Tack Box Talk
Tack Box Talk
Not for Profits: The story of how to get started
Dr. Karin Bump, equine business expert and owner of Saddle Up New York, provides great insight on not for profits. She clarifies how they are very distinct from private businesses and what aspiring entrepreneurs may need to get started. Dr. Bump also shares some insights on to what a not for profit should provide you if you are considering support through donations.
resources:
Choose a business structure | U.S. Small Business Administration (sba.gov)
Nonprofit Board Resources | BoardSource
Kris Hiney: Welcome to extension horses. Tack box talk series horse stories with a purpose. I'm your host, Dr. Kris Hiney, with Oklahoma State University. And today we're actually gonna be talking about nonprofits, what they are if you wanna be involved, etc. So with me, today is our resident horse business expert. So Dr. Karin bump who is
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Kris Hiney: retired right from Casanovia and now is running her own. I believe this is a for profit. Or maybe not. She's gonna tell us Saddle UP New York. So welcome to the program, Karin.
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Dr. Karin Bump: Thank you. Thanks. Kris. Yeah. Delighted to talk about some business stuff.
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Kris Hiney: Very good. So, and this is one where I am clearly not going to be the expert. So I'm gonna have to rely on you quite a bit. I won't be able to snip in my fun facts that I tried to do on kind of our science related topics.
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Kris Hiney: So I think the question and why? We decided maybe to do this one cause. I hear it a lot from students. And I know Karin, you hear it from other people. This interest in doing a nonprofit, and I am assuming it comes from a
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Kris Hiney: desire to do some good work or some charities that really underlies people kinda thinking about these. So maybe even tell us, what what does a nonprofit do? Is it just you collect donations or let's get us some definitions going.
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Dr. Karin Bump: Sure. Yeah, great. So the a nonprofit structure is a legal structure, and usually we think of it as a 501 c. 3. Although there are other
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Dr. Karin Bump: functions or other structures that it can be. But that's probably the most common
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Dr. Karin Bump: and the goal of a not for profit is
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Dr. Karin Bump: to either do some common good for the universe, the world, or to do good for a specific purpose. So on a specific purpose, you might have a not for profit Sports Club, for example. So their work is on the growth and the support of that
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Dr. Karin Bump: big distinction is that in in terms of how the government looks at that
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Dr. Karin Bump: is then in a for profit. You have owners, and you may have shareholders if it's a big for profit business in which the proceeds, the things that you're the money that you're making goes to those folks.
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Dr. Karin Bump: in a not for profit. It doesn't. It goes back into the entity or the organization, which is why it becomes a tax exempt. Why, you can apply for tax exempt status. I think that's very appealing, particularly in the in the equine world. When people think about, you know, doing a common good, that notion of being able to apply for grants.
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Dr. Karin Bump: So there's certainly a larger pool of grants for not-for-profit.
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Dr. Karin Bump: And that's really because people and organizations and like to give funds
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Dr. Karin Bump: to an entity that intends to use those funds
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Dr. Karin Bump: to improve
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Dr. Karin Bump: something other than the business owners.
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Dr. Karin Bump: Pocketbook.
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Kris Hiney: Got it so, and again, the goal, then the commonality between all nonprofits is that they should be providing
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Kris Hiney: something
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Kris Hiney: good out there. Right. It's not just a profit-based.
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Kris Hiney: Outcome. But I assume, and maybe this is not maybe the point of what we're going to talk about, but like
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Kris Hiney: different nonprofits may alter like. How much of the money that comes in goes towards
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Kris Hiney: good.
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Dr. Karin Bump: Yeah. Yeah. Oh, yeah, there's a whole, you know, lot of ethics that go into any kind of business structure. And from us, from a from the not for profit sector, not for profits. Have grown quite significantly over the last 10 to 20 years.
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Dr. Karin Bump: And
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Dr. Karin Bump: with that comes more attention to looking at. How they're operating and what their governance structure is. There is very much a governance structure, and I think we'll we'll talk about that at some point today
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Dr. Karin Bump: to ensure that the funds that are coming in are specific to the mission of that organization, that they are truly being utilized
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Dr. Karin Bump: for the purpose in which the organization was founded or the purpose for strategic plan. What it's doing, its outcomes now that does not mean so colleges and universities. For example, I are,
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Dr. Karin Bump: typically not for profit. I mean, we have some for profit. And clearly they pay salaries. You know, they, they people get money from. It's not as if all the money that comes in goes back to improving the institution or the organization. There's a percentage
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Dr. Karin Bump: of which the funds come in. If it's a donation that needs to be declared to indicate what percent of that donation is going to the cause or mission of the organization versus what percent is being used for salary or overhead.
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Kris Hiney: That would be like a big one. Right? I'm just, you know. I think if non for profits with horses a lot of times, what I think of is either horse rescues or adaptive riding facilities.
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Dr. Karin Bump: Great, so.
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Kris Hiney: Would people like, I'm gonna donate $100. So I wanna know what
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Kris Hiney: percent like is that what they would have like this amount of money goes, feed the horse, and the rest goes for salary.
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Dr. Karin Bump: Great question. And these are important questions. When people are thinking about giving to a not for profit. First.
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Dr. Karin Bump: we definitely see challenges where and this is not just in the equine industry, but in general, where an entity will indicate or suggest that it is a not for profit, but it truly has not filed as a not for profit. It doesn't have. I mean, there's definitely a structure that's required to be a not for profit, and a Federal EIN code number that comes with it. And then we often look for things like guard guidestar listing
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Dr. Karin Bump: which is another verification process.
