The complete guide to setting up a charity

If there is a cause you’re passionate about, you may be thinking about setting up a charity – that’s likely why you clicked on this article. Charities can benefit the public and contribute to society by meeting high standards of conduct and behaviour, connecting with local people and communities, providing expertise in their topic area, and providing a voice for the most vulnerable.

 

Setting up a charity can seem overwhelming – maybe you don’t know where to start with tasks such as writing a mission statement, coming up with a name, finding trustees, and so on. Indeed, there’s a long list of things you must do to run a functioning charity which genuinely benefits your chosen cause.

 

But as Jo Owen, co-founder of Teach First and seven other charities, says: “There is…one mistake which outweighs all the others when it comes to starting a charity: not trying. If you have a great idea, then go for it.” In this article, we have outlined everything you need to know when setting up a charity. Treat it as your guide to return to each step of the way.

 

 

Skip to: Is setting up a charity right for my cause?

Skip to: Understand the parameters of your charity

Skip to: Write a charity mission statement

Skip to: Name your charity

Skip to: Find suitable trustees for your charity

Skip to: Choose a charity structure

Skip to: Take stock and gather new evidence for your charity’s plans

Skip to: Create a realistic “business” plan for your charity

Skip to: Write your charity’s governing document

Skip to: Register with the Charity Commission

Skip to: Put your charity plan into action

 

 

Is setting up a charity right for my cause?

 

Setting up a charity may be the perfect way to help a cause dear to your heart. But before rushing into the process, it is important that you consider all the options and be clear about whether charity is the best way to achieve your goals.

The Charity Commission recommends that you start by clarifying who the charity would help and how it would help them.

 

At this early stage,  learn as much as you can about those you wish to help to ensure that their needs are central to your plans. That should involve talking to your prospective beneficiaries and gaining an understanding of the wider context of the problem they face, as well as its political aspects.

 

If you are in the UK, check whether your idea would exist for the public benefit and fits into one of 13 charitable purposes as defined by the Charity Commission. Then, check the charity register to see if a charity is already doing what you want to do. Rather than competing for resources by setting up a new charity with the same purpose, you could work together.

 

Finally, it is a good idea to think about how your charity might raise the funds to operate in the way you want it to, from donations to engaging in trading activities.

 

You can also start thinking about whether your cause would benefit from an alternative approach, such as setting up a Community Interest Company, a social enterprise, a named fund or a trust, or another type of organisation.

 

 

Understand the parameters of your charity

 

Understanding the parameters of your charity will help you mould your vision into what is realistic and sustainable for you and the wider context of your cause. It is important to have a grasp on what running a charity will actually entail at this stage, so that you don’t make plans that have to be drastically changed later down the line.

 

The key parameters that might impact you when setting up and running your charity are:

• Your ability to commit time and effort to the charity, based on other commitments
• Your own skills and experience, or access to help and expertise when it is needed
• Whether the charity will be able to pay necessary costs e.g. legal advice, an office or location for service delivery, or new equipment
• Your government’s rules and regulations around charities

At this stage, you should investigate whether you will be able to pursue your idea for a charity within these parameters, or whether you will need to adapt your idea based on personal, financial, and regulatory limitations.

 

This will involve being realistic about your own lifestyle and abilities, as well as conducting research into the specifics of what it will take to carry out your ideas and what support is available for you to do so.

 

A good start is to learn from those who have successfully done what you are trying to do, for example through online networking.

 

Also be aware of the trends and challenges in the charity sector at the moment of setting up your charity to take forward with you as you think about the best ways of launching your charity.

 

 

Write a charity mission statement

 

Writing a mission statement will bring together your ambitions for your charity. The purpose is to clearly define who your charity will help, and what it will do to help them.

 

This step will use your prior research about the problem you are looking to address through your charity. You should also identify what is unique about your charity or its approach.

 

When writing the mission statement, the trick is to be simple and concise in your language. You want everyone to immediately understand what the charity does and why – and a well-written mission statement will also be a guiding light for the actions your charity takes over time. Pinning down the mission early on is key to ensuring clarity of vision going forward.

