What happens when your nonprofit is engulfed in scandal? Or what if you have a board member or highly visible donor who’s reputation is significantly on the rocks? As always, being prepared for crisis and scandal is always the best policy. Every nonprofit leader should know when and how to act in times of trouble. Managing these crises is especially important when it comes to fundraising and mission advancement.

Fundraising is all about managing relationships. In times of controversy or not, nonprofit executives should be carefully navigating through their relationships with stakeholders. When there is a crisis, the trust they’ve built along the way will have the biggest impact on successfully wading through the times of murky waters. In general, it is good to have open, honest communication with all of your stakeholders so a crisis doesn’t tip you over the edge but makes everyone come out stronger.

If news breaks that a major donor was engulfed in scandal, a nonprofit executive should remain calm and act swiftly with integrity.  A solution and plan of action to mitigate the crisis should be immediately ready to go. This includes knowing who to pull into a room for immediate strategy, who to contact first, and who are the best people to carry out the plan. Communicating clearly, concisely is paramount.
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Your main strategy will need to be disassociating your mission with the person experiencing the scandal. Your core group of loyal stakeholders should continue to feel that you are an organization they can trust.  Continue to align their passions and initial interest in the work of your organization with the impact and mission you make in the world. The scandal could, in effect, give you an opportunity to engage your stakeholders in a closer, meaningful way that ignites even more respect and loyalty than before. 

If you're passionate about a certain issue or cause, you may decide to go beyond donating your time and money to a charitable organization and start a new nonprofit.

But before forming a nonprofit for personal fulfillment, there are a few crucial financial and logistical steps to address, including financing and taking advantage of tax exemptions to ensure the organization can solely focus on its core mission, not unnecessary expenses. You'll also want to consider whether you have the time to start a nonprofit, and if you'll need to be paid for the time you put into creating and operating the organization.

Choosing whether or not to receive a salary is one of the fundamental differences between launching a nonprofit versus a for-profit business. With a for-profit business, you can earn as much as your business can afford to pay you; with a nonprofit, if you generate more than what the IRS considers "excessive," you could pay an excise tax and lose your tax-exempt status.

So, if you're contemplating forming a nonprofit, there are a number of factors you'll need to consider to meet your organization's goals. With that in mind, here's what you need to know to get started.

Research the prospective charitable cause. Conduct a competitive analysis to determine if there are other organizations addressing the same issue. If there are competing nonprofit organizations, it doesn't mean you shouldn't start a new nonprofit, but you do want to know the lay of the land, says Caitlin Worm, managing director of Blackbird Philanthropy Advisors, a nonprofit based out of South Bend, Indiana, that works to help businesses be strategic about their philanthropic giving.

"If you can't find anyone doing the same exact thing, it could be a good sign, but maybe you can find an organization that does similar work and help them build a program to help your intended population rather than building a new organization from scratch," Worm says. "It's always a good idea to make sure you are not replicating services already being offered at satisfactory levels. ... For example, if you want to start a food bank, you may want to do a search for food banks in your community and find out what works and what doesn't work before you start a new one on your own."

Consider incorporating your nonprofit. The process varies by state, but you'll likely need to register your nonprofit with your secretary of state's office, which typically requires a filing fee (in Ohio, for instance, it requires a $99 fee). You'll also want to choose a corporate name for your nonprofit.

Weigh the pros and cons of tax-exempt status. If you've done your research, and you're certain that there is a need for your nonprofit, you'll want to make sure the IRS agrees.

James Hsui, a New York-based attorney who specializes in offering legal advice to nonprofits, says that most nonprofits that are exempt from taxes are under Section 501(c)(3) of the U.S. tax code. "However, Section 501(c)(1) to 501(c)(29) all describe tax-exempt entities that could be classified as a nonprofit, and it is also not a requirement for nonprofits to be tax-exempt," Hsui says.

How do you decide whether or not to file for tax-exempt status? Whether you seek out this tax exemption is something you should discuss with an attorney like Hsui, but assuming you're going to form a 501(c)(3) nonprofit, you'll be involved in a two-step process. First, you'll need to form the nonprofit as a corporation, trust or unincorporated associated with your state. "For most nonprofits, the corporation is often the best option because it provides the broadest amounts of liability protection for its directors, officers and other insiders," Hsui says. "Once the underlying entity is established, the next step is to apply for the entity to be recognized as a tax-exempt 501(c)(3). This involves filing either Form 1023 or 1023-EZ with the IRS."