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Dr. Karin Bump: The best. And so we can also think of these things as charity. So the best charity and not for profit entities will tell you if you're making a donation, what percent of that is going to.
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Dr. Karin Bump: whatever the cause is, and if they don't
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Dr. Karin Bump: you should ask
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Dr. Karin Bump: if I give you a hundred dollars, how will those funds be used?
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Dr. Karin Bump: One thing to think about is that we do need salaries. So if we're thinking like an equine rescue organization or equine sanctuary. We do need
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Dr. Karin Bump: paid staff to do those. They're largely, often
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Dr. Karin Bump: totally functional because of volunteers, but you still need a organizer, and sometimes people will say, Oh, I don't want my money to go to salaries. But often not for profits. Don't I mean, that is the way that they get their funding is through grants. You're giving. But, generally speaking, you want to ensure that
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Dr. Karin Bump: of the money that you're giving, that you know what percent of it's going to? What cause?
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Dr. Karin Bump: So like, just off the top of my head.
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Dr. Karin Bump: I was thinking of a very well known us based
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Dr. Karin Bump: not for profit that supports showjumping.
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Dr. Karin Bump: and when their appeals come out they will say things like
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Dr. Karin Bump: X amount of dollars will cover this. I can think of any number of equine rescues who have said it costs. Would you sponsor a horse for a month? And this is what it costs for their feed, and if you give that money, all of this money will go to the feed
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Dr. Karin Bump: but you should always really ask if I'm giving this money how will you actually use it? You can often also specify. And I suggest in writing what that's used for. Then the last piece is sort of a
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Dr. Karin Bump: full circle. Is that because they're a not for profit charity organization, they should be able to provide you with a letter for your tax purposes. Even if you don't itemize, you should still request these. They're really required to send these. That indicate what the total amount
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Dr. Karin Bump: was donated. And then what the value of that was for tax purposes. So, for example.
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Dr. Karin Bump: if you were, gonna go to a fundraising gala for
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Dr. Karin Bump: any organization, there are hard fix costs that come into doing that. So if I buy a ticket for $100 to a gala, it may be that $40 of that covers my meal. So $60 of that, then, is my charitable contribution to the organization. So
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Dr. Karin Bump: these are kinds of checks and balances that tell you a little bit more about how your money is being used, and what amount of it is used for different kinds of things.
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Kris Hiney: Okay. And they would do that even with, you know, I keep thinking about horse rescues.
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Kris Hiney: Donate.
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Kris Hiney: hay? Or feed, or tack, or something like that. They always give you that little letter back.
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Dr. Karin Bump: No, they don't always. So we have we. So we have the best practices and then we have
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Dr. Karin Bump: sort of how organizations operate. So the best of those operations
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Dr. Karin Bump: very much do these things. And there's plenty of plate things that lists, you know, what are good practices, and
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Dr. Karin Bump: and so that is certainly one. That also then requires that you have someone, either a volunteer or staff who's kind of doing that accounting and the bookkeeping, and is sending those letters off.
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Dr. Karin Bump: so the
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Dr. Karin Bump: they are required. If you ask for a letter, and they said they were a nonprofit charity. They are required to provide you with a letter.
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Dr. Karin Bump: The best of the groups, or the groups that have the most structure to them will automatically provide that letter, because then that's also how they keep track of their own accounting and bookwork.
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Kris Hiney: Okay.
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Kris Hiney: okay. So we know that they have to do something good for the benefit of others. And those others could be people, others, or horse others or any others, I guess. So I guess we're. And when I have people that are interested in this, I tend to have a lot of college students that they have
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Kris Hiney: great aspirations about doing a lot of good things when they leave college, and a lot of them the ones that I deal with love horses, or they wouldn't be in my class.
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Kris Hiney: And it just see like I've always thought, man, what a hard place to start to be like, I'm gonna graduate from college and start a nonprofit cause I always think like, well, how is that going to work? So how? How would one even
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Kris Hiney: start? You can't just be like shingle out and like, give me your starving horse, and I'll feed it right. That doesn't sound like a good idea.
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Dr. Karin Bump: No, that that sounds like a problem in the works. Right? So yeah, there, there's any number of models but in
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Dr. Karin Bump: in general.
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Dr. Karin Bump: What I encounter is that people like the idea of starting a not-for-profit because they want, like, as you said, do something good.
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Dr. Karin Bump: But for profit businesses can very much do something good as well. And so I'll just give you a caveat. So
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Dr. Karin Bump: My, the current business structure that I work in, and it's really a sort of a side gig contract kind of business. But it's called saddle up New York, and it's not a not for profit, and very specifically did not set it up as a not for profit.
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Dr. Karin Bump: because I've both started, founded.
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Dr. Karin Bump: run, and worked in not-for-profits.
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Dr. Karin Bump: and there's pros and cons of both models.
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Dr. Karin Bump: But
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Dr. Karin Bump: the point here is that
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Dr. Karin Bump: you can have a business whose mission is to do good.
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Dr. Karin Bump: and to have
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Dr. Karin Bump: a significant, if not majority, of the funds that come in go to good work
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Dr. Karin Bump: without being a not-for-profit.
