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Starting a nonprofit thrift store gives your community access to essentials at low prices. At the same time, it allows you to raise money for an existing (or your own) nonprofit organization.If you’re interested in opening a nonprofit thrift store, there are essentially two ways to go about it. One is to start your own nonprofit and open the thrift store under your organization’s name. Another is to partner with an existing nonprofit and use the proceeds of the thrift store to help fund that organization’s mission.Either way, there are a number of steps you’ll need to follow to get a nonprofit thrift store up and running. Here’s what you need to know.
What Is a Nonprofit?
A nonprofit is an organization formed to serve the public good. It uses any money it earns to further its mission and fund its programs rather than enrich its founders or directors. Nonprofit organizations receive tax-exempt status from the Internal Revenue Service (IRS). A nonprofit thrift store is a retail establishment operated by a charitable organization for the purpose of fundraising. Nonprofit thrift shops are typically staffed by volunteers and sell secondhand goods that have been donated by the public. This allows them to keep operating costs low and sell items at low prices. Any income leftover after covering the store’s expenses is given to the sponsoring nonprofit to help further its mission.Recommended: Starting a Nonprofit in California in 8 Steps
For-Profit vs Nonprofit Thrift Stores
There are actually two types of thrift stores — for-profit and nonprofit. While they look and function in similar ways, there are also some key differences. Here’s a side-by-side comparison.
For-Profit Thrift Store
Nonprofit Thrift Store
Tax exempt
X
✓
Must be sponsored by a nonprofit organization
X
✓
Profits are distributed to owners
✓
X
Purpose is to create wealth for owners
✓
X
Purpose is to raise funds for a nonprofit organization
X
✓
Can raise money through donation-based crowdfunding
✓
✓
Can receive a grant
✓
✓
Can take out a small business loan
✓
✓
Starting a Nonprofit Thrift Store in 7 Steps
What follows is a step-by-step guide for how to start a nonprofit thrift store.
1. Write a Business Plan
Whether for-profit or nonprofit, the foundation of any successful business is a well-thought-out business plan. Keep in mind, too, that if you’re looking to partner with a larger organization, that organization will likely want to see your business plan when considering your proposal. Your business plan should clearly lay out how your thrift store will address an unmet need, where your store will be located, where your funding will come from, and how you will get the word out about your store.
2. Establish Your Nonprofit
If you’re creating a new nonprofit for your thrift store, you’ll need to establish your organization. This requires choosing a legal structure, as well as putting together a board of directors who will make day to day decisions on how to run the organizations. You’ll also need to file articles of incorporation with your state and apply for 501(c)(3) status with the IRS. Since there are multiple steps (and a fair amount of paperwork) involved in setting up a nonprofit, you might want to enlist the help of an attorney. You may be able to find one who will offer their services at a reduced price or pro bono.Recommended: How Much Does It Cost to Start a Nonprofit?
3. Choose Your Thrift Store Type
Some thrift stores offer a wide variety of products, everything from clothing to tools to furniture. Others specialize in one type of product, such as clothing and accessories or home furnishings. When deciding whether to generalize or choose a specialty, consider the needs of the community. You may also want to look at what competitors are doing and if there is a gap in the current offerings.
4. Secure a Location
Ideally, you'll want to find a space for your nonprofit thrift well ahead of when you plan to open so you can use it to receive donations. When scouting out your options, see if you can find a location that already functions as a retail store, has good lighting, convenient parking, a display window, and is the right size to accommodate the inventory you will sell (without being overcrowded). Unless you can find someone who will donate a space, you’ll also want to make sure the rent is affordable.
5. Accumulate Inventory to Sell
Consider advertising for donations to stock your store. If you don’t yet have a space, you may want to schedule a pick-up day when people can put donations on the curb and you can drive around and pick them up.Other ways to get inventory include:
Going to bulk thrift store distribution centers that sell used goods by the pound
Checking local listings for storage unit auctions.
Going to local yard and estate sales near the end of the sale and offering to purchase the remaining items as a lot.
6. Set Up a Payment System
You can keep it simple and only accept cash or checks at your nonprofit thrift store. However, customers generally like the convenience of paying by credit or debit card. This can make setting up a payment system and paying the transaction fees well worthwhile. To be able to accept payment by credit or debit card, you’ll need to apply for and get approved for a merchant account with a credit card processor. Small shops can typically process credit and debit transactions using an app on a tablet.
7. Plan and Publicize Your Grand Opening
Once you set your opening date, you’ll want to start getting the word out two to four weeks ahead of time. Consider printing flyers, running ads, spreading the word on social media, even sending direct mail postcards. A week before opening day, you might also send a press release to local media outlets so you can be sure to attract a crowd.
Ways to Fund a Nonprofit Thrift Store
Before you start bringing in funds through your thrift store, you'll likely need funding to get it up and running. Here are some funding options to consider.
Crowdfunding
There are many different types of crowdfunding, but the one most used by nonprofits is donation-based crowdfunding, which works by asking large amounts of people to donate small amounts of money. You can launch a crowdfunding campaign to raise money specifically for your thrift store, or you might simply ask for general donations to your organization.While donation crowdfunding can be a low-cost and effective way to reach potential supporters all over the world, keep in mind that crowdfunding platforms typically charge fees and it can take a fair amount of time and effort to create a compelling and successful crowdfunding campaign.
Donations
In addition to inventory donations, you may want to seek out cash donations from individuals and local businesses to help cover your store’s overhead and day-to-day operating expenses. If you don’t have one already, you’ll want to create an online donation page for your nonprofit that enables recurring donations. Some ways to increase the support you get from individuals and businesses include:
Promoting your cause on social media
Leveraging text-to-give campaigns
Asking for donations at community events
Mailing out fundraising materials
Hosting charity events
Organizing peer-to-peer fundraisers
Small Business Loans
Many nonprofit organizations don’t realize that they may be able to qualify for a small business loan from a bank, credit union, or online lender. When applying for small business loans as a nonprofit, you typically need to provide financial documentation that proves your organization has sufficient revenue to pay back the loan. Because nonprofits are limited in how they can raise money, you may need to secure your loan with assets your nonprofit owns.
Compare Business Loan Rates
You can use a nonprofit business loan or line of credit to help get your thrift store up and running, cover ongoing operating costs, or smooth out seasonal dips in cash flow. To find a loan at a cost your nonprofit can afford, consider using an online loan search tool. With Lantern by Sofi’s online lending platform, for example, you can quickly get access to multiple loan options matched to your organization’s needs and qualifications with just one application.
Frequently Asked Questions
How much does it cost to start a nonprofit thrift store?
Can you run a thrift store as a nonprofit?
Is owning a thrift store profitable?
Tax Information: This article provides general background information only and is not intended to serve as legal or tax advice or as a substitute for legal counsel. You should consult your own attorney and/or tax advisor if you have a question requiring legal or tax advice.
Photo credit: iStock/JLco - Julia Amaral
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About the Author
Lauren Ward
Lauren Ward is a personal finance expert with nearly a decade of experience writing online content. Her work has appeared on websites such as MSN, Time, and Bankrate. Lauren writes on a variety of personal finance topics for SoFi, including credit and banking.
