← The Journey with Morgan DeBaun
The Journey with Morgan DeBaun
Nonprofit vs. For-Profit: Dr. Sharon Elefant's Expert Take
00:53:56
Pre-order Rewrite Your Rules: This week on The Journey, Morgan DeBaun sits down with Dr. Sharon Elefant, founder of The Nonprofit Plug, to explore the complex world of nonprofits. Together, they examine the nuances of choosing between a...
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- [00:00]
Morgan Devon
Hey, everybody. Welcome back to the Journey podcast. I'm Morgan Devon, your host. Today we are getting into a topic that I actually don't talk about that much because I always have so much going on. But I have a nonprofit with my co founders called Blabby.org and recently I shared a point of view on social that said, black folk, I need y'all to stop making so many nonprofits. And everybody either agreed or didn't agree with me, but very strong opinions either way. And I wanted to actually talk about my journey with my own nonprofit and also bring our internal expert and consultant who works with the Bobbi.org nonprofit, Dr. Sharon, here to join me today to talk about different ways you could think about approaching the nonprofit space and really impact in your business or impact in your life. Regardless of kind of where you are in your life, what you're thinking about. We wanted to just talk about how, how you could approach that for yourself. So Dr. Sharon is incredible. She runs a organization called the nonprofit Plug, and she has both a nonprofit and a for profit business, but really a foundation. And we'll talk about the difference between all of those things. But she has a foundation and a for profit business where she helps companies, nonprofits like mine. She has over $15 million that has been raised by the companies that she works with and nonprofits that she works with and over $5 million in assets under management. AUM and so she has a lot of experience, hundreds of clients, and she is also just a joy to work with. I can tell you. Me and my co founders, we are not easy. Like, we all have a lot going on all the time, and it is definitely like hurting literal bees. And she is incredibly patient and kind, and it's just a joy to work with her. So, Dr. Sharon, welcome to the show today.
- [01:49]
Dr. Sharon
Thank you so much. That was an excellent intro. I love it.
- [01:53]
Morgan Devon
She's like, yeah, y'all crazy. Hey, everyone. I'm Morgan Debon, a passionate entrepreneur and life advisor. With the Journey podcast, you'll discover that success isn't about the destination. It's about the journey. I'm sharing stories of amazing people who've taken control of their lives. Join me on my own journey to discover the secret sauce behind reaching success with permission from no one else. Okay, so first let me just tell you how we started a nonprofit and then we could talk a little bit about, I don't even know if you know this story, but, like, we could talk about how we got here and then some of the things that I maybe would have done A little bit differently. So I love it. So blavity started in 2014 over 10 years ago. And when I started the business, I wanted to help people. I also wanted to make money. And I knew from the beginning that I wanted it to be an enterprise because I believe that it would be possible for a business to both make money and help people at the same time. As the business got bigger, I started to raise funding from social impact investors. And I had never heard of social impact investors before. I just thought you were just a VC and you focused on returning value back to your LPs or your shareholders or the people who invested in you. And that was the priority. And as I was exploring the different types of investors who were going to invest in me, mostly because a lot of people said no. And I said, well, somebody somewhere has got to say yes. I stumbled across these people who were social impact investors. That's how they. They define themselves. And in those processes of pitching those investors, they would start to ask me questions like, well, how are you going to measure your impact? And I'm like, what do you mean? I mean, just existing to me is impact. Like black media at its core is a function that is giving access to information to people who otherwise are not going to get spoken to in the way that they understand or appreciate and, or information from their perspective on how current events impact them. And it was, to me, it was obvious what the social impact was. So when they kept pushing me, I'm like, well, how are you going to measure it? I kind of was like, I don't. I literally was like, I don't understand your question. Because obviously there's a social impact here. Now, many years later, I understand why they needed to measure it because they had investors behind them that were basically trying to say, okay, well, how many jobs are you creating? How much money are you putting back into the ecosystem because this exists. How many voters are you registering? So I started to get smart about, oh, you're asking me, are we going to do the right thing? And then how do you know that you did the right thing? Yeah, sure, I could come up with all these KPIs that do that. Yeah, I'm like, of course, you know, like, of course we can talk about the small businesses that we promote on our editorial and how many people are getting becoming speakers because we're the first company to ever give them a speaking engagement. Or we can talk about the income that we spend by hiring black producers and black creators for all of our campaigns and the money that goes into black Creators pockets from us. Like we can talk about with Afro Tech, all the vendors that we prioritize, minority and black owned vendors. Because to me I'm like, duh, I'm going to operate this way. I just never thought that it was something that deserved a hand clap or to be measured. And so the more that I interacted with these social impact investors, I realized, oh, like this is a whole industry. Like this is a whole segment of people that operate this way and I could choose to intentionally be a part of this industry. And that is where I started to bubble up and say, like, oh, wow, there's like decisions that we make as a for enterprise company that hurts my bottom line. Like sometimes going with the black or woman owned business means I am spending more money than I would if I wasn't otherwise. You know, I used to just give away tickets to Afro Tech. Like literally a student would DM me and be like, morgan, I'm a senior at Spelman. I have a CS major immediately ticket. Like, I don't even have to finish reading it. Like your CS major is Spelman done. Like we would just give away hundreds and hundreds of tickets. I wasn't getting any credit for that. And as we were getting larger and larger and my investors and I wanted to, as a chairperson, I'm like, look, we got to move towards caring about profitability. This was back in 2019 that I said, no more raising money. I'm going to start shooting for profitability. I just finished our our series A from Google Ventures in 2018. So we had cash in the bank. So I was like, all right, if I'm going to move to profitability, I need to start looking at all the places that we spend just because it's the right thing to do and not necessarily because it's good for the business. The business. Bottom line, everything is good for business when you do the right thing. But the bottom line, not so much. That's when I started the process of we need to move all this activity that we do to the nonprofit. And we didn't have a nonprofit. So I started that with my chief of staff, Ashley Harmon at the time, who started all the paperwork and all the things to get that going. And then of course, what happened in 2020 with George Floyd's murder. Then there was all these new entities who really wanted to invest in black nonprofits. And by then we had done the 501C3, which in hindsight I should have got a fiscal sponsor, but I didn't. I went the hard route. So that is My journey. I'll talk more about what we've done since then, but that's kind of like the how and the why we created this and why Blavity Inc. Has Blavity.org, so. Yes, Dr. Sharon, good story.