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Dr. Karin Bump: So that's one thing to recognize. The big distinction is that
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Dr. Karin Bump: a not-for-profit requires that the funds that come in
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Dr. Karin Bump: are
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Dr. Karin Bump: dedicated towards its specific mission and not dedicated to paying a salary.
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Dr. Karin Bump: Now, in small businesses. When people small bits pay, start small businesses. If you look at the statistics, most small businesses don't. The person who's running them don't drive salary for the first 3 to 5 years. I mean, we're. This is just part of the small business land.
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Dr. Karin Bump: So you can. At the same point you can start a not for profit, and have some of those funds that come in. Pay the startup costs for the business. If you declare that that's what you're doing?
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Dr. Karin Bump: Does that make sense.
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Kris Hiney: You declare yourself.
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Dr. Karin Bump: So, for example, crowd funding, yeah, like, like you do.
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Kris Hiney: I don't know about crowdfunding. I'm a college professor.
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Dr. Karin Bump: I know, I know.
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Kris Hiney: Last like.
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Dr. Karin Bump: That's my kind of in. So let's go kind of go back to it. So to start a, not for profit typically is an upfront anywhere from 2,500 to $10,000 to start a not for profit from the legal structure piece. So it is more complicated and does
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Dr. Karin Bump: require some upfront costs
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Dr. Karin Bump: period. You can start a for profit business and convert it to a not for profit. Just like you can have a not for profit business that then you move to for profit
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Dr. Karin Bump: regardless. If you're gonna start doing any kind of business, you gotta have a business structure. You have to have a legal structure. You have to file paperwork.
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Dr. Karin Bump: So for someone to start a not-for-profit, they first have to have funds to even begin that
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Dr. Karin Bump: now somebody listening might go. But but, Dr. Bump, you can go to legal zoom and pay $250 and start, you know, and file your not for profit. Well, yes, you could. Don't do these things, but there's the difference between what you can do and what is best practices, and how to move along with that. So to start a not for profit,
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Dr. Karin Bump: begins with understanding. Why, what is it that you're actually doing? And if you're saying, well, I want to do a not for profit, because I want to do good.
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Dr. Karin Bump: Great! I'm hoping that the majority of us in the world want to do good.
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Dr. Karin Bump: So then, what's the next thing? The next thing often I hear from is, well, I know if I do a not for profit, I can get donations. I can get feed. I can get tack, get all these things, and that is true. People are more inclined to provide donations. If you are not a not if you are a not for profit business.
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Dr. Karin Bump: the other is grants.
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Dr. Karin Bump: That's definitely true. There are significantly more grants for not for profits than there are for other entities. Those are good reasons to start, but those are good reasons to look at a value of a not for profit.
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Dr. Karin Bump: Those donations from tack feed, etc, are going simply to the care of the horses. They're not going into any salary. So you have to find ways to then cover the salary, which can also be donations towards the hard costs of an entity
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Dr. Karin Bump: in terms of how do you ensure that that's done from a legitimate, transparent basis.
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Dr. Karin Bump: It comes to filing your annual tax forms, which, if you're a not for profit, are supposed to be publicly accessible so that you can look at the financial basis, and that you have a board. So not for profits, maybe getting it ahead of myself here.
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Dr. Karin Bump: but not-for-profits
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Dr. Karin Bump: are not owned by a person.
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Kris Hiney: So so they're owned by lots of people. They're not owned by anybody, or they're.
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Dr. Karin Bump: They are they are operated under the direction of your board members.
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Kris Hiney: Okay? Are they voted on.
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Dr. Karin Bump: No.
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Kris Hiney: Ok.
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Dr. Karin Bump: Depends on what your structure is. So as a legal entity. And this is why one doesn't just start a not for profit. It requires, you know, a business plan, or at least some semblance that identifies your vision, your mission, your purpose. Who your audience is, what the goals are for the funding all those kinds of things, and it will identify how many board members you have to have
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Dr. Karin Bump: cool, but.
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Kris Hiney: Who who creates that? Don't you create it yourself so like you could be like.
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Kris Hiney: But you can't say I've got one board member. Is it like a minimum of 2.
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Dr. Karin Bump: Minimum of 3.
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Kris Hiney: Yeah.
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Dr. Karin Bump: That's not best practice back. Best practice is usually, you know, 7 in that 5 to 10 range 7 is kind of a nice number, and then when you vote, you don't have that
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Dr. Karin Bump: but you have to identify it. And because again, not for profits
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Dr. Karin Bump: are a public entity.
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Dr. Karin Bump: They are not privately owned by you.
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Dr. Karin Bump: and this is where a lot of not for profits get into trouble or people working for, not for profits don't necessarily understand that.
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Dr. Karin Bump: So if you start a not-for-profit, it is not your not for profit.
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Dr. Karin Bump: It is the not for profit that is operated by a board for which you might be the executive director or the chief operating officer, etc.
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Dr. Karin Bump: That board minimum of 3 people is to not have any direct relationship with you. They shouldn't be your husband, your wife, your brother, your sister, your cousin, your aunt, your uncle.
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Dr. Karin Bump: and you're supposed to identify why you selected those people and ensure that they're selected for the purpose of the mission of the A organization. So if I'm gonna start a horse rescue, I can't just I mean I could grab or grab 3 good friends, Kris, you could join me on the board, but I could say, Well, you are serving a purpose, because this is your background.