 

The mission statement may change as you learn more about the realities of running a charity. It is important to embrace such changes to ensure that your mission is both realistic and of value to your cause.

 

 

Name your charity

 

Naming your charity well is important to your charity’s appeal and memorability to beneficiaries, donors, and even potential employees and trustees. Therefore, you should take time to consider how you want to represent what your charity is going to do.

 

 

Steps to naming your charity

 

Start by writing a list of potential names that come to mind. Then, research similar organisations – how do they name themselves? Do you want to take a similar approach, or differentiate your charity in some way?

 

You can search online for definitions and synonyms to pinpoint exactly what you want to communicate through the charity’s name. You should also consult with your prospective beneficiaries to understand if this is a name that they feel is representative of the cause.

 

You can talk to friends and family about the potential name to get a sense of its public appeal for fundraising and awareness purposes.

 

Before confirming your name, type it into a search engine to make sure it isn’t similar to other organisations, or other words and concepts that are regularly googled. This is to prevent your charity getting lost in a sea of irrelevant results.

 

As a final step, you must also check that your name follows the Charity Commission’s rules for charity names.

 

 

How to pick the perfect charity name

 

Naming your charity can be an opportunity to be creative – for example, Digital Candle’s name was made to reflect the charity as “something to light the way in digital”.

 

According to nfpResearch, good charity names are:

• Memorable
• Self-explanatory
• Inviting
• Can’t be shortened or misspelled
• Not named after the founders of the charity
• Internet friendly
• Not tied to the existence of the UK
• Work in all types of communications

They give the example of the name “Save the Children”, which is “inviting to those interested in children with an action verb to boot, plus the benefit of doing what it says on the tin”.

 

Other good charity names, according to the research, include “WaterAid”, “Oxfam”, and “Macmillan Cancer Support”. These all share the common attribute of being easily recognisable to any audience.

 

 

Find suitable trustees for your charity

 

Now you have created a detailed image of what your charity would look like, what it would do, and how it would function, it’s time to get other people on board.

 

Trustees are “the individuals who make decisions on behalf of the charity”. Being a trustee is a voluntary role which people may take on because they want to make a difference to a cause that matters to them, get involved in a community, or develop professionally.

 

Good trustees will bring a diversity of skills to the table, give insights into your beneficiaries’ needs and experience, make contacts in the community, and think of new ways of doing things. They will also be active in the running of the charity and be prepared to ask awkward questions of the charity’s leaders.

 

To help your search, we have previously explored the best charity trustee recruitment sites.

 

 

Vetting and appointing trustees for your charity

 

When you have found potential trustees, you should first check whether they are eligible for the role. According to UK law, trustees of charitable trusts and unincorporated associations must be at least 18 years old, while trustees at CIOs or charitable companies must be at least 16 years old.

 

Some people may be ineligible to be trustees if they have a “disqualifying reason” such as being bankrupt or having an unspent conviction for certain offences. See the full “disqualifying reasons” table here and more detailed guidance around disqualification here. Each trustee should declare that they are not disqualified in order to be eligible for the role.

 

The Charity Commission states that you should ensure trustees are DBS checked where necessary, and consider potential conflicts of interest for all prospective trustees.

 

Then, tell the trustees what will be involved in their role, including their legal responsibilities – and finally, give each trustee a specific role in your governance team. The Charity Commission outlines how the appointment of new trustees should be formalised.

 

Once you have your trustees, you can use them as a sounding board for the decisions you have started thinking about, from the name and mission statement to the practicalities of how the charity will function.

 

 

Choose a charity structure

 

A charity’s legal structure defines the rights the charity has as an organisation. In the UK, the four types of charity structure are:

• Charitable incorporated organisation (CIO) – a corporate body with wider membership
• Charitable company (limited by guarantee) – a corporate body with or without wider membership
• Unincorporated association – has a wider membership without a corporate structure
• Trust – no corporate structure or wider membership

“Corporate structure” refers to whether a charity is allowed to do things in its own name, such as employing paid staff, delivering charitable services under contractual agreements, entering into commercial contracts in its own name, and owning freehold or leasehold land or other property.

