How to Start a Foundation

If you're a successful entrepreneur who wants to give back to the community, you might be thinking of starting your own foundation. But first, be sure you understand the many demands of running a nonprofit organization.
Creating a foundation can be rewarding, but it requires much more than financial support, says Janne Gallagher, senior vice president and general counsel of the Council on Foundations in Arlington, Va. Among other things, foundation founders must get up to speed on laws and regulations, oversee operations, attract donors, and review programs for possible funding.
Some businesses instead choose to establish a fund through a community charity, but don't necessarily have the final say in how money is distributed. For those who want to retain control through their own foundation, here are several important steps to take:
Make the necessary commitment. As Dick Palazzo built his Tinton Falls, N.J., pet boarding and grooming business, Purr'n Pooch, he regularly rescued dogs from animal shelters and found homes for them. As his business neared its 30th anniversary in 2009, his daughters decided to launch the Purr'n Pooch Foundation for Animals to further their father's animal rescue work. Because a foundation is often like running another business, you need true dedication, Palazzo says.
"You have to have real passion for what you're doing because you're going to be dedicating a lot of your personal time to the cause," he says. "If you love what you're doing, I think the success will follow." His foundation has granted more than $40,000 to various animal nonprofits and expects to disperse another $25,000 to $30,000 in January.
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Get good counsel. An experienced attorney can help you decide whether your organization should be a charitable trust or a 501(c)3, which is named after the portion of the IRS code defining nonprofit entities. Although Palazzo says working with an attorney makes the process easier, you can file the paperwork on your own. Newton, Mass. law firm Hurwit & Associates, which specializes in nonprofit law, provides the filing requirements for each state.
Create bylaws. The foundation must be governed by a set of bylaws, says Jeff Hurwit of Hurwit & Associates. They include provisions for the organization's governance and board selection process, general decision-making, required meetings, and conflict-of-interest policies. GrantSpace.org provides a good collection of bylaws information and samples.
Develop award criteria. Foundations need to create a clear set of criteria for selecting funding recipients. "Although it's not legally required, you want to make sure you're not setting expectations that people will be entitled to grants without meeting specific criteria," Hurwit says.
Your foundation should identify the types of programs it will support and a timeline for applications, program selection and grant awards. You also may require follow-up reports from funding recipients to document how the money was used and what impact it had.
Related: 'Count Me In' Helps Women Entrepreneurs Increase Revenue
Recruit a strong board. A foundation often fills its board with family members, but that may not be the best approach. Family members fill all board positions for the Gabe W. Miller Memorial Foundation, founded by attorney Alan B. Miller in memory of his son Gabe, who died in 2005 while he was a social work student at the University of Colorado.
Although Miller likes having an all-family board, he says it limits fundraising. "To enable larger and a greater number of scholarships and social service project grants, we may well have to go to a donor board or sub-board to expand our support population," Miller says. For example, Palazzo's animal-focused foundation recruited such outsiders as Nicholas H. Dodman of the Cummings School of Veterinary Medicine at Tufts University and Brian T. Voynick, a veterinarian who hosts an animal show on a New Jersey television station. They brought additional insight, dedicated service and networking opportunities to the foundation, says Palazzo, who serves with his daughters on the board.
Create a sustainable plan. Unless you're independently wealthy, you're going to need to do fundraising to sustain the foundation. Miller, for example, raises funds through his foundation's annual 'Celebration of Life' dinner, as well as direct mail and email solicitations.
Since 2005, the Miller foundation has given away about $55,000 in scholarships and $40,000 in grants to social work projects. "We're not wealthy like that," Miller says. "What we do is raise money from everyone we know and everyone we can find who is interested in the work our foundation does."
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Avoid conflicts. Nonprofits need to prevent conflicts of interest, such as using the foundation to advance business purposes. Hurwit says, having the foundation sell products or services from your business could mean forfeiting your tax-exempt status. Nonprofits also cannot generally engage in political activities without jeopardizing their tax-exempt status.
Manage funds properly. It's critical to keep the foundation and your business as two separate entities with different accounts, Hurwit says. Secure individual employer identification numbers for each entity and do not comingle funds. If you make a donation from your corporation to the foundation, clearly state in your corporate records what the money will be funding. But don't funnel money from the foundation back into the business, Hurwit says, unless your attorney has cleared a transaction. He advises that it's best to assume that it's never permissible.