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Dr. Karin Bump: The boards are incredibly important for a not for profit, because they help guide things like
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Dr. Karin Bump: going back to money coming in. If we had. If somebody's giving a hundred dollar donation there should be in writing
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Dr. Karin Bump: how those monies are accepted.
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Dr. Karin Bump: and what is the benefit of those funds to the operation, and it can't be into your pocket.
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Dr. Karin Bump: You could say, 20 cents of every dollar that comes in is going to go to operating overhead.
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Dr. Karin Bump: You don't make those decisions based on. I just gave you a hundred dollars. It's pre-written
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Dr. Karin Bump: through discussions with the Board, and then it's written down in your strategic plans because you're open to auditing.
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Dr. Karin Bump: You're open to all kinds of things, just like any other business or entity.
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Kris Hiney: Well, how does
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Kris Hiney: like? I guess you'd say, here's your fixed costs like, I guess I'm thinking about. I got a horse rescue here, so, depending on the number of horses is how much I have to pay the bill to feed them. But if I have hired the person that works there during the daytime. Their cost is
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Kris Hiney: like, that's a regular thing. So what if it ends up being a bigger percentage than what the money is coming in like, what if nobody don't need any money this month? And then I need I need all of that. I need a hundred percent of that $100, or
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Kris Hiney: Sarah's leaving
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Dr. Karin Bump: Yeah, so right away, you are delving in to.
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Kris Hiney: And ask these questions.
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Dr. Karin Bump: No, no, you should, Kris, because what I worry about, and I and I do talks with this, and I've done small business plans, and I work for I was a volunteer with score for a while. There's all these agencies and entities, and can help write business plans when someone thinks about a not for profit.
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Dr. Karin Bump: and maybe even does the $250 on legal zoom and gets a not-for-profit. And they don't think about the fact that it is just an example of a small business.
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Dr. Karin Bump: The same principles that go into starting any small business apply for not-for-profit, plus
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Dr. Karin Bump: all these additional ones because of public accountability
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Dr. Karin Bump: and transparency. And so, if we go back to the beginning, the interest in starting a, not for profit, working and not for profit. If we look at in the equine world, the equine assisted transition services. So we've got the rescues, the retirement, the sanctuaries. We've got equine assisted therapy services. People tend to always automatically kind of think about those as a, not for profit.
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Dr. Karin Bump: They could be for profit as well.
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Dr. Karin Bump: and still be intended to be doing good things.
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Dr. Karin Bump: The distinction, one key one is who owns it
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Dr. Karin Bump: and what the intent is.
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Dr. Karin Bump: So if you want to start a business that is rescuing and retraining horses. You could certainly do that as a for profit model.
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Dr. Karin Bump: and you could still say the majority of the funds are coming back are coming in. You know that that when whatever money we collect we're intending to have it cycle back into the business, you know that. I mean, that's just good practice. You're not eligible for donations, and grants to the same extent that you would be otherwise. But it is your business
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Dr. Karin Bump: and a not-for-profit business. It is the Board's business.
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Dr. Karin Bump: You operate at the pleasure of the board, just like you can be terminated at the pleasure of the Board, and oftentimes people don't understand that.
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Kris Hiney: So that you could have a thing that you started, and you've been doing all the work, and then they vote you off the island.
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Dr. Karin Bump: Absolutely, absolutely.
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Kris Hiney: That doesn't seem fun.
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Dr. Karin Bump: And people that people say, Well, it's my not for profit. It's my I mean I I've been, you know, in.
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Dr. Karin Bump: I am very aware of scenarios where this has happened.
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Dr. Karin Bump: and
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Dr. Karin Bump: sometimes what you start
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Dr. Karin Bump: grows to, where you also realize you need to back away. So, for example, the National Association of equine affiliated academics. So that's a not for profit that I started off my dissertation work. My husband and I started that
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Dr. Karin Bump: founded that did all the legal paperwork, etc. And then
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Dr. Karin Bump: When you do that, you say I am building something for which I want it to live beyond me. It is not my business, it's not my company, and at some point, ideally you face the major entrepreneurs dilemma with not for profits, and you step you. You get your board to a place where that they can operate without you.
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Dr. Karin Bump: The goal of a not-for-profit is that that entity should be planning to outlive the person who started it. If that makes sense.
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Dr. Karin Bump: That means that you have a functional board that knows enough about the business, knows enough about the operation that they are that they are able to take over, if need be, and or when that person who started it steps back.
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Dr. Karin Bump: So these things also mean
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Dr. Karin Bump: that any funds that come into a not-for-profit.
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Dr. Karin Bump: if the founder of the not-for-profit
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Dr. Karin Bump: were to
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Dr. Karin Bump: die, or the founder of the not for profit, and the board decided that
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Dr. Karin Bump: the not-for-profit was going to end
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Dr. Karin Bump: any of the funds that are in those accounts. Go to another, not for profit that has to be named when your not-for-profit was founded.
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Dr. Karin Bump: Okay, so again, an understanding that
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Dr. Karin Bump: whatever funds you are building, because, in addition to paying for your costs. You should be building rainy day funds, saving funds, whatever funds are in those accounts.
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Dr. Karin Bump: when that not-for-profit, if it dissolves those funds, go to another, not for profit.
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Dr. Karin Bump: that has to be identified at the time that you are for profit
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Dr. Karin Bump: was founded.
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Kris Hiney: Okay. So when I hear of like college students and like their goal is to start a not-for-profit, then that's a terrible idea, because they could get fired by the board, and then they're just unemployed and.