- [07:33]
Dr. Sharon
I. I didn't know that whole piece and it makes perfect sense why you guys went that route. And I'm glad you went the 501C3 route because had you gone fiscal sponsorship and we can go into that, you would have lost a little bit of control and you would have had to rely on other people. And now, you know, you and Jeff and Aaron, you get to make all the decisions, which is a really great, you know, potential and opportunity to that. But cool story. I did not know that makes perfect sense.
- [07:59]
Morgan Devon
It was a. It's a. It's definitely a roundabout way, but I.
- [08:01]
Dr. Sharon
Think the reactive way of creating a. Which is how most nonprofits are created. Reactive to a problem, you become a solution.
- [08:10]
Morgan Devon
Exactly. And I think the other thing is I was researching other large tech companies and I was like, why don't these people pay taxes? And I was realizing like so many of them were investing their profits back into the nonprofit of whatever. They're like giant surplus was so like Salesforce has like a huge, huge, huge, huge number. I mean, it's like crazy when you look at how much money and assets these nonprofits have of these tech companies. That was the other thing. I was like, I'm. Something is interesting here. When it comes to. When you start to become profitable, where does this money go? What? Yeah, how are these people not profitable? So, Dr. Sharon, how did you get into this business?
- [08:52]
Dr. Sharon
Good question. So I've always been in public service my entire life. My mom was a high school teacher for 30 years. My dad was a forest firefighter. You know, Smokey the Bear, that was my dad. So it was just always ingrained. And the. The culture I grew up with is the concept of tikkun olam. Tikun olam means to heal the world. So it was the foundation to our family. So I thought I was gonna go the route of like, my educational background is actually hospital management and hospital leadership. I did that. It was horrible. I was a hospital administrator at the VA Health system for a couple of years. Ended up moving into like the partnership division, working with homeless veterans and their outreach services. Got recruited by one of my partners. But right before that happened, I was working with a non profit organization while I was still with the va. So I was a federal employee. So I've had lots of random experience. And we set up this really cool program called welcome Home where veterans would get their vouchers for housing from the VA, like Section 8, it's called HUD Vash. And they would move into these, like, basically empty. I. You could. I, I can't even call it a home. It's like this, you know, just an apartment, a walled building, this empty space with nothing in it. So social workers would go check on their vets. They're not there, of course, because they're out in the street on the corner with their family. There's a couch there, you know, that's, that's comfort. So we were like, oh, that's, that's interesting. And that kind of defeats the purpose of like ending homelessness. Right? Which is a functional zero because it'll never be zero homelessness. So it's functional. And so we partnered with this nonprofit that had excess furniture. They were a thrift store. And we were able to create this program called welcome Home. And the furniture would literally get delivered to every single one of these veterans in Southern California all the way up through Fresno and central California. And so I, because I got to know that organization, I ended up getting recruited and went and worked for them. So I left a federal government job. And if for anybody like listening, who knows, like, that's like ballsy. That's leaving a max 40 hour a week job with a killer government salary and full benefits, like all of that.
- [11:10]
Morgan Devon
Yes.
- [11:11]
Dr. Sharon
It was more valuable to me as a person to leave that and go work with this nonprofit to do what was really like in my soul and really the concept of my family of Takuna Long. And so I did that. I did it for a couple of years. We probably housed with the, in partnership with the VA and local housing authorities, over 5,000 vets in just the first couple of years. And it was so cool. They would just fill out a form, say what furniture they needed, and then this nonprofit would deliver it bed, like a brand new bed, which we ended up getting a grant from Good360 and they shipped in $10,000 worth of Tempur Pedic mattresses. And I say all this to make a point as to like some of the benefits of nonprofit. Right. So then the vets would get their bed, they would get a coffee table, they would get kitchen utensils, a 20 grocery gift card, like just all this stuff for the basic necessities. And every single social worker that went to check on their vet, the veteran was in their home with their family. Oh, that's unbelievable. So Built that non profit industry. I got laid off a couple years later and I was like, good opportunity. Finished my doctorate, got my doctorate, couldn't get a job because nobody wanted to hire anyone with a PhD. And so I was on the side hustling, just helping non profits connect to resources, find grants, find partnerships, you know, whatever they kind of needed. And so people would call me the Plug. And I'm like, oh, that's cool. I like being the plug. Like, I like being a resource for people. My parents are like, are you doing drugs? And I'm like, I'm not that kind of plug, but it is Los Angeles. So they're like, no, no, no, you're the nonprofit plug. And so that's really kind of where the. My company blossomed. It was, it was kind of like a nickname at first. And then I was like, wow, like, how can I make money and a salary since nobody will hire me with my doctorate? I dropped it off my resume, got interviews, got a couple of jobs. They were horrible. Quit them like two months later. So I was like, I need to be paid to connect people and to be a resource and to provide support to non profit business developers. So I started the non profit Plug. And it's really just, it's a part of my, my blood is what I tell people. I can't, I literally can't help myself. I can't not connect people and resources and try to find opportunities for folks. So I had to create it into a mechanism that also funded, you know, my life and paid that Los Angeles rent.