 

“Wider membership” refers to when an organisation has members who can vote on important decisions – but it is important in most of these cases that the charity isn’t set up only for the benefit of its members.

Your chosen legal structure will be referenced in your business plan and governing document.

 

 

Take stock and gather new evidence for your charity’s plans

 

You’ve already come so far – take some time to appreciate yourself and your hard work!

 

Then, reflect on the decisions you have made about your charity, and make sure the foundations are stable. Are the charity’s activities achievable within the parameters you identified? Do the name and mission statement accurately represent what your charity will stand for and do? And would all these factors complement each other in addressing a genuine need for the charity’s beneficiaries?

 

Make sure you and your trustees are comfortable with the decisions you have made so far, then you can move onto the next stage: creating a plan.

 

This will require a lot of research and serious thinking about the practicalities of how your charity will work. Take it one step at a time and enjoy the process as your ideas get that bit closer to becoming a reality.

 

 

Create a realistic “business” plan for your charity

 

Here’s where it gets real. You will need to write down how you’re planning to put your ideas into action based on all your learnings, and make sure you also develop a strong understanding in some new areas. A good charity business plan will show the reader that your charity’s activities are both valuable and achievable.

 

Your business plan can be suited to a range of audiences, for example guiding the charity’s leadership team, trustees, and employees. It can also be used externally used by sending it to key funders or donors and can be published on your website.

 

At the early stages, it may be best to develop a plan that’s as detailed as possible and suitable for all potential audiences so it’s ready (or close to ready) for when it’s needed.

 

 

Writing a title page of your charity business plan

 

The title page should tell you the charity’s name, the period of time that the plan is for (most are for three to five years), and when the plan was written. Make sure to also include your mission statement so the reader immediately knows the purpose behind your plan.

 

To make the plan look inviting and engaging for readers, use images and graphic design.

 

 

Writing an executive summary of your charity business plan

 

Although this comes at the beginning of the business plan, it should be written last. By the time you have explored each area in the plan in detail, it will be much easier to have a birds-eye-view and identify the most important points.

 

The executive summary should be no more than one page long and should clearly state the mission of the charity and how it is going to be achieved. It should be written in a way that makes sense to readers with no prior knowledge of the charity.

 

The executive summary should include:

• An organisational summary – a brief “who, what, when, where, why, and how” of the charity and its plans over the given time period
•  A market summary of the charity’s beneficiaries and customers
• A financial summary of your sources of income and how you will assure the long-term financial future of the charity
• An overview of the risks facing the charity and what is in place to ensure resiliency
• Any other information that you think is important for readers to know

If you go on to use the business plan to apply for a grant or a loan, you will also need to include a short statement of what you need from the reader to achieve your mission.

 

 

Writing an “About” section for your charity business plan

 

This section is about providing the core facts about your charity. It has the potential to get readers excited about your work and will contextualise the rest of the plan with the basics of what your charity is all about. Don’t worry about going into too much depth: you will be providing much more detail in the following sections of the report.

 

Start by introducing the reader to the driving force behind the charity’s activities: the vision, mission, and values. The National Council for Voluntary Organisation (NCVO) defines vision as “the ideal world for your organisation”, the mission as “how your organisation is going to help achieve that vision”, and values as “the basic principles that guide who you are as an organisation and which form the basis of how you interact with others”.

 

As you are setting up your charity, your business plan won’t include certain operational details such as staff turnover, achievements, and challenges you have faced. But you might include:

• Why you are setting up the charity, and the key facts that demonstrate the need for your organisation
• An explanation of what makes your charity unique
• Your charity’s legal structure
• An outline of your charity’s key activities (for example, what your service delivery and fundraising will consist of) and your targets for these activities
• An outline of the current team of paid staff, including how many there are and what tasks they perform
•  How many staff will be needed for your core activities in the period laid out by the plan and what skills and attributes will be needed
• How you will fund your charity’s activities
• The role that volunteers will have in your plans
• Whether the charity has any partnerships or associations

Elements of this section will change depending on your audience. For example, if you’re presenting the report to a grant maker, you will need to demonstrate where their help is needed and why. It’s best to be honest and realistic, while making sure your strengths as an organisation are understood.