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Dr. Karin Bump: If it? If so, is it a terrible idea?
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Dr. Karin Bump: No, it's not a terrible idea. Do they need to think of it
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Dr. Karin Bump: very specifically as to why they're doing it. Yes, what I often say to people is.
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Dr. Karin Bump: are you building something for which.
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Dr. Karin Bump: having donations and grants, will be essential to your ability to keep the operation running.
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Dr. Karin Bump: If it is, then you probably need a not-for-profit model.
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Dr. Karin Bump: Having said that, you need to understand
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Dr. Karin Bump: what the purpose is of a not for profit, and what the requirements are.
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Dr. Karin Bump: and the best way to figure that out is to work for another, not for profit. You've never worked in the land of not for profits. I mean the basic small business planning principles. If you're, you know, if you're building a small business for which you've never worked within it. You better work within it, for you know a couple of first and that's no different than not for profit. And you could have a student says, Well, I've done training, and I've done this, and I'm totally ready to go it. Not for profit done. The correct way
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Dr. Karin Bump: is very different, and going back to the growth of not-for-profits.
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Dr. Karin Bump: we have much more attention to, not for profits now than we ever used to, and, in fact, the financial accounting standards changed a few years back. To require now that not for profits identify their liquidity, ratio
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Dr. Karin Bump: might say, what is a liquidity.
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Kris Hiney: Yeah, I have no idea.
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Kris Hiney: universities, it's how much water is in the trough. 8 to 10 gallons a day.
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Dr. Karin Bump: Will there be enough for tomorrow? That's the question. So liquidity ratio. It tells us how many months you can operate should no new revenue come in.
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Kris Hiney: Would not depend on. I I was just thinking like, Okay, well, what if all these starvy horses show up? Then you'd be like, oh, I'm out of luck. So
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Kris Hiney: correct!
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Dr. Karin Bump: Yeah, correct.
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Dr. Karin Bump: which is why one should not be a hoarder, right? But
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Dr. Karin Bump: their board comes right. And so
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Dr. Karin Bump: I did a research project for the Equis Foundation. My
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Dr. Karin Bump: Partner, Tim, works with the Equis Foundation, a great organization that provides grants
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Dr. Karin Bump: and training for equine, not for profits, doing rescue, retraining, and also use for therapy.
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Dr. Karin Bump: And so in having done a lot of that work,
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Dr. Karin Bump: and understanding more and more about how operations current. How operations do operate versus
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Dr. Karin Bump: you know what the best practices are. One of the challenges is that
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Dr. Karin Bump: people are very passionate about horses. This is a good thing. But then get can get in over their head where they decide they want to. I'm just gonna use rescue horses. Unfortunately, the Equis Foundation's been around for a really long time, and it has a guardian status program. So sort of see the cream of the crop in that
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Dr. Karin Bump: about the people doing good things, be, you know, really following transparency and standards.
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Dr. Karin Bump: but one of the things that really comes out with that
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Dr. Karin Bump: is the importance of boards.
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Dr. Karin Bump: because
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Dr. Karin Bump: you should have with your board an identification of
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Dr. Karin Bump: what is the total number of animals
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Dr. Karin Bump: we can maintain. Given what we're projected to have as income this year.
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Dr. Karin Bump: and you get the phone calls, and you cannot accept that other animal because of that. This is hard, right? We're very passionate horse. People
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Dr. Karin Bump: oftentimes passionate about horses, but not grounded in in business land.
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Dr. Karin Bump: Right? So that's where that kind of push pull. I really, I know a lot about horses. I want to help horses, but I'm not good over here on understanding that business structure. So from a board perspective, you want to have people on your board that are finance people that do understand, volunteers that do understand working with donations that do understand? The standards for nonprofit management
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Dr. Karin Bump: so that you don't get into that now. That being said.
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Dr. Karin Bump: the liquidity ratio
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Dr. Karin Bump: came about, in short, because there
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Dr. Karin Bump: had been a growing pattern of people providing donations or providing funds
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Dr. Karin Bump: to organizations. And then and this is in general, this isn’t equine related. And then, finding that that organization would close.
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Dr. Karin Bump: So how did we? How did we give money to something that was going to close right? So the liquidity ratio is a transparency standard. So, going back to who owns the company. I own Karin owns blank company
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Dr. Karin Bump: and
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Dr. Karin Bump: that that's me right. Those are. I still have to file my taxes, do all that kind of stuff. But
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Dr. Karin Bump: when I am a not for profit, I have a responsibility to the community for which I serve
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Dr. Karin Bump: to be transparent and say,
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Dr. Karin Bump: this is where we are from a sustainability perspective.
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Dr. Karin Bump: So liquidity ratio basically says. And there's 2 ways to do it. One is basically kind of cash on hand.
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Dr. Karin Bump: If I get no more donations this month.
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Dr. Karin Bump: Can I feed the horses next month?
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Dr. Karin Bump: Am I living paycheck to pay donation to donation?
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Dr. Karin Bump: You can imagine a lot of nonprofits live
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Dr. Karin Bump: donation to donation right?
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Dr. Karin Bump: Ideally. You want to have 7 months to 2 years of liquidity, so that
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Dr. Karin Bump: if covid hits
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Dr. Karin Bump: we get some catastrophic problem that hits
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Dr. Karin Bump: suddenly you have 0 volunteers because Covid came. And now we've got to hire people to do things, whatever that is that you can maintain
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Dr. Karin Bump: your mission, which is in the case of equally caring for living animals.