- [13:42]
Morgan Devon
That's right. And I think that's an incredible journey. And I think it just shows like, you are uniquely made for that because also you had experience in the government, you had experience working on partnerships within the nonprofit space with enterprises so that it's benef. Mutually beneficial for both groups. You've seen the ups and downs of, like, when you can't get the funding, the market doesn't necessarily always sustain all the nonprofits. And that I think that was one of my biggest reasons or points to people when I was like, y'all love nonprofits and it's not always the best thing to do because when your nonprofit is just floating in the wind, it's not tied to, to an enterprise. In my opinion, you're putting yourself at the whims of donors and philanthropists. And that effort that you could be spending on building a product or some sort of source of income, like for your nonprofit, to me, is the same amount of effort that you're gonna have to Spend constantly writing grants and then the compliance behind if you get a 10 cent grant, the compliance is still the same.
- [14:42]
Dr. Sharon
Like the effort, negative cents, millions of cents. It's all the exact same. Yeah.
- [14:49]
Morgan Devon
And that sunk energy on the compliance. We're going to talk this. That's what drives me nuts about blackware.org I'm like, yo, you gave us money four years ago. Like what are you talking about? Like we did the thing, it's happened, it worked, move on. They're like, can you send me? No, no, I cannot send you that. But that's why I do not run the nonprofit. It's a group of people. But yeah, it's the compliance is what gets me. So what are the things? Like how should someone who's like, I have this idea, I want to help people. How does someone make a decision on if a non profit is right for them or not?
- [15:25]
Dr. Sharon
So here's the best way. I kind of like to think about it because I do have the experience of both being a nonprofit founder, nonprofit executive director and a CEO business owner on the LLC side. So I can speak to both of them. So when someone comes to me and says I got this idea, I'm thinking about, you know, starting a non profit or I'm not sure which route to go. I asked them what are you thinking about doing for the community? And that answer to that question will tell me which route they should go. Now for example, if I'm talking to someone and let's say it's someone in education or ed tech edtech, it's a really big one right now. And I'm like okay, cool, what do you want to do for the community? They're like, well, I want to create a curriculum that I can contract with the school systems and bring to the schools where the kids can do. That's. That feels very for profit to me. Although it's, it's an impact on education, it's educational advocacy, it could be equity in education. It provides alternative options for learning for students which we love. Here's why I say it's for profit. Not because it sounds for profit, but because it's intellectual property. It has a component to it that could be proprietary. It has a component to it that you want to own. And the word ownership and own does not exist in the non profit world. So say I was a really bad consultant and I said start that non profit like f the for profit. Start a non profit because we just want to avoid the taxes. All in all, just go non profit route. And this person created A curriculum or a technology that was like even an app for students that contracted with the school districts. And then they got all these contracts which some of this is partially two stories because I've experienced this with some clients and seen it other places and I'm like, oh no, you should have been a for profit. And they go and get all these contracts and their app takes off and now they're in the US and they're going to go global and they're nailing contracts. Multi million dollar company. And it's only under the nonprofit. And the nonprofit maintains that intellectual property. And that person gets voted out of their nonprofit, they lose all rights to everything that their brain created. And that's, that's the part and the only time you'll really ever hear me say create that LLC or keep it under your sole proprietorship until you need to go to L.L.C. s corp route. That's the part that kills me. Or people buy property under the non profit name and you get voted out of that and you lose all rights. So there's the benefit to having both. And that company is the beneficial for them would be to have the LLC and the nonprofit the intellectual property. Anything that you create that is proprietary or that you want to own and you want to maintain all decision rights on that goes under an llc. So that is how I direct the decision making. For people who come to me when it's their like initial ID and they haven't filed anything, that's the process I go through. What do you want to do for the community? Let's talk about that. What parts of that may be created that are intellectual property? And then we go from there.
- [18:43]
Morgan Devon
So I think that's really interesting and important and I just want to highlight this again for people. When you have a non profit, you do not own your non profit. There is no owner of a non profit. So when you're like I want to create a non profit, that's fine. You can create it, but you will not own it. There's no ownership, there's no shares, there's no stock you do not own.
- [19:12]
Dr. Sharon
The IRS or the state can revoke you just like that and then you lose everything.
- [19:18]
Morgan Devon
That's right. And the board is the owner and that board makeup will fluctuate. Yeah, I'm on the board of of course two nonprofits, Blabby.org and another one called Leading Women Defined, which was started by the former CEO of BET Deborah Lee. And I've learned we've only had one board meeting. I just joined the board last this year. This year. And we had a board meeting the other day. It was really interesting because it's, it's a democracy in a lot of ways. There is no hierarchy. Right. So I, part of, I was listening a lot and I basically was thinking to myself, I was like, how are we going to approach decision making on a nonprofit when there's no hierarchy and there's no ownership? You know, there's, it's just a lot of, it's a lot of conversations. In a for profit company, there's clear hierarchy. Right. Either because you're the large shareholder, you have the title or whatever it may be. So in a nonprofit world, it's also a lot of Robert's Rules situations going on in the conversations because it is a bit of a democracy. It's very interesting.
- [20:29]
Dr. Sharon
And not only that, there's a caveat to it too. Depending on the nonprofit's bylaws, there's an executive committee that can trump all of the decision of the democracy.
