Celebrating Small Business Month: Including new and small nonprofits in the small business conversation

This month we celebrate small businesses and the people behind them who keep our economy running. Forbes reports that “not only are the majority of jobs in the U.S. created by small businesses, but they are also a major source of innovation, economic growth, and national prosperity.” Small businesses are the backbone of our economy and are responsible for hiring millions of Americans. 

One of the most celebrated aspects of small businesses is the startup phase. Startup companies push us to think bigger and create bolder solutions to societal problems. Some of the most successful startups are now an everyday part of our lives - think Uber, Tesla, even Facebook. 

Just look at television shows like “Shark Tank” and “The Profit” - we have a fascination with entrepreneurship, particularly new entrepreneurship. It’s not surprising. It is thrilling to hear the stories of people who start with just an idea and launch their businesses to success. It’s exciting to think about how a new idea that didn’t exist yesterday, can literally change the world. 

Even though there is strong support for new businesses, that same energy and excitement does not exist for new nonprofits. 

Many don’t realize that small nonprofits are also considered small businesses. One of the biggest misconceptions of nonprofits is that they cannot have profit. Many think that nonprofits exist only on volunteer labor. The fact is, there are many thriving nonprofits that have budgets in the millions - and they are meeting their missions and earning profits as well. 

So knowing that small nonprofits are small businesses too - the question becomes: why aren’t new nonprofits celebrated as much as new businesses?

In fact, in many nonprofit circles, starting a nonprofit is frowned upon. There is an assumption that there aren’t enough resources for nonprofits so adding one more to the community will divert the little resources that already exist for nonprofits. For the record, I do not agree with this sentiment, but I will save that for another article.

New nonprofits carry the same promise that for-profit startups carry. They can bring the same innovation and fresh ideas that for-profits do. However, they don’t receive nearly the attention and financial support as for-profits. In fact, it is even harder for new nonprofits to receive money (particularly grants) compared to more established nonprofits, because grant funders want to see a proven track record and need confidence that the organization is financially capable. It may take up to 3 years for a new nonprofit to receive a sizable grant, while startup businesses regularly fundraise and receive investment money to fund their ideas early on. 

While there are important differences between for-profits and nonprofits which impact their ability to raise substantial money in their startup phases, it’s important that we intentionally highlight the importance and need for new nonprofits as we celebrate small businesses and entrepreneurship. 

Here are 3 important ways we can use this small business month to lift up this part of the business sector so that new nonprofits can get the support they need: 

More visibility 

Most new nonprofits struggle with launching due to lack of visibility. New nonprofit founders don’t yet have savvy marketing skills to properly brand and position their nonprofits, and with no visibility, it’s difficult to get funded. There is no concentrated mechanism across the U.S. to regularly identify and highlight new nonprofits. There are some resources that exist like the National Council of Nonprofits, Guidestar, and local nonprofit associations, but there is not a public list where nonprofits can be identified so that individuals can support them. Local chambers of commerce or business development groups can be sure to  highlight nonprofit founders and create affinity groups to help bring them more visibility. They can also use their resources and connections to introduce nonprofit founders to key people in the community to assist with board development, fundraising, and volunteering.

Local for-profit partnerships

SCORE data show that 75% of small business owners donate an average of 6% of their profits to charitable organizations annually. Local businesses are incredibly supportive of local charities, but due to lack of visibility, they may not know where to find nonprofits doing good work in their communities. Nonprofit founders who are often doing the day to day work don’t have the capacity or the funds for a robust marketing strategy to highlight their impact to their community or online. In turn, the more established or financially stable nonprofits are more visible and tend to get the most support. Big name nonprofits are often the go-to places, and businesses owners don’t know enough about the local nonprofit sector to consider supporting other types of organizations, particularly new and small nonprofits. Local businesses should actively seek out nonprofit founders in networking groups or connect with local associations and the United Way so they can get a broader understanding of nonprofits in their local communities. 

Financial and Legal Supports

A nonprofit’s regulatory requirements can be confusing, burdensome, and time-consuming. While nonprofit founders are designing programs and working with their clients/participants, they also have to learn important IRS and state requirements to ensure their organizations stay in compliance. It requires an understanding of nonprofit accounting and IRS rules that are complicated. It can be difficult to find lawyers and accountants who specialize in nonprofit startup and management to assist nonprofit founders. On top of that, because this is niche work, it may be costly. Training more professionals versed in nonprofit law and regulations who are willing to work with startups is essential to support the nonprofit startup industry. Membership organizations and associations can create speciality groups or identify members who specifically work with nonprofits so that it’s easier for organizations to find them. They can also intentionally network in their local community at nonprofit events and with the nonprofit association, to work more with founders.

All nonprofits deserve to be celebrated along with small businesses as they are the key to the success of our economy. We cannot leave out the contributions of nonprofits as they often carry out difficult missions with limited resources. This May, as you think about how to support a small business, make sure you’re thinking of how to support a local nonprofit business as well.