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Dr. Karin Bump: And and be sustainable
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Dr. Karin Bump: for a reasonable amount of time for you to make other plants
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Dr. Karin Bump: okay.
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Kris Hiney: No, this you said, they're accountable. Do you have to like host? This on a website?
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Dr. Karin Bump: So, for example, to be on guidestar.
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Dr. Karin Bump: you have to file the organizations that are the the or not for profits that are operating at
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Dr. Karin Bump: the
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Dr. Karin Bump: recommended standards and ideals for nonprofit management
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Dr. Karin Bump: are filing their tax returns, and you can access access those publicly because they're a not-for-profit.
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Dr. Karin Bump: Nothing.
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Dr. Karin Bump: The other
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Dr. Karin Bump: mechanism that makes it a little bit easier. And you can. You can search for these that they're usually by State. Some of them are by Federal, the others you can look at. Guide star
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Dr. Karin Bump: Guidestar is kind of like a
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Dr. Karin Bump: sort of 2 levels should be listed on guidestar in order to be listed on Guidestar. You're listing your financials. So your last audited reports and part of that is, who are your board members? How many are there? How often do you meet and then basically what you know, what is your what are your expenses? What's your you know your balance sheet. And then from that you can calculate the liquidity ratio
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Dr. Karin Bump: that's required. So my recommendation, when people want to give funds is.
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Dr. Karin Bump: ask for those things
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Dr. Karin Bump: because there's 2 ways, I think, about giving funds. One is giving funds to something that will be around for quite a while. And I know they're doing good work. And so I I'm going to basically invest in that mission because it's important to me.
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Dr. Karin Bump: Another is to say.
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Dr. Karin Bump: emergency donations. And so we see a lot of this with equine.
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Dr. Karin Bump: This horse now needs surgery. This horse needs to be.
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Dr. Karin Bump: you know, whatever that is, and people asking for donations for that cause. Usually. What that means is that
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Dr. Karin Bump: the expense to care for or take in that animal exceeds what they can support in their regular operating money, so every month they should know. How much is it gonna cost for me to keep these, this number of horses and this facility with this number of volunteers and this number of workers for at least 3 months out right
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Dr. Karin Bump: what that's gonna cost. But now we have an emergency that enters. And so now somebody is asking for immediate donations. And so I might choose to make a donation to that.
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Dr. Karin Bump: because it's an immediacy for something that I value or an organization I know is otherwise doing good work, but they're not going to be able to. Proceed without additional funds.
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Dr. Karin Bump: Okay.
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Dr. Karin Bump: it's complicated, isn't it?
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Kris Hiney: Complicated.
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Dr. Karin Bump: Maybe we didn't have a second office. Now.
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Kris Hiney: Well, I mean, and obviously my path through the equine world did not involve any of this stuff.
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Kris Hiney: Where does one? I mean, maybe there's college classes on it. But where does one learn this, or is it like, Oh, if I got in trouble with the law that was wrong, or like.
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Dr. Karin Bump: No. And you know your point is one that
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Dr. Karin Bump: really plays out in in the equine industry. If you look at other farm animals or livestock species.
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Dr. Karin Bump: those are more often
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Dr. Karin Bump: operations that are managed, started, etc, from people that grew up
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Dr. Karin Bump: with some kind of background in agricultural livestock
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Dr. Karin Bump: equine is, you know, a gateway drug so like chickens. And so we're very passionate. And so we start. And then you're like, Oh, I didn't know I didn't know. Of course you didn't know. You don't know what you don't know. And then you start this conversation. You're like, Oh, my gosh! It's a lot more complicated. It's probably easier just to start my own business. You're right. It probably is. But that doesn't mean that you couldn't explore, not for profit another way to think about it just going back, because
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Dr. Karin Bump: I don't want to dissuade people from this is that you can have. And I see operations that do this, that they have a for-profit business.
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Dr. Karin Bump: Maybe you have a lesson program, a boarding facility. That's a for profit business. But then you have a not for profit, entity as well, that maybe allows you to
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Dr. Karin Bump: bring in a retire or rescue, or whatever one or 2 horses a year. You kind of build that. And then maybe that builds enough that
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Dr. Karin Bump: you just move fully over into that direction. That does that make sense is kind of another
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Dr. Karin Bump: option.
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Kris Hiney: Yeah. So I get okay. So in that scenario, and maybe this never happens. But okay, so let's say, I start to do that. And I'm gonna do
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Kris Hiney: my lesson program, and we're going to have the other piece. That's the maybe
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Kris Hiney: rehabilitating horses or something like.
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Dr. Karin Bump: Yeah.
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Kris Hiney: So you've decided that part is not for profit, and it's at your house, and you have to have a board and they vote you out like. Then what happens?
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Dr. Karin Bump: Well, then, it goes to a different organization, or they say we don't think it's fiscally sustainable, and
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Dr. Karin Bump: we're gonna close it out.
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Dr. Karin Bump: I. I don't have any statistics on how often a founder is removed from for profit, they start or not for profit. They started, but it certainly is not unheard of.
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Dr. Karin Bump: and something that people need to think about where I've seen it most is years after it's begun.