- [20:40]
Morgan Devon
That's right. So you just gotta like, just chit chat. And I'm like, are we making a decision here? Are we just having a conversation? Unclear.
- [20:47]
Dr. Sharon
It's important for people to, to understand that because it's important who you pick to be on your board in the beginning.
- [20:54]
Morgan Devon
Right. And do you have to have a board?
- [20:56]
Dr. Sharon
You do. You need to have a board. And some each state has different laws. Like California state, you have to have a minimum of three year president, secretary and treasurer. There's some wiggle room in some of that. Best practice is really to have your president, secretary and treasurer no matter what state you're in. And then to grow your board from there. That's just best practice. There's legality differences between all the different states, but I usually recommend three separate individuals because some people want to be president and secretary. No, I don't allow it. Not with my clients. I don't allow it.
- [21:29]
Morgan Devon
Yeah, but what if you guys are curious, I'm the secretary of bobby.org not that it means that much. I'm very.
- [21:38]
Dr. Sharon
Such a cool role. It's such a cool role.
- [21:40]
Morgan Devon
Such a great role. So what's the difference between a 501C3 and having a fiscal sponsor? Cool.
- [21:48]
Dr. Sharon
Good question. So if you're somebody that has a 501C3, you have your own legal entity, business infrastructure, you have your own employer identification number. That's how you open your bank account, that's how you give people tax write offs, that's how you file your taxes, you have your own board, you have your own bank account. Everything about it is its own legal entity. Now, the difference between that and a fiscal sponsor, let's say you just have an idea that you want to have a program for the community, but you don't want to file for illegal infrastructure, then you would have a fiscal sponsor, which means another nonprofit organization that has their 501c3 would be basically our. Your financial manager. Now, there's tons of fiscal sponsors that do more than that. For example, our nonprofit, the nonprofit Plug foundation, our fiscal sponsorship service also provides program development and execution and other support. Only because I have found that most people who want to do, like, community good don't typically have a business background. It's not like they went to school and got a business degree. They're typically people who just. They just literally want to do good for the community. And the education backgrounds range middle school up to doctorates and everything in between. And so for people who don't really have that business acumen, which is an absolutely okay thing, I tell people that all the time, it is okay if you don't have business acumen. Just be a nice person. But it's okay if you don't have business acumen. Fiscal sponsorship is the way to go for you. Because otherwise, the stress of that learning curve going from I just wanted to serve PB&J sandwiches on skid row, to now I have to manage QuickBooks and PNLs and balance sheets and compliance reporting, all that like it is, that can be overwhelming for folks. And people don't know that there's this other option in fiscal sponsorship out there where then all of that stress and responsibility is then on me, which is the stuff that, you know, I thrive off, that I like. That's the nerdy side of me. I'm like, oh, yeah, give me out. I'll do all that stuff.
- [24:00]
Morgan Devon
Right? And that's actually how we got to you, because at the time, we had an ED who was like, I want to do good, but, like, all this other compliance stuff, can we find someone else to do it? I was like. We were all like, yeah, sure, find a consultant or a service that can do this part of it while you're working on program development. We had talked about in my own family, if we wanted to start, like, a family foundation, because my dad gives away a lot of money every year and just does things that are good, you know, similar to me, where I'm like, I just do the things just because it's the right thing to do. And whether that's giving to universities or programs A lot of things behind the scenes have donated hundreds of books to hospitals. Just depends on the day, right? And we just do that. And there's a tax deduction, you know, when you decide to report it. I don't think I've ever reported any of my donations because I just don't feel like I have the time.
- [24:50]
Dr. Sharon
There's no benefit to reporting it, honestly.
- [24:52]
Morgan Devon
Yeah, true. Or just like, how do you quantify, like, the books that you donate to the hospital for the kids? Like, I don't know, just whatever. It's not. So what is the benefit of having, like, a family foundation? Because I have noticed a lot of my peer entrepreneurs, like Pinky Cole, for example. I know she has, like, a Pinky Cole foundation. And I'm like, oh, like, should I, Should I be doing that? What's the benefit?
- [25:14]
Dr. Sharon
So the biggest benefit for folks doing that is there's like, the innate sense to do good for the community. One, that one. We don't have to even debate that one. The second one really is the tax write off. What's interesting about that, though, is you can't just, like, donate a million to your foundation. I mean, you can, but not all of that is even tax deductible for yourself. There's certain percentages against your adjusted gross income, your AGI. And so I always tell folks, your CPA is your best friend. And not just any CPA, a tax exempt specialist CPA. Because I work with both for profit CPAs and nonprofit CPAs. They don't even know how to communicate. So if you're considering doing a family foundation because you want to get a tax write off, that is absolutely an excellent route to go. And what a lot of entrepreneurs and folks with companies that they just have the excess cash that they want to write off, good way to go. You just have to know that it's not all of it that is tax deductible. It's percentages. And sometimes it may be like 60% of your adjusted gross income. And I'm sure there's tons of other qualifications, too, that a CPA can speak to. But the reason you would do a foundation, and here's the interesting thing about the word foundation, it's used very loosely. Now, back in the day, foundation was like what you and I think of as a foundation, where it's like a family foundation or a wealthy individual that just funnels their money into the nonprofit to then do good from there. Now, people who just have, like, regular public charities who have programming use the word foundation. So it's Very confusing out there for the community every day. I'm constantly doing filings for folks and they want the word foundation. People just don't use it the same anymore. But your typical family foundation, it's because it. There's usually like a process because you want to donate the excess funds that you have, or the surplus of funds, or you just want to do good and you get that tax write off and then you kind of go from there. Now there's a difference in the legal filing, though, for a private foundation and a public charity, and those are different. Although they're both 501c3 tax exempt nonprofit organizations. A private foundation typically has one ish source of funding, and it's a different type of tax filing. So you don't go back and forth between private foundation and not. And some people start as a public charity and they don't meet the test to be a public charity. And then they have to transition into private foundation, which is fine. But going from private foundation into charity is a little bit more challenging. But it's all in the, like, tax filings.
