You’re ready to start your great nonprofit. You have visions of community leaders from blocks around knocking at your door asking to participate in your great project. You know who your board members will be, and it is looking good. You’ve started on your marketing plan. Now, you are sitting down to put your budget together, and you happen upon the line 17 on IRS form 1023 “Compensation of officers, directors, and trustees.” What you put in that little box could make the difference between a particular funder giving you money or not; so, choose wisely.

As you plan out your nonprofit business plan, you’ll probably find several areas where you would benefit from
staff presence. It is a known fact that salaries and benefits are the highest allocation in any business’s budget. However, I would caution you against starting your nonprofit with lots of staff members. Most nonprofits operate with the support of volunteers for the first few years. Also, it’s more appealing to funders that their financial contributions go directly to supporting the projects of the organization and not just to salaries.

One of the first things you should do, before setting a rate, is write a job description. Start with what will likely be your job the Executive Director’s job description. Things that should be included in this job description: highlight the top skill levels, educational background, and previous work experiences needed to fulfill this position successfully. Don’t forget to include future expectations for this position. At the moment, you are looking at it as your position. One day you’ll move on, and you’ll want to be sure to have considered how the position should evolve. Also, consider your organization’s operating location. If you are in a major metropolitan area, then that may justify raising your salary slightly over the average.

Finally, do some research. Find out what other organizations are paying for the same position with similar skill sets and regional location. The National Council of Nonprofit Associations has a list of several nonprofit salary reports you can review; please note some may be for sale. Or you can browse through the classified section of your local newspaper to see what salaries are being offered.

Important point here is being diligent and fair. You don’t want to make your organization top heavy.

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