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Dr. Karin Bump: Maybe it's outgrown. Maybe they wanna go in other directions. And the person that started it just isn't that in that place, you know. Usually there's those kinds of reasons. You know that that it happens, and often years and discussion before that it's very different than having a for profit, you know, having a business board that just suddenly decides we're gonna eliminate you right? There's a lot of different things.
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Dr. Karin Bump: But the
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Dr. Karin Bump: having a for profit business. And again, this is not an uncommon model with a not for profit. It could also be a foundation or a not, for profit does require. It's 2 different business entities and 2 different books
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Dr. Karin Bump: that's really, really important, and also gets very challenging for figuring out percent allocations of
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Dr. Karin Bump: of things. So it's not an easy thing to do. But it is something that can be done. It comes down to again. Why.
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Dr. Karin Bump: what is the motivation to think about it as a not for profit. You can
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Dr. Karin Bump: look at different business structures and still have, like saddle up New York. Our mission is very much an improvement of the entity and improvement of of the organization, the money that comes in. We have partners, not donors. Those partner, those partners meet.
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Dr. Karin Bump: At least 3 times a year. Last year was closer to like 9 times a year, depending on what the mission is. Those dollars are used specifically for the work and strategies that those folks want it to be used for. But it's not a not for profit, because
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Dr. Karin Bump: that structure does not work for what I'm looking to do with the business, nor you know the complications that go along with it. So the notion that you can't have a business doing good for people that isn't a not for profit is one to kind of reexamine.
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Dr. Karin Bump: Now, back to your question about how? Where do you find stuff.
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Kris Hiney: Yeah, like, how would one know? So.
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Dr. Karin Bump: All in one. No? So yes, so certainly. Nonprofit is is. You know, there are now undergraduate degrees master's degrees. MBAs specialize in this kinds of things, and not for profit management, because it is a very big thing.
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Dr. Karin Bump: There's also any number of resources that are out there that are free resources. So the small business association is in every State, and you can access an SBA in every county, in every State, and they have. That's a government program. And so they have paid staff that will meet with you to talk about different business structures and help you develop a business plan that's both for for profit and not for profit. So that's one
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Dr. Karin Bump: there's every state typically has a council for not for profits. You pay a membership.
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Dr. Karin Bump: I think, in New York it's like
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Dr. Karin Bump: a couple of $100. I don't remember for sure. And then you have access to all kinds of free resources and training all these kinds of things. So there are lots of
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Dr. Karin Bump: things other than going back to college to help. You understand the not for profit business
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Dr. Karin Bump: and then there's loads of stuff there's
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Dr. Karin Bump: board support for training for board members. All these kinds of things that are also pretty available on the web.
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Dr. Karin Bump: Correct.
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Kris Hiney: And I suppose we, you know, since we're talking about horses, we need to be clear. There is a difference between not for profit and never making a profit.
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Dr. Karin Bump: Yes, yeah. And having said that, I think not for profits, for anything with animals is
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Dr. Karin Bump: even more challenging. Because again, you're dealing with a live animal
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Dr. Karin Bump: that when you bring it in you are responsible for its care, and need to really have plans in place for
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Dr. Karin Bump: for what you're doing with that and that ability to
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Dr. Karin Bump: maintain and care for a set number of horses, and knowing what that number is and what you can do is critically important, because without that, people take in too many animals, and then we have to rescue rescues.
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Kris Hiney: Yeah. And I guess I and maybe you could help set the story straight. I always think about not for profit workers. To me it just seems incredibly stressful, right? Because you need. You don't sell a product. You don't have the seller that this is what I get every month. It's all based off of, or largely based off of donations and fundraising. And that sounds
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Kris Hiney: just terrifying to me.
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Dr. Karin Bump: Yeah. And so, if you ask people who live in the not for profit world, that is terrifying. We certainly have seen a decline in donations and a decline in in general across, not for profits, a decline, and donations and volunteers, and part of that is probably offset by the fact that we have so many more, not for profits out there asking for money, asking for time. I'm asking for resources. So in thinking about starting a not for profit.
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Dr. Karin Bump: that something that we call the unique Value proposition has to be really important. It goes along with the why. So why do you want to do that. And if anybody's not listen to the assignments, the next stuff, it's really really good
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Dr. Karin Bump: to help you understand the importance of having a clear. Why, why am I do working in this area? Why, in this structure? What is it? Why, I'm doing it. Most people in the equine rescue rehab world will say their whys. They're really passionate horses. They want to give them a second chance. They want to give them an opportunity to thrive. Okay.
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Dr. Karin Bump: but what's unique about that?
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Dr. Karin Bump: What is unique about what you're doing compared to other people that may be still asking the same donors
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Dr. Karin Bump: for resources, time, talent, treasure, money, etc. What is unique about your operation?
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Dr. Karin Bump: Who is your network? Who would be your volunteers? Where would you get that support stream? Are you good at marketing. An awful lot about nonprofit management is marketing outreach donor relations, volunteer management, none of which is easy, right?
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Dr. Karin Bump: All all of which you know, takes a lot of skills. And so those organizations that are doing it well are ones for people to study volunteer at,
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Dr. Karin Bump: you know, work at to learn about the ins and outs before they decide they're going to start their own not-for-profit.
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Dr. Karin Bump: because he, you know.
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Dr. Karin Bump: here's the worst scenario
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Dr. Karin Bump: This is the question that really I struggle with when I get it.
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Dr. Karin Bump: So I've rescued a couple horses.
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Dr. Karin Bump: And now I'm thinking I'm going to start a not-for-profit.