- [27:57]
Morgan Devon
No, but this is important because I think the vocabulary does feel very nuanced, you know, to someone. And it's like, am I saying, like, let's say, for example, I want to buy a bunch of black art? Because I just believe that, like, more black artists, like, this is one of the things I talk about with my family. I believe that, like, more black artists need black people to buy their art. And then the question becomes, okay, what are you going to do with the art when you die? Right. So do we want to put it in a foundation that then we say, great, this is going to be gifted to, you know, XYZ museums or these, you know, it's going to become art that then can be used for other things in the future. Or do we want to put it under a trust?
- [28:38]
Dr. Sharon
I was just going to say, yeah, yeah, right.
- [28:42]
Morgan Devon
And so, I mean, these are like very first world problems. But this is why you guys listen to this podcast. So don't come from me, because this is the point, right? It's like, okay, maybe I should put it in the trust and then it can be loaned out to the museum, etc. Etc. But like, it's still an asset, right?
- [28:58]
Dr. Sharon
And remember, when you put it into a nonprofit, you lose ownership.
- [29:02]
Morgan Devon
Exactly. And then you don't have the asset to leverage. So, like, let's say you buy this piece of art that all of a sudden becomes worth a million dollars for some random reason. Now the nonprofit has the foundation has this asset that it can leverage, which is lovely, but future generation too.
- [29:17]
Dr. Sharon
I mean, people do that. And that's a form of a donation. Right. So a lot of times when people die in their wills and trust and stuff, they have notes in there of how they want their assets distributed. And a lot of people do choose to have those hard assets go to nonprofits that are just like their favorite nonprofits. They'll have their life insurance or, you know, their house, because maybe, maybe at one point in life they were homeless, they became super wealthy, they bought a bunch of properties, and when they die, it says in their will that they want these properties to go to a nonprofit that does transitional housing and you know, is working in homelessness. That's a common thing that happens here and there. It happens with art, it happens with money. You know, you just want to. The caveat to this right, though is like, go talk to an attorney, go get the. Yeah, I think that's structure on that because they're. What you have to think about is the angle or the difference between a trust and a foundation and where that asset should go is what did you want your end goal to be? Did you want it to be family legacy? Because then you would not put it into the non profit. Did you want it to purely like, you don't care. It doesn't need to go to the family. You don't care what happens. So it's like donating a kidney. When you donate a kidney and it goes to another human, it is 1000% out of your control. And however that person treats that kidney, that has nothing to do with you. And you literally, that is it. Goodbye kidney. It you just say kidney. There you go, off you go. It's the same concept.
- [30:48]
Morgan Devon
And I think a lot of people think that they can control it. And actually I think that's like my biggest thing that I want people to hear is like when you have a nonprofit, you are not the CEO of the nonprofit.
- [31:01]
Dr. Sharon
Yeah. And there's, I mean, there's some cool things to think about with that. Like, you know, maybe especially in the state of California. I'll use that as an example because just like tax stuff here is crazy, is, you know, it might be more beneficial to start a nonprofit versus an LLC if you're in a place like California, because the amount of taxes you have to pay and when you start a business in California, you have to pay the franchise tax board every year, whether you have negative in your bank account or positive, and whether you operate or not, you still have to pay all of that and then you have to pay taxes on all of the revenues. So maybe a non profit is a better route for you to go while you're learning business acumen and how to create programs and products that are a bit more beneficial. Now products are more of a for profit thing. You don't really see non profits doing that unless it's like that intellectual property and curriculum and.
- [31:54]
Morgan Devon
Right.
- [31:54]
Dr. Sharon
You know, there's people who create toys like medical devices and things like that. I would still do that under for profit. But a non profit is a great route to go if you're creating a business with a cause and you're impacting the community, like maybe a child care center, an after school tutoring program.
- [32:13]
Morgan Devon
Right.
- [32:13]
Dr. Sharon
Those are great, great non profits because then you're learning the business structure and the, the acumen without being penalized on taxes and paying fees when you don't have that startup money. Nonprofits are great if you don't really have the start money. However, just because you start a nonprofit does not mean you're entitled to funding.
- [32:35]
Morgan Devon
Yeah, so let's talk about funding. So how do people approach finding funds for the nonprofit? So let's go back to that example of I am a psychologist and I want to create a program that gives free therapy to homeless trans youth. Yeah, like so good. Love that.
- [32:58]
Dr. Sharon
Good. Yep.
- [32:59]
Morgan Devon
Right. And I'm a therapist by day. Right. But this is like my passion. How does one even begin to approach funding for that?
