Don't overestimate the potential financial returns of starting a business – or underestimate the challenge of running a for-profit company. Half of all small businesses fail in the first five years. This goes for companies run by charities, too.

Common pitfalls for for-profits run by nonprofits include:

• conflicting priorities, such as the desire to pay employees a living wage, which can put the company at a competitive disadvantage
• lack of business acumen, notably regarding startup costs
• unrealistic or overly complex revenue models

Also, the consulting firm Community Wealth Ventures works with nonprofit groups seeking to start for-profit ventures. The firm's website includes a database of nonprofit groups that have profit-making ventures, including small businesses and strategic alliances with companies that yield in-kind donations or revenues. The site also has an excellent resource database that includes links to publications and websites such as that of the Stanford Center for Social Innovation.

[Source: "'Harvard Business Review: Perils of Charity Ventures," Debra E. Blum, The Chronicle of Philanthropy, February 17, 2005.]

It's not enough to be tough in negotiations. You need to be prepared. Gather information on the interests, resources, and alternatives available to your group and your counterpart. As a baseline, figure out the best-case scenario if you simply walked away from negotiations (a.k.a. the Best Alternative to a Negotiated Settlement, or "BATNA"). Set a target. Then assess your counterpart's target and BATNA.

Prepare a list of negotiating points. Start with critical issues, but also consider possible tangential discussions/arguments. Place a value on each point. Estimate your counterpart's value equation for each point. Look for potential tradeoffs.

Don't lock onto a fixed idea of what your counterpart's needs and interests are. Stay receptive to new ideas and information.

[Source: "Are You Giving Away the Store? Strategies for Savvy Negotiation," Margaret A. Neale, The Stanford Social Innovation Review, Winter 2004.]

Seeking nonprofit status? Your job just got a bit harder. The IRS has revised the federal nonprofit application form, called Form 1023, and added a dozen new questions. Be prepared to supply information on payments to third-party organizations, justify staff salaries, and explain your conflict-of-interest practices.

For more information, see the new Form 1023 at the IRS website, or call for a copy of the form: 800-829-3676.

[Source: "IRS Asks Organizations Seeking Charity Status to Supply More Details," Brad Wolverton, The Chronicle of Philanthropy, January 6, 2005.]

Get your arms around a giving circle! Giving circles are small groups of friends, neighbors, families, and acquaintances with an interest in philanthropy. Since 2000, they have given an estimated $44 million to charity. Many are interested in youth development, programs for women and girls, human services, and mental health and crisis intervention.

57% of giving circles are female-only; 42% have memberships consisting of both men and women.

For more information, see the "Giving Together: A National Scan of Giving Circles and Shared Giving" report from New Ventures in Philanthropy, available online.

[Source: New Ventures in Philanthropy press release, February 8, 2005.]

It's time to get serious about developing your online fundraising strategy. Online giving grew 60% in 2003, with more than $2 billion donated online. Three out of four Internet users say they have visited a charitable website, and half say they have taken action after doing so.

Why the increase? Americans are more comfortable about using their credit cards online. And nothing beats the efficiency of online giving.

To make your online fundraising campaign as effective as possible, ensure that your objectives are clear. Are you trying to recruit new donors? Raise awareness? Knowing before you start will sharpen your message and establish standards for measuring results.

Get to know your supporters by asking them to volunteer information about themselves. Then tailor messages to various groups based on their interests.

Donors and those seeking more information should be directed to a dedicated website set up for the campaign. The site should include a place where visitors can donate.

For more information on online giving, see the website of the Network for Good, which gives charities a quick and easy way to start accepting online donations in exchange for 3% of donation revenues. TechSoup has a collection of resources on nonprofit technology. And the ePhilanthropy Foundation has an online-fundraising ethics self-test as well as a vast array of resources and information.

[Sources: "Online Gifts to Charity $2 Billion and Growing," Philanthropy News Network Online, December 20, 2004. And "The Basics of Online Fundraising," Philanthropy News Network Online, February 4, 2005.]

Recruit volunteers now! 57% of Americans volunteered last year, up 9% from 2003. 75% of volunteers said their personal moral values motivated them to give their time to charity; 47% said they wanted to gain new experiences, and 42% said they felt obliged to help because they had received assistance from a volunteer themselves.

Half of Americans believe volunteering is more valuable to charities than giving money; just 20% think giving money is more helpful.

In 2005, 58% of volunteers expect to spend the same amount of time helping charities as last year, while 27% expect to volunteer more.

For more information, see the survey by Thrivent Financial for Lutherans.

[Source: "Percentage of Americans Who Volunteer is on the Rise," Sharnell Bryan, The Chronicle of Philanthropy, February 17, 2005.]

Does your group treat women right? Equal pay for equal work is still not a reality in the nonprofit world. Last year, male CEOs of large charities earned an average of 54% more than their female counterparts.