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Kris Hiney: Now you're in trouble.
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Dr. Karin Bump: I rescued a couple of horses.
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Dr. Karin Bump: And now I'm gonna start a not-for-profit.
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Dr. Karin Bump: What do you think their motivation is for starting the not-for-profit.
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Kris Hiney: They wanna help more horses, and then they're gonna get into trouble and not have money to feed the original ones.
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Dr. Karin Bump: And or
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Dr. Karin Bump: they decided it's too expensive to care for this couple of horses that they rescued, and so they think by starting a not for profit that they can get.
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Kris Hiney: Are people.
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Dr. Karin Bump: Fine. Correct. Yeah.
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Kris Hiney: See, I didn't even think about that. I just.
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Dr. Karin Bump: So so these things get driven by a heart mission heart mission heart missions are very important to not for profit. That's why, you know we're driven that.
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Dr. Karin Bump: But then that's about taking care of my horses.
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Dr. Karin Bump: Or maybe some others for which you, thinking you're owning.
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Dr. Karin Bump: You don't own any of those horses.
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Dr. Karin Bump: The not for profit. Entity owns those. Those are not your horses.
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Dr. Karin Bump: There's a real. There's a real fine line, there isn't there, you know, a real donation and and other industries, you know. If you look at the models
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Dr. Karin Bump: for dog and cat rescues, and these are companion animals. These are not livestock. There's a whole lot of nuances there, but one of the other struggles that we do find sometimes in equine, not for profits, is a lack of recognition that those animals are not your own animals, and then then is to have those horses. If if your mission is rescue replacement rehoming, retraining, then at some point those animals are intended to go to someone else.
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Dr. Karin Bump: so that then you can bring in other horses. That then you can do these things for. And this, again, is why boards are so important, because it's really hard as a person who's really passionate about it.
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Dr. Karin Bump: to sometimes see those nuances where the lines might be crossed. But if you have a board who has is really invested in the success, not just sitting around to say, Sure, you know, do whatever you want to do, but really invest in the success. They will help. You see that
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Dr. Karin Bump: they will help you. Say, you know I you had this one horse that came in.
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Dr. Karin Bump: and you know it. It's been here for 3 years. Is that now? Not? Of course.
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Dr. Karin Bump: You know. If if your what was your goal, were you anticipating that within a year that horse would find another home.
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Dr. Karin Bump: You know what's happening with that horse, what's going on? But that's where boards become really important.
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Dr. Karin Bump: And looking at the strategies and the financial sustainability of an operation
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Dr. Karin Bump: that's really different than my own business.
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Kris Hiney: Yeah, yeah. Well, I think that's helpful for people to think about that. And so we probably should be like, Don't discourage everybody like, I'm clearly doing right now, but that's because I could never exist in that world. I'm like, no, that sounds horrible. Not that the good work like I don't think that part's horrible, but like trying to run it. No, no, no!
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Kris Hiney: But there are great people and resources out there to help you, if that's your passion and your goal.
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Dr. Karin Bump: I think that's a good way to look at it. Somehow. We've gotten to a place where
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Dr. Karin Bump: people seem to think that a not-for-profit
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Dr. Karin Bump: is easier to run than a for profit, easier to start. It's not
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Dr. Karin Bump: There are really good reasons to do a not-for-profit.
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Dr. Karin Bump: but there are also
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Dr. Karin Bump: big realities.
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Dr. Karin Bump: That you need to understand before you get in it. And so if we look at the rate of small business failure in general, right? It is tough to start a small business and make it to the 5 year mark. I don't know what the comparable rate is for, not for profits, but my guess would be. It's probably lower than that. But probably even lower from people who say they're starting, not for profit. So you may have seen this, too, where someone will say, you know we're starting, and then
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Dr. Karin Bump: Then they will finally say we just we finally got our not for profit status. So there's probably a fair amount of people who are thinking about doing it or talking about themselves being that way, but haven't actually filed status that then back away, or never file the status, but still kind of have a public presence or sense that they are a not for profit or charity, when they may have not actually legally filed for that status.
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Dr. Karin Bump: Got it. Okay?
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Kris Hiney: Well, I definitely appreciate you walking us through this. I assume that we'll probably revisit and talk about maybe
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Kris Hiney: what people need to think about for profit at some point in time. That would be a good one, and I'll be of 0 help there. 0. So I will tell you how to vaccinate, do where manager pastures train them, what their behavior is, all that but money. No.
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Dr. Karin Bump: Add the money part in right, and make it, you know, more robust.
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Kris Hiney: I know my lane, and now you've.
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Dr. Karin Bump: You know more than you knew about, not for profits, and maybe to say, yeah. So that sounds like you've got a real passion for that. Here's some places that would be good for you to really explore what that means.
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Kris Hiney: I will say, call Dr. Bump. I'll take the cop out.
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Dr. Karin Bump: Oh, and I'm fine, you know. I I definitely enjoy working with people and helping them, you know, find the pathways to do the things they're passionate about, and and try to help them see, maybe, what they don't yet know enough about that could be problematic.
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Kris Hiney: Yeah, absolutely. Well again, really, really appreciate your time. And if there's any of those organizations that you think would be helpful for people. We can certainly drop links in the show notes if you wanna send them my way. And we do have some business resources on our extension horses, homepage. So it's not all just about pasture management. We do have a fair amount of business information there as well. Just not written by me.