- [33:06]
Dr. Sharon
So you can do things like I tell people all the time, like Google is your best friend. I mean they're. Everything is on Google, YouTube, university. So if you can't afford to pay for like a consulting firm and a, and a company or a coach literally put into Google. I am a therapist. I want to provide free resources. Are there organizations out there with funding or grants that will give me money so that I can go provide free resources? Some of the first places I would start if I was in that exact position, I would go to nami. That's a massive non profit organization that. And they actually grant out funds. So lots of non profits grant out funds and a lot of nonprofits grant out funds as like what you and I would call seed funding, startup funds, even to individuals. But even better than that, donor cultivation. Donor cultivation is the first place I would actually start after sort of that Google search. Because number one, that funding is unrestricted so you can do whatever you want with it. And I say do whatever you want with it with like a little asterisk on it. You Know, and so that's. That could be used to pay your salary, to do outreach, to maybe rent an office space. If you're a nonprofit and you're a psychologist doing this, you probably can go get free space just by being a nonprofit. Parks and recs, the libraries, buildings. You know, you can create these partnerships because you're a nonprofit to get these free spaces to use schools, colleges, all of that kind of thing. So donor cultivation is going to be your best friend. Fancy way of saying asking your friends, family and business partners for money. That is what donor cultivation means. And you don't just go to someone and say, hey, can I get, you know, 5,000 bucks? You say, morgan, I have got this new program. I want to provide free therapy to trans youth that are battling homelessness. You know, I've worked with five youth already. Here's what's happened with those youth. $5,000 would cover me getting them into housing, clothes, and that kind of thing. That's right. That's where people need to start is with donor cultivation.
- [35:21]
Morgan Devon
And I think that what people miss is exactly what you just said, which is the. Your money directly goes to insert mission. And, like, when people come to me and they're like, hey, can I have 500 and 500 pays for, like, somebody's meals for a month, I'm like, yeah, you can have it. Well, it's usually not about. It's like 12 months. And I'm like, yes, you, yes. Immediately yes. Here.
- [35:46]
Dr. Sharon
How can you not say no to that? Like, that's. That's impactful. I love a tangible ask. I love a tangible ask.
- [35:53]
Morgan Devon
Yes. When someone's like, here's this money, and I'm thinking about this, and we're just getting started and that. I'm just like, no, I'm good. No, thank you. Thank you. But if it is very cause and effect, and I trust that that person is going do the right thing, and it will be cause and effect. Even if they say, you know, it's 90% of it goes to this, and the 10% goes to us continuing to operate our business. I'm like, sure, happy to. Happy to give to that. I think that that's been. That would be my biggest recommendation for people who are listening, who are like, how do I get people who have discretionary income to make a decision to give me a piece of that discretionary income, make the benefits so tangible. And that storytelling of these are the people you're helping. And your $10 buys this backpack or your $100 if you want to buy one backpack is $10. If you want to buy 10 backpacks, it's $100. Show me the scale and then tell me the story after the fact because that's how you're going to get the recurring contribution, which I also think is really important. When you have a nonprofit, being able to have your own donors that commit to you like they're your patrons is a much more sustainable way to live. Because when you want to get something done, you don't have to try to merge how you want to get something done to benefit or to fit into the requirements of a program or a grant or some other thing that you've been applying for. A lot of times when you're seeking funding and we've done this process for Blabby.org, where it's like, okay, if we're running a program that then helps X amount of people get jobs or X amount of people reskill or X amount of people do this, then we're going to be able to apply for this grant funding. Right? I even just looked at one that was like teaching communities about AI and like how to use AI and how to have skills in AI and as I was literally going, it was like a million dollars. This was from OpenAI and GitHub and a couple of other people that kind of come together to do this, this program that they wanted to invest in. As I was Filling it out, Dr. Sharon, I literally was like cringe. I don't know that over two years we're really going to want to do exactly what this grant says. I don't even know that I agree with the premise of some of the things that are requirements to receive this grant. And I know now enough that if I say yes to these funds that then I'm going to have to report out on a thing that I may not actually philosophically agree with. And so I didn't actually submit for the grant.
- [38:21]
Dr. Sharon
But though people need to hear you on that because when you apply to a grant you are applying to that funders program, not your program, you're applying to that funder's program and, and there's a lot of grants that are like a three year commitment grant and you have to follow what you said. Now they'll let you like, you know, do some ALEC like budget modifications and things like that, but you're applying to their program, right?
- [38:52]
Morgan Devon
So if you start a non profit because you want the freedom to help people who a you want to help them, then you're going to want to spend a lot of Time and effort cultivating your donors and cultivating campaigns that you do on a regular basis. A quarterly campaign, an annual campaign, an annual dinner, a gala, whatever your mechanism is to help create those funds. And then let's talk a little bit about unrestricted and restricted funds, because I think that's really important too. Can you just write that down a little bit more?
- [39:20]
Dr. Sharon
Yep. So, perfect example. Let's say that you have a funder that gives you $10,000 for diapers. That $10,000 is only for diapers. And when you report to them, you have to show receipts of $10,000 worth of diapers. That is restricted funding. That is the most restricted. I could give you. As an example. Unrestricted would be. There's a couple of grants that have come out that are like capacity building grants. Unrestricted grants are fantastic because those come in the form of the funder knows and is saying you can do whatever you want asterisk with these funds. So it has to be mission aligned. So a lot of times, like discretionary funds from political like council districts, board of supervisors, those are fantastic funds. Actually, they're some of my favorite to go after. It may be a $25,000 grant for your nonprofit to. Let's say your mission is. Is to end homelessness. Here's $25,000 to end homelessness. So you might be able to use that to pay rent for people, to buy groceries, to pay a portion of your salary, all within the context of your mission. Restricted. The grant will tell you exactly what it is for. Do not deviate from that unrestricted asterisk. Do whatever you want with it.
- [40:43]
Morgan Devon
Right. Including paying yourself.
- [40:44]
Dr. Sharon
Yeah.
