We’ve all heard of nonprofits, but have you ever wondered how they actually work? (Like, how does a non-business entity even get money?) Or how about knowing whether or not an org is legit? To get those answers, we chatted with Sabrina Walker Hernandez (she/her), the president and CEO of Supporting World Hope, a coaching and consulting brand that’s on a mission to help small businesses and nonprofits—often led by women CEOs like herself—increase their revenue and navigate the complex world that is nonprofit operations.

National Nonprofit Day is here folks, so join us in learning more about them.

How exactly do nonprofits make money/stay in operation year-round?
Nonprofits sustain their operations through a diverse range of channels, including donations from individuals, grants from foundations, collaborative partnerships with corporations, and proceeds generated from fundraising events. The pivotal strategy lies in cultivating a varied pool of funding sources to establish a resilient financial base that bolsters the organization’s overarching mission. It’s prudent for an organization’s financial health that no more than 20% of its revenue is reliant on a singular funding source. Moreover, aspiring for a reserve equivalent to at least 90 days of operational expenses serves as a safeguard against unforeseen disruptions, such as a pandemic.

It’s imperative to dispel the misconception that nonprofits cannot generate money or attain profitability. On the contrary, nonprofits have the potential to accrue income and achieve financial success. The distinguishing factor is how those funds are allocated—typically reinvested into programs to enhance capacity and amplify impact.

Effective planning is integral to nonprofit growth as well. Tools such as an operating budget, strategic plan, and fundraising plan act as navigational aids, guiding the organization towards sustainable expansion. Equally pivotal is the composition of the board of directors, as their credibility and influence play a pivotal role in fundraising triumphs. Selecting individuals with diverse backgrounds and robust networks significantly contributes to the organization’s fundraising prowess.

What’s the difference between a nonprofit and an NGO?
While the terms are often used interchangeably, there is a subtle distinction. Nonprofit organizations (NPOs) are entities that operate for charitable, educational, or social purposes. NGOs (Non-Governmental Organizations) are a subset of nonprofits that typically work on an international scale, addressing global issues like human rights, healthcare, and poverty.

How do we vet a nonprofit organization?
Vetting a nonprofit organization involves thorough research:

1. Start by delving into their mission and values to ascertain whether they align with your own principles. Examine the impact they strive to achieve.

2. Evaluate their financial transparency and accountability. Reviewing their annual reports and financial statements is a key step. To access their 990 tax return, you can visit guidestar.org. It’s worth noting that focusing solely on capping administrative costs at a certain percentage may not always paint an accurate picture. Recognizing the necessity of fair compensation, operational expenses, and direct service provision is crucial.

3. Confirm whether the organization is registered with relevant regulatory bodies to ensure legitimacy. Additionally, seek insights from various sources—read reviews, engage with volunteers, and explore their program outcomes.

After vetting a nonprofit, what are some of the best ways to donate to one?
When you’re ready to donate, consider making a one-time or recurring donation directly through their website. Many nonprofits also offer the option to donate through platforms like PayPal or crowdfunding sites. If you want to have a more targeted impact, inquire about specific programs or projects that need funding.

If we really like a nonprofit and want to do more than donate, are there other ways to help out?
Absolutely, there are numerous ways to get involved beyond donating. Spread the word on social media, sharing their mission and successes. You could also organize a fundraising event, participate in community outreach, or even serve on their board if the opportunity arises. To gain a more personal understanding, take the initiative to become directly involved. Visit their programs, immerse yourself in their activities, and consider volunteering. This hands-on experience grants you a deeper insight into the organization’s mission, impact, and overall effectiveness. By combining thorough research with immersive engagement, you can confidently make informed decisions when vetting nonprofit organizations.

Is there anything else you’d like to share?
Remember, nonprofits are fueled by passion and purpose. Every small action, every contribution, has the potential to create a ripple effect of positive change. Whether you’re leading a nonprofit, supporting one, or simply advocating for their causes, you’re an essential part of the collective effort to make the world a better place. Together, we can turn dreams into reality and bring hope to those in need.