 

 

Writing about your charity’s market

 

Writing about your market is about considering the financial environment surrounding your charity and how the charity will make the most of that environment. This includes your beneficiaries, customers, donors and supporters, and other influences on your market.

 

The National Lottery Heritage Fund recommends that market analysis should be proportionate to the size and scope of your organisation.

 

 

Beneficiaries

 

Beneficiaries are included in the “Market” section because they are who funds will be directed towards through your charity work. Understanding this group and how it might change is therefore important to understanding your financial environment.

 

Start by describing who your beneficiaries are, what challenges they are facing, and what your charity will do to address these challenges. Be clear about who is not included in this group: as the NVCO recognises, your activities may not apply to certain groups who are already supported by similar charities.

 

Write about how your beneficiaries have shaped your plan so far, and also include factors relating to your beneficiaries that could alter your plans in the future.

 

 

Customers

 

Customers include anyone who your charity sells products and services to. This may not apply to every charity, but if it applies to yours, start by describing who your customers are going to be. They might be a specific group of individuals or could be made up of other organisations. Try to provide as specific detail as possible about this group, the size of the group, and your reason for choosing them as customers.

 

Then, explain why your products and services are competitive to those offered by other organisations. The NCVO recommends that you reflect on what situations will encourage your customers to come to you, and describe what is appealing about your specific offering.

 

 

Donors and supporters

 

If fundraising is going to be a major source of income for your charity, describe your potential donors and their reasons for donating. You can also create a more detailed fundraising strategy to refer back to, which explains how donors and supporters will help you achieve your mission.

 

You should also note any potential risks in managing your relationships with donors and supporters.

 

 

Other influences to your market

 

Writing about your market can include considering the socio-economic trends and policies that will impact on your charity, its beneficiaries, customers, donors, and supporters during the period covered by your plan.

 

You can also consider other potential changes in the specific environments that your charity will be operating in and the potential impact these could have. For example, if your charity relates to health, note how changes in the country’s healthcare system could impact your finances and operations.

 

Once you have outlined these four areas, you can also give a brief overview of your marketing strategy, approach to developing your various audiences, and your route to market.

 

 

Writing about your charity’s finances

 

This section will be a specific outline of how your charity operates financially. It should explain:

• Fixed costs: what are your constantly recurring or one-off expenses such as rent, staff salaries, insurance, and loan repayments?
• Variable costs: what are your costs which fluctuate and are less predictable – such as utility bills or the cost of supplying your operations?
• Main sources of income: what are your main sources of income? Have they already been secured and are they diverse? If not, how will you secure and diversify your income?
• Pricing strategy: if your charity will sell products and services, what is your pricing strategy?

You may also wish to gather and present other more detailed financial forecasts in the plan’s appendices, particularly if you are going to present the plan to potential funders.

 

 

Writing your charity’s strategic plan

 

The strategic plan will describe the long-term strategy of the organisation, including how this strategy will be executed on a day-to-day basis.

 

It should include:

• The priorities for your charity for the period covered by the plan
• A timescale for your plan, with key activities, milestones, and projects
• Key performance indicators – or how you will know if your charity is succeeding at its goals
• An outline of all the resources you need to operate your business, such as premises, equipment, knowledge, and access to information
• The partners and suppliers you will need to work with to carry out your work
• How the costs of premises and equipment relate to the charity achieving its goals
• Your process for transporting goods and services, if applicable
• How people will pay for the charity’s products and services, if applicable
• The legal requirements your charity is beholden to, and whether you have met or are working towards them
• The type and level of insurance needed for your charity
• A “SWOT” analysis outlining the strengths, weaknesses, opportunities, and threats of your plan
• Dates and a timetable about when the strategy will be reviewed next

If necessary, department-specific operational plans can be developed to go into more detail and provide clarity over workflow and responsibility within the charity.

 

 

Writing about people, management, and governance

 

The purpose of writing about people, management, and governance is to make sure the charity’s team has the appropriate skills and experience to do the work within your plan.

 

Start by giving short biographies of the people currently on your core management team and trustee board, including their roles and responsibilities, and how their existing skills and experience will contribute to your aims.