- [40:45]
Morgan Devon
You know, a lot of nonprofit founders that I meet barely pay themselves because maybe even though they have funding, they actually don't have any funding to run the nonprofit. And that is their biggest thing. That's their biggest thing. You know, we don't take salaries on blackbay.org because we have day jobs. So we're like, I'm not taking this money out of here. Right. And I think that's given us a lot of freedom because we don't really have overhead. Like, our overhead is the tools that we use. The tax compliance stuff. You. That's it.
- [41:22]
Dr. Sharon
Yeah.
- [41:22]
Morgan Devon
Right. So any dollar that really comes in is going directly back out to the community. And I think that that has given us a lot of freedom. In fact, like, even when we have had grants, we wind up underspending what we thought we were going to spend and then we wind up with the surplus. You know, then we're like, okay, well what else can we do with this money? And who else can we help with this money? And it's a really interesting thing. The other thing that we've done, which I have to give a shout out to Aaron because I feel like a lot of people don't think about this is when you have those surplus funds and you don't have necessarily you're not planning on spending it, investing it in a high yield savings account. Because we have literally made income in our non profit because of that. And then we use that as our overhead, like basically our baseline overhead so that then we're literally every year like it's basically like having an endowment in some ways, right? The bigger that we get, the more that we have in the bank, the more we're able to get a return on it. And we're not doing, we're not doing like 10% return. I mean we're not talking like crazy, crazy returns here. But for a nonprofit or like a.
- [42:29]
Dr. Sharon
Low level salary or coaching or the, or compliance, like the stuff that you can't avoid paying as a business, whether you're a nonprofit or for profit, you still have expenses you have to pay. Accounting, bookkeeping, tax filing. You have to pay those.
- [42:43]
Morgan Devon
Exactly. And that could cost you up to 15 to $25,000 a year. And so for us, we've been able to figure out a way where it's like, cool, that is going to be the interest that we get off. And like, I think for me that's been so refreshing too because it really means that in perpetuity we're able to create an institution that lives, that gives back. And the other thing that I've been doing recently, like sometimes I get speaking engagements or people want to like if I want an advisory board, they might say, here's $10,000 to be on this advisory board. And also we're going to do a $10,000 donation to a nonprofit of your channel choice. I always obviously pick my own nonprofit and then it's kind of like a double win. I'm like, okay, cool. My labor is also benefiting this entity that then is giving back. And so that's the other reason why having a nonprofit has been nice for me. Because I, there's situations where I'm like, I really don't want to take this money from this person or like I'm happy to do the thing, but they want to spend, give me $5,000. And I'm like, my speaker on RM is way more than that. You got to unlock zero on there. But I'll take it and say, cool, actually just give it to the nonprofit and, like, that makes everybody feel good. Right. And that was my other suggestions for people who are entrepreneurs or who have, like, other sources of. Of money or assets or things that are coming in where you're like, I don't really want to take this personally, but you can give it to a nonprofit or you can have a friend. Like, that could be how you contribute to somebody else. Where you say, hey, all my speaking fees for this year are going to actually go to this nonprofit that I'm supporting in my local community.
- [44:16]
Dr. Sharon
People can get behind that, and sometimes with that, you'll get more. So sometimes they may be like, oh, my God, so you're not taking your speaker fee and it's going to go to a nonprofit. I'm a double that.
- [44:29]
Morgan Devon
Exactly. That's actually happened before, too. We're like, oh, that's really nice. Great. What else can we do with blabby.org? i'm like, oh, thank you for asking. In fact, these are the things you can do. So I think that for anyone who's listening to this, my intention always with the podcast is to inspire you. Right? It's not to give you the A to Z. That's why we bring people like Dr. Sharon on the show, because she's going to give you the A to Z. Right. But my hope is that you're able to think differently about how you spend your time and that it's not necessarily that you have to, again, work harder, but. But it's that you can work smarter with how you are receiving funds, leveraging your own value, creating more value for other people, and doing so in a way that can benefit you in the long run, whether it's through social capital that you're building because you're now invited to these, you know, upper echelon dinners and private parties. And, like, some of the most exclusive rooms are rooms funded by nonprofits and foundations and family foundations. And you can only get in if you're like, yeah, I'm going to spend $10,000 to buy this table. Right. But if you have a nonprofit or foundation, and that's like, part of the thing that's built into your wealth story, that's no big deal, because it's also doing good.
- [45:45]
Dr. Sharon
And I think that's what you just said. I think a critical component to your wealth story and to financial literacy is leveraging the different types of entities for business out there, for sustainability, for your income. Because that's one thing that kills Me about nonprofit founders is they will break their back and not feed their family and feed the community first. Which how could you not love that person? I, I mean I've been there. I'm, I, I do that here and there too. You have to feed yourself and your family otherwise the community will lose you to whatever extreme that might be death or whatever. The community will lose you. So you have to create that wealth story and have financial literacy, which is maybe leveraging both a for profit and a non profit for whatever that end goal is or whatever it is you're trying to sell or trying to provide.
- [46:42]
Morgan Devon
Absolutely. And I think valuing yourself as a non profit operator. The other thing that I'll, I'll share, there's a couple nonprofit folks who've been in blavi.org Fellowship programs or I've worked with, it's coached them with Worksmart. They have their like day to day income and their salary as the non profit executive director. And then they also are getting booked for speaking engagements or they're getting booked for like brand deals with brands to highlight their work or you know, they're on like these lists of with brands. And so they get a, you know, $5,000 or $10,000 for that and they put that as income for their nonprofit. And it irks me every time I'm like, but you did. That's not the saying. If you are a person, you as a CEO or executive director, like that is separate income. Stop giving it to the company that you work for or the non profit that you work for. Stop it. Maybe you can give them a fee. So like for me, if I get booked to do a speaking engagement or something like that, and it's stemming from the blavity ecosystem, like a client is doing a thing. I have blavity take a fee. Right. Because it's, I don't want any, you know, checks and balances systems like I pay blabby fee. If it's some other brand that we don't even work with that wants me to do a post on LinkedIn about something that is a Morgan Devine LLC situation. Yeah, right. And you can set up those kind of infrastructures within your own nonprofit as well so that you can make sure that you have financial stability for the work that you're doing outside of your job description as an executive director. Okay. You don't have to be so self sacrificing all the time to Dr. Sharon's point. You have to sustain yourself.