Read more: http://www.entrepreneur.com/article/224690#ixzz2SRMAQw5g

 

 

How Focusing On 'Why?' Powers Up Your Business

 

Do you want to know why some companies are more innovative, more profitable, command greater loyalty from customers and employees alike? It’s because they start by asking “why,” according to Simon Sinek, an ethnographer, author of Start With Why: How Great Leaders Inspire Everyone to Take Action and speaker (his TED speech is among my favorites).

Holly Lynch started her company with the “why” in mind: Why do women, who control 85% of consumer spending in the US lead only 4% of the companies they buy from?

  Lynch didn’t start her company, The 85 Percent, because she is a feminist, though she is. She started her company because by understanding why women buy, you develop better products and communicate about them more effectively. With clearer differentiation, you create a competitive advantage and are more profitable.

“People don’t buy what you do, they buy why you do it,” said Sinek. “The goal is not to do business with everybody who needs what you do. The goal is to do business with people who believe what you believe.”

Women control the purchase decisions not just for obvious products and services such as food, home, family, and healthcare, but even banking, automotive, and travel. Lynch has worked with companies in virtually all these categories. While working at ad agencies, her clients have included Dove, Frito Lay, Levi’s, Toyota,  among others.he 85 Percent works with companies that believe in bringing a woman’s perspective into the design and marketing of products aimed at women. By better understanding why women buy your product, you’ll make more sales. “The heart makes the decision,” said Lynch. “The head justifies it.” You need to appeal at an emotional level.

One way companies can ensure that a woman’s perspective becomes ingrained into the design and marketing of products is to make sure that women are part of the management team. The 85 Percent also works with companies on leadership for up-and coming-women (and sometimes men) in their companies.

Lynch is driven by a purpose: making sure women live up to their potential to drive economic health. She does this not only in her business life but in her personal life. She is an angel investor, advisor, and mentor who helps women entrepreneurs define their “why?” and build their businesses.

 

3 Honest Ways to Raise Startup Money

 Create a healthy foundation for your business by combining enthusiasm with honesty.

Entrepreneurs tend to exaggerate. They exaggerate the success of their business when talking to startup investors. They exaggerate the market potential of their products to find distribution partners. They exaggerate the soundness of their strategy to recruit employees. Funding your business without exaggerating isn't easy, but there's a clear line between optimistic exaggeration and outright fabrication. Here are some guidelines to help you get your startup off the ground without selling your soul or spinning a web of lies.

Develop financial projections that are rooted in verifiable assumptions
Venture capital firms and angel investors typically want to see financial projections that shoot up like a hockey stick. Entrepreneurs often feel compelled to exaggerate projections to look like their businesses can reach a billion dollars of market value in a few years. There's no point in just fabricating a set of projections that aren't based on reality. One way to build a set of realistic projections is to start with business drivers that can be discussed and debated with investors. For example, if you're selling widgets that depend on the cost of oil, develop a set of financial projections that link market value to the number of widgets you plan to sell and the changing price of oil. This will show billion-dollar market value and allow investors to understand what assumptions you're basing your growth on.
Write paychecks that don't bounce, but increase as the business grows
One of the most difficult tasks for entrepreneurs is to convince talented employees to join the team and stay on the team before their company is profitable or stable. As a startup business owner, you're faced with a choice: Pay your employee a market salary (say $150,000 per year) and take a bet that you can grow the business to justify the salary, or share risk with your employee by paying a below-market salary (say, $75,000 per year) plus equity incentives (worth $75,000 or more). Most experienced entrepreneurs will tell you that it makes more sense to share risk with your employees until you have funding or until your product line gets market traction. While this makes sense, it often puts the entrepreneur in the precarious position of having to recruit employees by exaggerating how likely the prospects of venture funding are, how developed the company's strategy is, or how popular the company's products are.
Employees are usually the first to know when funding prospects dry up, strategies fail and products don't sell, so it's better to be upfront about the risks of joining a young company. But enable new recruits to share in the rewards of business success immediately rather than waiting for their equity to appreciate. For example, one clever way to share risk with your new recruits is to outline a path to increase their base salaries as the business grows. For example, offer to increase a base salary from $75,000 to $100,000 when the company hits certain milestones, then again to $150,000 when profitability is attained. Put this in writing in the offer letter. This compensation plan will cost less than promising to pay out bonuses, which get spent then forgotten, or subsequent equity grants, which get expensive for the company if they are granted many times.
Get your clients to compete to be first
Successful entrepreneurs love to tell stories about how they got their first client. While working out of a closet or a garage, they print up business cards with a prestigious address and fancy logo and close the deal. That's what it takes to sell. Exaggerating the stability or size of your enterprise to secure your first client is the stuff of legend. Even if your product isn't ready, you can use a similar approach to raise money for your business by getting investors and business partners--who can provide financial support--to compete to be first. There's a certain prestige in being part of the first group of investors, partners or customers to help launch a business. Create the feeling of exclusivity. Require an invitation to use your beta product. Generate buzz about your product plans and your team among blogs that investors read. There's less need to exaggerate if you can set expectations that your product is still being tested among early adopters.

