Step 4: Have Adequate Financing

Step 4: Ensure Adequate Start-up and Long-term Financing

“Show me the money” is a famous line from the movie Jerry McGuire. It also applies to keeping non-profits going.

Non-profits are like any other business in that they have certain fixed, regular costs. These include power, rent and employee wages—including accounting and legal fees—advertising and fund-raising. They also have capital costs for big-ticket items such as buildings, vehicles and major appliances. Don’t forget the typical office expenses such as computers, paper, pens and ink cartridges. You’ll also want a dedicated phone line.

Organizers need to know what these costs are up front. Answering, “I don’t know” on a grant application is often a guaranteed rejection.

There will still be some capital costs even when using an outbuilding on your existing property. For example, a pet sanctuary will need a separate bathroom for staff and visitors plus laundry facilities to wash bedding and towels. Installing a separate electric meter just for the non-profit, and wiring the right circuits into it, is also a good idea.

Unlike for profit businesses, though, non-profits also have client-related medical expenses (i.e., veterinary costs for animals) that are frequent and variable. For example, every incoming pet needs to be tested for communicable diseases. Some may need surgery, others will need medicines. Hard as it is, some may suffer less by being put down.

How expensive are these vet costs? One of our adopted shelter cats was exposed to a deadly disease, feline infectious peritonitis. Though we eventually had him put down to end his suffering, it wasn’t until he had racked up more than $15,000 in vet bills. A more recent stray needed a tooth fixed. That bill was $600.

How can you estimate these costs?

First, talk to people who run existing shelters. Ask them for copies of their annual budgets then scale their figures up or down to better suit your own needs. Take into account various factors such as differences in climate that can affect utility costs.

Second, take the time to talk to both an accountant and a lawyer. Both will have tips on ways to keep your organization financially sound and running legally.

Once you’ve got some solid cost estimates, it’s time to move onto the second stage: raising money.

Fund-raising

Your estimates, backed by a recognized Certified Public Accountant and/or lawyer, are going to be critical in getting start-up funding. You will also need to hire—and pay—someone experienced in grant writing. These folks often charge a fee of 10 percent of a successful grant, so that fee needs to be taken into account in the grant application.

Grantors (the people writing checks) may demand some sort of oversight into how their funds are spent. This often occurs in two forms: releasing funds on a bill-by-bill basis (typical with new construction projects), or by having one of their employees on your governing board. You will need to account for every cent spent, so having a good accountant is a necessity, not a luxury.

Grants are great for large expenditures, such as buying a new van, but they typically do not cover day-to-day expenses. They also have drawbacks: they take time to get, often a year or more; you are competing for these funds; and you may only get a fraction of the money you applied for.

Getting day-to-day operating money and special expense (i.e., pet surgery) funds takes another type of fund-raising: special events and private giving. Look at other similar charities and see what types of fund-raising work for them. See if the rewards are worth the time and expense, realizing that it might take several years for your events to become popular.

This sort of fund-raising depends heavily on having one or more people who are well-connected in the community. And that leads us to Topic 5: Staffing.