten grant applications gets accepted, best case. Sign me up for working for free 90% of the time – no thanks I'll pass. Here's a hint. Grant writers expect to get paid for every application they submit – and they should.
Let's take a little inventory of the mistakes my client has made. I see lots of people make these errors. The first is not figuring out where his revenue was coming from. I would not expect a successful business owner to make this mistake. In this case, my client was a life long employee, and not a very senior one at that. He was a nose picking treatment technician. He had no experience running a department let alone an entire organization. So I guess his total lack of knowledge of basic business principles, such as revenue really matters, shouldn't be so shocking. I would expect few of my successful clients to make this mistake.
His second mistake was believing everyone in the world would care about his mission. He believed grant writers would be so impressed with his will to help mankind that they would work for free. I know he expected his attorney, and probably me to some extent, to work for discounted rates. Back in the 1990's Paul and I had a partner in an office in Newport News, who wanted to approach a software company for free accounting software for a non-profit client. She thought they would be ecstatic about the chance to help a charity, she believed in, that was struggling financially. Paul and I let her know that wasn't the case. One of their major markets was selling to non-profits. Why would they give the software away in a target market? Nonetheless, she insisted on making an ass of herself and tried, predictably with no success.
Here's a helpful hint for you. Out of the seven billion people on the planet, very few are going to care about your mission – maybe not even your family. You can go to the IRS web site (http://www.irs.gov/charities/article/0,,id=249767,00.html) to get a list of charities that qualify for tax deductible donations. There are somewhere in the neighborhood of four trillion charities in the United States. Well maybe I exaggerate a little. There are so many that the IRS no longer publishes a list. You have to run a search from the site above to check on a charity. My point is that there are so many charities competing for money and attention that you shouldn't be surprised that no one cares about yours.
The third and most common mistake was believing he could run a non-profit organization without any such experience. Even successful business owners make this error. A typical business owner believes that because he successfully runs a doggie do do pickup business, he can run a non-profit organization. Applying business management concepts to non-profits is all the rage these days at non-profit conferences and in their magazines, but non-profits are fundamentally differ from for profit entities.
One of the major differences is groveling for money. Business owners attract revenue by selling goods and services that benefit (hopefully) customers. Non-profits aren't selling a direct benefit to their contributors. They are trying to separate potential contributors from their money for a good cause. Groveling is such a harsh word, but it is a hurdle most business owners can't get over. For instance, my client told me he hated asking people for money. I said, “If you won't ask for money, why will people just give it to you?” He didn't want to stain his soul with groveling. Fund raising for non-profits has a few things in common with marketing for businesses, but many more differences.
I have a suggestion for you that will satiate your philanthropic urges, while giving you the opportunity to actually do something good for the planet. Don't start a non-profit. Join one that already exists. If your passion is eliminating nose picking, there are probably five hundred organizations already doing good work in that area. They already have knowledge and infrastructure you would have to create from scratch. In the nose picking arena, such knowledge is invaluable. These organizations know how index finger pickers differ from pinkie pickers. Who knew, except for me, that such things are important. Don't blame me. Your parents told you education is a life long endeavor. At least I'm not writing masturbation jokes – yet.
The one thing you'll give up in joining an existing organization is being in charge, at least initially. If your philanthropic urges are sustainable and pure, this shouldn't matter that much. If your aim is to do good, you'll adapt. Over time as you learn about an organization, you can choose to take on more responsibility. Time will give you a good chance to learn not just about your organization, but how managing a non-profit differs from your day job. Lastly, if working in someone else's gig really isn't for you, consider just giving money. I see the tax returns of would be charitable entrepreneurs. Often they donate next to nothing to charities. Just how pure are their philanthropic instincts? Yes, I am judging your moral worth to humanity when preparing your tax returns.
Yes, I am drinking my own Kool Aid. I sit on the board of directors of Christian Relief Services. Not surprisingly, I am chair of the audit committee. They gave me something to do in an area where I might actually be competent. I have opinions on all sorts of areas like fund raising, but wisely they generally ignore me.
While I am shamelessly self-promoting, the web site is www.christianrelief.org. The organization has four major programs: Running Strong for American Indian Youth, Americans Helping Americans, Bread and Water for Africa, and a plethora of low income housing initiatives. Please take a look at the web site to see the national and international reach. I am really proud to be associated with the organization.
While writing this installment, my philanthropic urges kicked in again. I have decided to start a second non-profit called Running Strong to Keep RG-III healthy. We will be raising funds to pay three hundred pound linemen to keep him safe. The Redskins don't seem to care so much about that. Maybe they'll bulk up Kirk Cousins to three hundred pounds to make him really good in pass protection, but I doubt it.
For real tax and accounting advice, please visit the S&K web site at www.skcpas.com. Thanks for reading.
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