Three Tips to Start a Consulting Business

 Starting a consulting business is one way of drawing on your expertise and creatively making use of problem-solving skills. It’s a popular – and potentially lucrative -- avenue for aspiring business owners. The consulting industry in the U.S. generates nearly $100 billion in revenues each year, according to a Harvard Business School analysis conducted in 2007. And it's an industry where one can earn upwards of $400 per hour depending on the work and location, according to the Association of Management Consulting Firms, a New York-based organization.
"People come into consulting from all different routes," says Andrea Coutu, a Vancouver-based marketing consultant and founder of the blog Consultant Journal.
If you're ready to hang your own consulting shingle, consider these three strategies to get started.
1. Establish your reputation before striking out on your own.
Ann Quinn spent more than a decade helping midsize, and some small, companies raise money in and around Baltimore. In 2009 Quinn was working at an investment bank and had few prospects for the big transactions the company was after.
But she did begin to work with small companies and nonprofits that didn't have good advisors to help grow their businesses. It was work she wanted to do, but it wasn't lucrative for her firm.
So in early 2010, Quinn worked out a deal with her boss where she would strike out on her own and take on clients her company wasn't interested in. She agreed to send other business to her old firm for tax and audit services when it made sense, while the firm would refer small companies and nonprofits in need of strategy to her.
The expertise she gained from years in the industry and the region helped her build a reputation and client base that would serve as the foundation of Quinn Strategy Group, which she founded in March 2010. The business is on pace to bring in $160,000 or more in revenue this year.
Related: Two Weeks to Startup
2. Partner with another firm while building your business. 
For some aspiring consultants, name recognition is more of an issue than expertise. In that case, look for an established company where your ideas will be complementary and pitch an arms-length partnership. It will allow you to build your name, refine your services and reach clients you wouldn't otherwise have access to on your own.
"Partnering with others is a good way to get started," advises Maria Coyne, who heads small-business banking programs at Key Bank in Cleveland.
That's exactly what Jill Reamer did six years ago. The former attorney and mergers and acquisitions specialist decided to start her own company to work with small-business owners looking to sell their companies or make an acquisition. She formed a strategic partnership with a two-person consulting firm that did similar -- but noncompeting work. The deal allowed Reamer to use the name of the established, respected firm while building her own business, Peak Strategy Advisors.
"It's a tricky balance of having the control and autonomy that drove you to create your own firm versus the collaboration and give-and-take you have when you are in a partnership," Reamer says.
She was able to avoid potential problems by signing on as a consultant, not an employee or partner. She kept her own office and paid her own overhead costs. That made it easy to part ways and move on amicably later.
Related: Five Creativity Exercises to Find Your Passion
3. Differentiate your services.
After the terror attacks of September 11, 2001, Brad Stern's multinational employer shuttered the Cleveland office where he worked. He and his team were told they could move to Chicago -- or leave the firm. So Stern and five other consultants left and started their own human-resources consulting firm, Shaker Consulting Group.
Stern, who is president of the firm, says he and his partners quickly realized they needed to differentiate from their well-established former employer in order to compete. So, they turned the hiring and talent management process into a video game, a sort of virtual job tryout. While it didn't reinvent human resources at its core, it offered a new twist to the field. Stern recalls how some companies preferred the umbrella of a bigger firm at first, but his team's new and different strategy helped win clients, and eventually catch the attention of big companies.
"It's easy to roll into a me-too attitude of 'I can do that, too, but cheaper,'" Stern says. "You have to commit to being unique."
And it is important to call yourself a consultant early on, adds Coutu, whose success starting her own consulting business led to the blog, four ebooks and her offering an online a course about becoming a consultant. Previously, she had been working in marketing at a hi-tech firm in Canada just before the 1990s dot-com boom, and started consulting on the side.
As soon as her side business grew enough to pay the bills, she went out on her own full-time and called herself a consultant from the start. Her colleagues at her former employer left her with a Rolodex of about 100 contacts -- many of whom ended up at new firms when the company downsized. They funneled work and referrals her way.
"If you want to be able to get full value for what you are offering, you can't see yourself as a contractor or a freelancer," she says.