The latter form is faster, but if you expect to receive more than $50,000 in annual gross income for the next three years -- or you're starting a church or school -- you need to fill out Form 1023, Hsui says.

"If everything goes well with the application for recognition, the entity will receive a favorable decision letter usually somewhere between two weeks and nine months," Hsui says. He adds that the time it will take to hear back from the IRS will depend on factors such as what type of form was used, the current backlog of applications, the complexity of the nonprofit's activities and whether any issues of concern were found by the officer examining the application.

"I highly recommend hiring a lawyer, tax advisor or business consultant to help you walk through the steps of the form correctly the first time or you could risk having your application rejected or sent back for revisions," Worm says. "There are horror stories of these revisions and resubmit processes taking months, if not years, to complete because of minor errors on the application."

Assemble a board of directors. If you're serious about starting a nonprofit, you'll need a board of directors. In fact, when you register your charity, you'll need to provide the IRS with names of three individuals who are your board of directors. Also, keep in mind the IRS prefers that the organization's board of directors are unpaid. You are allowed to have more than three board of director members, but experts suggest making sure your number is uneven, so when you have big decisions, such as how to spend money, you won't have a tie.

Remember: Nonprofits require financing. Starting a nonprofit is tough enough, but running it indefinitely isn't easier. You'll need to have an interest in raising money or your board will need to be passionate about it. It's also beneficial to have a business plan. You'll want to create a road map that shows a fundraising and operational plan, and include an executive summary to entice organizations and foundations to offer grants for your nonprofit.

"Startup nonprofits need to have board members who will aggressively and unashamedly lead, bringing in donations and other influencers that can help the nonprofit grow and get the traction that will lead to a healthy, sustainable inflow of donations," says Peter Dudley, chief development officer of Cancer Support Community San Francisco Bay Area.

That's because fundraising will be a big part of your nonprofit's existence. "I've seen a lot of nonprofits struggle with cash flow because they underestimate the amount of time it takes to bring in donations. People passionate for their work often think that passion will translate into donations, and they also think that if a person will donate to this, then they will donate now," Dudley says.

But it doesn't always quite work out that way. "In reality, a lot of people who are willing to donate will need to be asked several times, over a period of time, before writing that first check," Dudley says. "People often will also want to see some traction or a critical mass before writing bigger checks. They'll donate $25 or $50 but will wait until you're established before giving at a personally meaningful level."

Many people wonder if they could afford to hire a nonprofit performance consultant. Our answer is simple in many cases: you can't. Do you want to be the best leader possible? Do you want to spend all of your energy working toward you mission? Would you like to improve in areas where you feel you face more challenges? These are all good reasons to hire a consultant. 

Rates and fees vary greatly among consultants locally and nationwide. Some consultants charge by the hour or provide a flat rate based on the project. There's no easy answer because the range is so broad -- some may charge $15/hr, while others charge $250/hr. Some may charge you $100 for a task that someone else will charge $2,000 for. Typically, more experienced and seasoned professionals are going to charge more for their expertise -- but then again, sometimes they do not. Also some people work faster and produce better results than others. Would you rather pay $500 for something that takes one consultant a month to do with loads of editing and feedback required from you to complete? Or would you rather spend $2,500 to get something delivered within a week, error free? It really all depends on what you're looking for and what you're willing to spend.

How does Blackbird Philanthropy Advisors determine rates?

It's really hard for us to give you an estimate of how much a project will cost until we dive deeper into the details. We know that's not exactly the answer you're looking for but it's an honest one. Generally, a "one-off" short term project that involves highly skilled work on a very temporary, short-term basis (1 hour to 2 weeks) will cost a little more than an agreement where there is an ongoing, retainer-based relationship with guaranteed work over a longer period of time or for a larger project. If you hired Blackbird to completely manage, plan, and organize all aspects of an entire special event -- this would be charged as a flat fee rate on a payment structure that works for both parties. If you're looking to hire Blackbird for a short term project, you might end up having an agreement where our services are charged by the hour. Long story short, there's no one size fits all plan.  

Some things you'll want to knock out of the way before you hire a team to pitch in at your organization: 
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• Know exactly why you need a consultant and what you want him/her to do
• Ask for word-of-mouth recommendations or consult professional associations
• Interview candidates to assess skills, experience, and fit with your organization
• Check references
• Determine fees and payment schedule
• Have a detailed written agreement