Women also are far less likely to be offered top positions at big charities. Less than 25% of CEOs at charities with $10 million budgets are female. By comparison, 54% of top officials at charities with budgets of $500,000 or less were women.

The news is better at smaller charities. But even at groups with budgets under $250,000, female charity heads earned 2.9% less than men in similar jobs. In groups of all sizes, men made more than women in jobs like fundraising, education, marketing, and technology.

For more information, see the annual salary survey by GuideStar, available for order online or by contacting GuideStar at 4801 Courthouse St., Williamsburg, VA 23188; 800-784-9378; e-mail: customerservice@guidestar.org

[Source: Charities Pay Women Less than Men, Study Finds," Ben Gose, The Chronicle of Philanthropy, November 11, 2004.]

Public trust? You've got it! Affluent, college-educated Americans have more faith in nonprofits than in government, businesses, or news organizations. 55% of those surveyed gave high marks to charities when asked about groups trusted to "do what is right." That's up from 36% in 2001 and 49% in 2003.

By comparison, 44% gave government high trust marks, and just 32% trusted the media.

For more information, see the 2004 Edelman Trust Barometer report at www.edelman.com. Also, see the less-optimistic appraisal by the Brookings Institution, "The Continued Crisis in Charitable Confidence," reported in the Sept. 16, 2004 issue of the Chronicle of Philanthropy and viewable online.

[Source: "Public Confidence in Nonprofit Groups is on the Rise in America," Brennen Jensen, The Chronicle of Philanthropy, February 17, 2005.]

Have your ranked your supporters? 90% of donations come from the top 10% of donors. Ranking or rating your supporters will identify your biggest donors and help you build productive relationships.

Rankings can be used to determine how much time and resources to invest in each prospect. They are vital for transforming potential donors into active constituents, and lower-tier donors into lifetime supporters.

[Source: "Identifying Your Top Tier Donors," Philanthropy News Network, January 20, 2005.]

Get on board with charity reform. The 2002 federal Sarbanes-Oxley Act is designed to improve corporate governance and accountability. Many nonprofits are taking the cue to address their own potential conflict-of-interest problems, internal financial controls, ethics codes, board policies, record retention, and protections for whistle-blowers.

48% of nonprofits said they have made these and other changes in direct response to the Sarbanes-Oxley law.

For more information, see the 2004 "National Board Governance Survey for Not-for-Profit Organizations" by the accounting and business advisory firm Grant Thornton, available free online.

[Source: "Accounting Law Spurs Charities to Make Changes," Grant Williams, The Chronicle of Philanthropy, November 25, 2004.]

What are your standards for excellence? Your success relies upon public confidence and support of your organization. To ensure this trust, develop a code of ethics and accountability, or adapt a code developed by others (such as the one created by the Maryland Association of Nonprofits).

Be sure to include standards for your mission and program, governance, conflict of interest, human resources, finance, openness, fundraising, and public policy.

For more information, see the ethics standards on the Maryland Nonprofits site.

Developing an effective board requires asking meaningful questions continually: What value is added to my group by having a board? What defines an effective board? How do we address issues of diversity as we develop our board?

For answers to these and other questions, see the Resources page of Joyaux Associates' website, which includes an archive of board-development publications available free in PDF format.

The 25th International Fundraising Conference will feature presentations by Simone Joyaux and communications guru Tom Ahern. The conference will take place Oct. 18-25, 2005 in the Netherlands. Some scholarships are available for those who cannot otherwise afford to attend.

For more information, see the website of the Resource Alliance, an international group dedicated to nonprofit capacity building through training, education and networking.

The Canadian Center for Philanthropy and the Coalition of National Voluntary Organizations merged in January to form Imagine Canada. Mission: to support Canada’s charities, nonprofit organizations and socially conscious businesses and champion the work they do in communities. The group's new website includes a Canadian foundation directory, guidance on ethical fundraising, library, and more.

Resources ...

Global Civil Society: Dimensions of the Nonprofit Sector. Country-by-country profile of the nonprofit sector in North America, South America, Europe, Asia and the Middle East. $34.95 from the John Hopkins Institute for Policy Studies' Center for Civil Society. Also available: Global Civil Society: An Overview ($12) and Global Civil Society: Dimensions of the Nonprofit Sector, Volume 2 ($39.95). All by Lester M. Salamon, et. al. Order at http://www.jhu.edu/~ccss/pubs/books/.

The Nonprofit Legal Landscape: Reference tool on key legal topics affecting nonprofit governance compiled by the law firm Ober/Kaler, written with nonprofit directors and other leaders in mind. Available for $32 for nonmembers ($24 for members) from BoardSource online or 800-883-6262.

The 2004 GuideStar Nonprofit Economic Survey: Nonprofits say that while donations have increased modestly, demand for services has surged. Survey includes breakdowns on giving and service demand sorted by region, organization size, and subject area. Free from GuideStar.