 

How to Create a Winning Business Idea--in Six Easy Steps

 I often meet business founders whose minds are overflowing with brilliant ideas for new products. They seem to develop terrific new concepts every single day of their lives.  They are watchful, always inquiring, perceptive and continually seeking (and often finding) the next big thing. Their never-ending challenge is to pick a winner—(only one!)–out of scores of possibilities, and run with it.
 On the other hand, I listen to intelligent and aspiring entrepreneurs who can’t concoct a single viable idea. These great souls are bright and earnest, but for some reason, imaginative ideas escape.

Within my circle of friends I see both types of individuals.  One is the quintessential entrepreneur who has developed several companies and has recently launched a new firm.
The other struggles to envision the next great product everyone in America would want.   From time to time, he asks me if there is a method to generating a great idea.
Today I am happy to share with you the process for creating a world-class idea, in six easy steps:
1. Infinite Ideas Remarkable new product ideas are everywhere and there is a limitless supply of concepts waiting to be commercialized, launched and marketed. They are there to be seen and pursued by those who seek them.   In fact, ideas are available to everyone, worldwide, and at any moment.   In some cases, an innovator in Israel and a thinker in Palo Alto will be enlightened at the same moment in time.

Ideas can be small and simple, or large and complex.  A passion for a subject may be the genesis of a compelling idea; derived from time enjoying a cherished hobby.  A new product may result from a tinkerer who sees an opportunity to transpose an existing concept to a totally new context.  Or someone might envision blending two disparate disciplines into an entirely new field of endeavor.
Special note: for entrepreneurs who have trouble generating ideas on their own, they can look to universities that have technology transfer offices. Research universities have a wealth of ideas awaiting the arrival of someone who can take the products to market.  If an entrepreneur can take a researched idea, validate it in the marketplace and license it from the university, he or she can commercialize the product it as though the idea were his own.
2. Knowledge Ideas are generally developed from known facts; not from thin air.   Business builders who generate bold ideas possess a high level of knowledge acquired by study, instruction and experience. Many high achievers have benefited from lessons learned from earlier educational and prior career experiences that have become foundational underpinnings of understanding.
Ideas are born by listening to customer needs and their perspective on new concepts; from data gathered on products manufactured and sold; from marketing research summaries; from the results gained from pilots of programs, and by observing established procedures.   For example, an employee may see an opportunity to start his or her new business by automating a labor intensive and costly business procedure, via a software application that an entire industry may purchase.
3. Connecting the Dots In my opinion, genius or idea generation is an epiphany that results from a person’s ability to mentally connect the relationship between two or more different but related facts. When joined together, they create a clear view of something novel which has never been seen, developed or commercialized before.  For example, 60 years ago my uncle H. Tracy Hall, a research chemist and university professor, invented and commercialized man-made diamonds.  His idea emerged as he noted several known facts;