An Investment with Meaning

Back in 2000, inspired by a desire to help those in need, Megan and Dennis Doyle of Minneapolis decided they wanted to do more than just volunteer or write a check. Instead, they took $30,000 of their own money and started a nonprofit called Hope for the City. The organization collects corporate overstock and distributes it to nonprofits in the Twin Cities, nationwide, and internationally to 26 developing countries. Today the nonprofit has a $900,000 operating budget and a 25,000-sq.-ft. warehouse to store the donated items and has distributed nearly $380 million of in-kind merchandise since its inception. "This makes us feel like we're a part of something a lot bigger than just the two of us," says Dennis, 54, who is CEO of a local commercial real estate firm.

The Doyles are not alone in their desire to give back. There are more than 1 million 501(c)(3) charities like theirs, up nearly 70% from the 614,000 that existed a decade ago, according to Tom Pollak, program director with the National Center for Charitable Statistics at the Urban Institute. Organizations dedicated to education, disaster relief, job development, the environment and AIDS are among today's "hot causes," says Phyllis McGrath, president of Philanthropy Management, a Fairfield, Conn., consulting firm that works with nonprofits nationwide.

Fueling this growth are several factors: baby boomers with a social-entrepreneurship mind-set and added time in their lives to give back to their communities, such tragic events as Sept. 11 and Hurricane Katrina, and greater numbers of wealthy individuals with the funds to launch their own nonprofits. But starting a nonprofit is a Herculean effort, requiring patience and determination.

It can take at least six months to a year and as much as 30 to 40 hours a week to get an organization off the ground, McGrath says. Hiring an attorney experienced with nonprofits to handle statewide and federal applications is key. The 501(c)(3) designation comes from the IRS, and nonprofits are expected to provide the government with such information as a mission statement, an idea of who will be assisted and by what methods, anticipated budget and board of directors, says Andrew Grumet, a lawyer representing nonprofits with the Manhattan firm Herrick, Feinstein, LLP. Accountants familiar with nonprofits can advise on how much of an investment can be made without affecting personal wealth. But even with the best of intentions, nonprofits have a high failure rate: only one-third survive beyond five years, says Stan Madden, director of the Center for Nonprofit Studies at the Hankamer School of Business at Baylor University in Waco, Texas.

The best approach is to start with a business plan. Research other organizations in the field to make sure there is no other group addressing the same cause. Consult with other charities to determine that there are constituents who can really use your services. As McGrath notes, "Consider a realistic and doable niche that your organization can uniquely fill."

That is just what Beth Shaw, 41, did. The owner of a $4 million company that trains yoga fitness instructors worldwide, Shaw used her knowledge of the market to launch Visionary Women in Fitness, which provides scholarships to underprivileged women so they can train to become instructors. With a budget of just $30,000, the nonprofit, based in Hermosa Beach, Calif., is able to help 15 to 20 women a year learn a skill that can get them an entry-level job.

"I have two homes and a successful business, and so many young women out there have nothing," says Shaw, who has donated $50,000 of her own money since she launched the charity in June 2004. "This was the time in my life to step up and start giving back."