How to Start a Non-profit Business

Do you have a great idea for a new non-profit business? Just like new companies can enter an existing marketplace and bring fresh thinking that disrupts the status quo, there is space for new charities that think they can do things differently and better.

There are 168,000 registered charities in the UK, but despite this, setting up a non-profit organisation is not for the faint-hearted. Not only is it a heavily regulated area but it’s also competitive. Find out what actions you need to take, the important considerations you need to bear in mind and how to legally establish your non-profit business.

What Is a Non-profit Business?

Non-profit organisations are not driven by profit but by dedication to a given cause, which is the target of all income beyond what it takes to run the organisation. Essentially, a non-profit company works just like a regular business. Money comes in, money goes out, employees are paid and day-to-day operations are carried out. However, unlike a conventional business, a non-profit company's main aim isn't to make lots of money.

Not all businesses are suitable to be set up as a non-profit organisation. Non-profits are often used for trusts, cooperatives, advocacy, charity, environmental and religious groups. Before embarking on the set-up of your business, you need to know what the motive of your business is, where will the revenue of your business come from and how you will structure your organisation.

Conduct Your Research

The first step in starting your non-profit business is to do thorough research to help form the basis of your business plan.

Define your mission

One of the hardest parts of starting a new charity is getting funding. To do this you need to convince funders and individuals that you are different and that the mission of your non-profit business is worth supporting. Funders are overwhelmed by funding applications and individuals are constantly bombarded by requests for money. How will you stand out? We recommend considering targeting geographical and demographic niches when defining your mission. This will give your non-profit the best chance of attracting attention.

Understand your audience

Understanding your audience is easier if you have a distinctive mission. Having a very broad audience is a good indicator that you haven’t defined a distinctive mission.

It is a common misconception that a broad audience makes it easier for you to attract people to your new cause. Many people are understandably reluctant to exclude anyone from engaging with their exciting new project. But the reality is the opposite. The broader you define your mission and the wider you cast your net for supporters, the less likely you are to succeed — since you will not stand out from other options. If you define your mission narrowly and derive from that mission a narrow audience, your communications are likely to be much more effective.

Find an appropriate name

When choosing a name for your non-profit organisation, you should consider these aspects:

• It should be relatively easy to say over the phone and easy to spell.
• If it is descriptive of your mission, then opt for something general rather than specific. While it’s crucial to have a clearly defined distinctive mission, this may legitimately change over time and you may not want to change your name as a result.
• Avoid long names that are likely to get shortened to meaningless or unfriendly acronyms.
• Take lessons from the business world where many successful companies have abstract names that, as they succeed, gather their own significance.

Choose a legal structure

To set up a new charity, you must decide what sort of legal structure it will have. The type of structure you choose affects how your charity will operate. For example, who will run it and whether it will have a wider membership, whether it can enter into contracts or employ staff in its own name, and whether the trustees will be personally liable for what the charity does.

There are four main types of charity structure:

• charitable incorporated organisation (CIO)
• charitable company (limited by guarantee)
• unincorporated association
• trust

You need to choose the right structure for your charity, depending on whether you need it to have a corporate structure and whether you want to have a wider membership.

How to Start a Non-profit Business

Once you have completed all your research and formed a business plan, you can start the practical steps to setting up your non-profit company. These steps include:

• Form your team — decide who will work in the charity with you.
• Start building a list of interested people — they will be the audience for your initial funding and communications.
• Get a website and start communications — write about what you do and share it by email and through social media. At this stage, don’t agonise over social media and choose a small number of marketing channels.
• Register with the Charity Commission — you don’t have to register until you have an annual income of £5,000. You may also wish to consider working as a social enterprise.

Ready to Form Your Non-profit Business?

Once the research and business plan is created, it’s time to form your company legally. This can be the hardest part of starting a non-profit business, but it’s crucial to your success. Using the services of Mint Formations to register your non-profit company can take away all the stress that comes from the legalities of starting a business. We’ll secure your business name and get your charity registered fast so that you can start doing what you love.

Are you ready to start a non-profit business? Register a charitable company online with our professional service.

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