 

Then, note if you have any key skills gaps, and if you do, describe how you are going to fill them – either through training or recruitment.

 

The NCVO notes: “If you’re a new organisation, it’s important to show that you can access a team of people who have skills and experience to support you as you grow. If these people are not on your board, you can still include them as ‘key advisors’.”

 

Make sure to also include a diagram (or “organogram”) of your management structure to show the supervisory relationships between different positions in the team.

 

Explain what role other staff and volunteers will play in the organisation, including how many there will be, what responsibilities they will have, and how they will be managed within the charity. Finally, outline your plan for developing your structure and management processes in the future to support your goals.

 

 

Writing about your impact

 

The impact section of your business plan addresses Social Return on Investment (SROI): demonstrating the social, environmental, or economic value your charity has.

 

As this is your first business plan, written at the beginning of your charity’s existence, you won’t be able to report upon your charity’s impact: it hasn’t started yet.

 

But you can make sure your intended impact is clear, linked to your mission, and measurable. The NCVO has a useful template for an impact table, which will help you go into more depth about your processes of collecting and using data to maximise your impact.

 

The impact section will be important for funders to see the benefits of their potential funding upon your organisation and work. For an example about what these audiences might require, see the National Lottery Heritage Fund’s template.

 

Make sure your impact section demonstrates what success would look like for your charity and how you will measure whether you’re on the right track.

 

 

Writing a risk map

 

Writing a risk map will help you summarise all the potential risks that you have identified through the course of the business plan. These should include the main risks to governance, regulatory or compliance risks, financial risks, operational risks, and risks from external sources such as changes in policy or negative media attention.

 

For each risk, describe the risk, explain how probable it is to happen, the effects it could have, and how you would deal with the risk. These risks should be presented in order of importance. Make sure you calculate the risks carefully and take time to consider all the options for how risks will be avoided.

 

You can use digital tools such as online toolkits, spreadsheets, and risk management software to help you assess risk.

 

 

Write your charity’s governing document

 

A charity’s governing document is like a “rulebook” that explains how the charity is run. What needs to be included depends on the structure you have chosen for your charity.

 

UK governing documents include:

• The charitable purposes of the charity
• What the charity can do to carry out its purposes, such as borrowing money
• Who the trustees are and who can be a member
• How meetings will be held
• How trustees will be appointed
• Any rules the charity has about paying trustees, investments, and holding land
• Whether the trustees can change the governing document
• How to close the charity

The Charity Commission has published a range of model governing documents that you can use as a template. When using these, make sure to use model documents referring to the same type of charity structure as your charity.

 

Make sure your trustees have a copy of the charity’s governing document: it will guide them through the process of running the charity.

 

 

Register with the Charity Commission

 

Now all your plans are in place, make it official by registering your charity with the Charity Commission. This step applies to your charity if it is based in England or Wales, if its income is at least £5,000 per year, or if it’s a CIO.

 

If your charity does not yet have an income of £5,000 a year, remember to register when it does reach this point.

 

When you apply, you will need to disclose your charity’s purposes, its public benefit, proof that it fits the criteria for registration, name, bank or building society details, most recent accounts, contact details, trustee details, and a copy of your charity’s governing document. You should already have a lot of this information ready from your previous work in setting up your charity.

 

Here is the link for when you’re ready to register. Make sure you answer the questions in full and be as clear as possible to avoid any delays in the process.

 

 

Put your charity plans into action

 

Congratulations, you’ve set up your charity! Now it’s finally time to start running the activities you have been so carefully planning.

 

For more support and information on your journey of running a charity, you may wish to learn more about how to grow your charity, how to manage staff, or how to best support your service users.

 

 Charity Digital’s content and events cover a whole host of topics surrounding running a charity, focusing on helping charity professionals to use digital to maximise their impact.

 

Should you need digital tools or training to help you execute your plans, we also have a catalogue of technology for charities to access at donated or discounted rates – be sure to have a browse.

 

Most importantly, remember to always keep your cause front of mind, and don’t forget to balance this with the wellbeing of everyone involved in making your mission happen. Now we wish you the best of luck as you put your charity plans into action.