The role of nonprofits has always been to generate social change that helps steer us to a better world. While many nonprofits start with compelling goals and a can-do attitude, it’s usually not enough to keep the organization alive.
Sure, it takes money, people, and resources to begin a nonprofit, and work towards its mission. There is considerable work involved with the startup phase as well as the operations once the organization gets going, and the inertia needed to continue.
Even with the great amount of hard work and passion that goes into the birth and life of a nonprofit, many of these organizations don’t survive. Was it a bad idea, or a bad organization? A nonprofit may have had a good start but lacked what it needed to be sustainable.
Current Nonprofit Status
The National Center For Charitable Statistics reports that in 2016, there were approximately 1.54 million nonprofits in the US, with an increase of 4.5% from the prior ten years. These nonprofits contributed $1.047 trillion to the US economy in 2016.
No matter what the mission, it’s always important to make sure that the organization is well-run and operates efficiently. Donors should feel like they are contributing to an organization that is stable, understands its mission, and makes good use of resources. If they don’t, they’re likely to cease giving.
Reasons For Nonprofit Failure
While many long-term nonprofits have their administrative and organizational processes in place, there are also those who don’t.
- No clear focus. Frequently, nonprofits start out with a good mission statement but fail to create a plan to make that mission a reality. Many focus on the immediate but don’t plan for the long haul so that the nonprofit can focus on revenue and continue to thrive and grow.
- Strategic planning—an organization that “plays everything by ear” and improvises as needed isn’t paying attention to future planning. A written strategic plan details the organization’s performance, as well as leadership and accountability. Quarterly reviews can help stay on course and make adjustments as needed. Without it, and adhering to the strategic plan, an organization can stray from its original mission. Donors will eventually shy away from a nonprofit that doesn’t observe its own mission and follow a strategic plan.
- Lack of experience and knowledge of financial matters. Of course, the mission is always important, but so is care and attention to financial matters. If the board, staff and other members aren’t paying attention to the nonprofit’s finances, or don’t have experienced members to do so, financial failure can take out the organization quickly. This is also the case when the founder continues to run the organization long after it’s been established.
- Failing to diversify income and revenue. Relying too much on one source of funding, such as unreliable government grants or major individual donors, can make continuing operations difficult if one should disappear.
- Missions that overlap. While both staff and employees are passionate about helping those in need, not everyone has the experience to run a nonprofit successfully. That’s why it’s vital for everyone to not only be on board with the mission but have a clear vision of how to accomplish it. Sustainability happens when everyone is working together on increasing revenue and addressing any issues that may interfere with the mission.
- An inexperienced Board of Directors, and other essential personnel. The board of directors is directly responsible for the financial health of the organization. However, not everyone on a nonprofit BOD has the business acumen to make a nonprofit successful. Without the experience to run an organization well, financial deficiencies may not become apparent until they are too difficult to overcome.
- Insufficient asset tracking. For nonprofits that have the equipment or other necessary assets, it’s important to know what they have, how much it costs, who’s using it, and other inventory-related queries. Most use spreadsheets, which aren’t comprehensive. Because these assets are purchased with nonprofit funds to use towards the mission, keeping track of everything is vital to prevent assets from becoming “lost” so that the organization always knows where their equipment is at any given time. A tracking system like AssetPanda can help a nonprofit keep track of assets easily.
The National Association of Nonprofit Organizations & Executives (NANOE) also offers an in-depth look at the reasons that nonprofits don’t last.
What Makes A Successful Nonprofit
- Agile, or adapting to changes quickly (you can read a primer on Agile Management here)
- Staying focused on the mission
- Being donor-centric
- Identifying and developing diverse sources for funding
- They inspire others as well as mobilize volunteers, staff and donors
- Have the digital savviness needed and quickly adapting to new technology, including fundraising online and using mobile donation methods (i.e., smartphones and tablets)
- Continuously improving and listening
- Setting achievable concrete goals
- Be willing to ask for money
- Take big risks
- Master the organization rules
These aren’t complete guarantees of success but are excellent guidelines for those considering starting a new nonprofit.
Provenza Law Can Help With Starting Your Nonprofit
We have over 20 years of experience helping major nonprofits in and around the Chicago area with their legal matters. Along with comprehensive knowledge of Illinois nonprofit law as well as best practices for growing nonprofits, Attorney James C. Provenza can help with everything from bylaws, mission, chargers, and other organizational documents to tax exemptions and compliance are properly prepared and submitted. Contact our office at (847) 729-3939 today, or use our online contact form. We look forward to helping ensure that your organization is successful.