- [48:28]
Dr. Sharon
It's not healthy.
- [48:29]
Morgan Devon
It's just not healthy. And it's not to the benefit of the people you're helping. Because if you're burned out and you can't afford to invest in the housekeeper to help clean your house so you have more time to give back to the other people, like that doesn't help us. There's no brownie points for that. There's no pat on the back for being an exhausted nonprofit founder.
- [48:48]
Dr. Sharon
And when you're a nonprofit founder and let's say you're also the executive director, you can absolutely have a salary. It can even be. It's in the bylaws. There are plenty of salaries and nonprofits that are comparable and at a level that can sustain you. You don't have to be a $25,000 per year salary as a nonprofit executive director. Plenty of non profit positions pay between 50,000 to 400,000.
- [49:17]
Morgan Devon
And you can.
- [49:18]
Dr. Sharon
You know how I know? Because I'll go pull a 990 of every single non profit I work with and that I partner with. And I'm nosy as hell. And I want to know everyone's salary. But I also do that because I want to know comparable. I do comparable salary studies for folks too. And it's okay. You just want to have like appropriate salaries, reasonable salaries and there's tax guidelines and stuff and all. All that. But you can have a very, very great salary. Non profits can be very lucrative. It's just not the same terms in for profit.
- [49:50]
Morgan Devon
That's right.
- [49:51]
Dr. Sharon
But they can be very lucrative. And that's the other thing people really need to know is you can go into the non profit sector and still have a very comfortable life. And take care of your family.
- [50:01]
Morgan Devon
Yeah.
- [50:01]
Dr. Sharon
And take care of your community. It's like the coolest thing combo ever.
- [50:05]
Morgan Devon
I agree. 100. And also one thing Dr. Sharon said that I just want to make sure y'all heard. You can look up a lot of these things online because nonprofits have to report to the government. So you can look up the salaries, the overhead, how much money they're making from donors, how much money they're getting from grants. You can look that up. And I do it all the time. Because so many of Blavity and Afro Tech's like different niche competitors are actually nonprofits. And I'm like, great. I wonder how much Grace Hopper is making. I wonder how much executive ELC is making. How much these people's salaries are. It's public information. They're nonprofits.
- [50:42]
Dr. Sharon
Yeah.
- [50:44]
Morgan Devon
That's all I'm saying.
- [50:45]
Dr. Sharon
I feel so bad when you're taking a Salary because everyone has to take a salary. Everyone has mortgages and rents to pay.
- [50:51]
Morgan Devon
And listen, the travel budgets, I've seen the, the I, I sometimes I'm like, stop it. That is obnoxious. Not about the two that I just said. They're all very reasonable and financially responsible, but some, some non profits, I'm like, wow. It's not that they're getting away with this. This is industry standard depending on scale. So that is all to say do your own research and you don't have to necessarily be in a deficit to be able to do good for people. And I think that is ultimately my point about not everything needs to be a nonprofit. But if you are going to do it like you can do it in a way that you're still able to live a balanced life.
- [51:28]
Dr. Sharon
Absolutely. Yeah.
- [51:30]
Morgan Devon
Dr. Sharon, how can people connect with you? How can they connect with the nonprofit Plug University? What else can they do?
- [51:38]
Dr. Sharon
Perfect. So best way to connect with us, the nonprofitplug.com@ the nonprofit Plug on Instagram at the nonprofit plug on Facebook info@the nonprofitplug.com I make it really easy for folks. So. And as long as you're seeing the non profit plug with the little elephant icon, that is definitely our firm. My last name is Elephant, so you know, I had to brand it with the, the most intelligent animal out there, the non profit plug that is us. You can find out all about the non profit Plug University on the website too, and especially from our social media. It's free to join, we post grants on there. It's a community of over 300 people and other nonprofit founders. It's a great way to just connect and, you know, share relatable stories.
- [52:24]
Morgan Devon
Amazing. Well, thank you so much for your time today and thanks for pouring into us every day. And thank you for your patience with me and my co founders. All right, y'all, that's it for this episode. If you found this enjoyable, make sure you leave us a comment, a note. If you have questions for Dr. Sharon, feel free to write it in the comments. I'm sure she'll linger on both Instagram, LinkedIn and TikTok. Also, my request is for you to pre order my book. It is available@morgandebond.com you all know I poured my heart and soul into this book to help you work smarter, not harder. It's called rewrite your rules and it gives you all the tools and tips that you need to be able to define for yourself how you can leverage your unique skill set, your values, your principles to live the life that you actually want to be living by your intentional design. Not by societies, not by the other people who tell you what you should or shouldn't do, but by actually getting clear on that for yourself. And then it has tons of frameworks and of course all the stories of how I did or didn't follow my own rules in the book. So please make sure you're pre ordering it and I can't wait to hear from you soon. See you next week. Bye. Thanks for listening to the Journey podcast. If you enjoyed this episode, make sure you leave a review and head to our Instagram and YouTube to leave a comment. I look forward to hearing how this podcast has made an impact on your own Journey.