From $0 to $2 Million: 3 Traits of Growth-Oriented Nonprofits
What does it take to grow a nonprofit from a concept to a $2 million-plus revenue organization? A November 2016 study attempted to answer this question by surveying 200 social entrepreneurs funded by impact investing portfolios such as the Skoll Foundation and Silicon Valley Social Venture Fund. Even if your organization’s growth goals are relatively modest — at least for now — the study’s findings can help you operate efficiently and effectively today so you have a solid foundation on which to build.
The survey, Scaling the Social Startup, identified three traits that drive early-stage success:
- Strong teamwork. The stereotype of the successful charity driven by an obsessive “lone visionary” is a myth, according to the authors. Instead, most successful nonprofits are run by teams of competent, experienced managers. Such teamwork enables the organization’s executive director to focus on high-profile fundraising or strategic planning, instead of getting bogged down by day-to-day operations. Also important is having an active and engaged board of directors.
- Impact-oriented performance measures. In the past decade, “impact” has emerged as the key consideration for nonprofits concerned about their efficacy — and the public’s perception of it. So it should come as no surprise that a majority of the study’s subjects use outcomes to evaluate programs and initiatives. Those that track outcomes from inception reach a $2 million revenue budget faster than those that don’t, possibly because tracking promotes continual improvement and donors look more favorably on data-driven decisions.
- Access to capital. Organizations need to build a broad donor base so that they have adequate public support and, therefore, qualify as a public charity. But a single large grant is usually the catalyst for substantial growth, particularly for organizations that want to breach the $2 million revenue mark.
Ideas into action
Of these three traits, the first should be relatively achievable for most nonprofits. Even if you don’t have the funds to hire a high-powered management team right away, make sure you’ve enlisted at least a few experienced and dedicated volunteers you trust to execute the many daily tasks involved in getting a charity off the ground.
In the absence of a large paid staff, your board of directors will be instrumental in helping you steer the nascent organization in the right direction. So make sure you’ve recruited board members who are passionate about your mission but who also bring something practical to the table, such as fundraising experience or financial and legal expertise.
Impact-oriented performance measures are also easy for most nonprofits to adopt. In fact, it’s often simpler to make outcome-driven decisions from the start rather than try to retrofit another evaluation system that’s already entrenched. Outcomes measure how your organization’s activities have improved the lives of your clients or altered the nature of the problems you’re targeting — generally as evidenced by data. Although the nature and objectives of your programs can help you identify useful metrics, consider getting professional advice to ensure you’re using the most meaningful measures.
Unlike the first two traits, gaining access to capital is an ongoing challenge for most nonprofits — from start-ups to century-old institutions. But, as the Social Startup study found, a large grant can mean the difference between struggling to find your feet and shooting out of the starting gate.
Most new organizations have trouble gaining the attention of philanthropic foundations and other deep-pocketed funders, so an experienced fundraiser can be an invaluable investment. Look for someone with contacts at traditional grantmaking institutions, new social entrepreneur funds and government agencies. Also, your fundraising expert must have a record of writing attention-grabbing grant proposals that are actually accepted.
Whatever growth cycle stage your nonprofit is in, it can probably benefit from adopting the traits of highly scalable organizations. For help implementing these ideas and suggestions for other best practices, talk to your CPA.