I recently had the opportunity to meet with a small, grassroots nonprofit organization that was justifiably proud of its growth. It had proven organizational sustainability by reaching the 10-year milestone and had proven capacity by quintupling its annual budget since its inception. And, the organization had a current grants strategy that was for a larger amount than the entire annual budget during its first years. However, it still operates on an annual budget of less than $500,000—not one of the “big guys,” but still quite successful.
This got me thinking about the fine line between success and failure for small nonprofit organizations. Contrary to Ben Carson’s claim that 9 out 10 nonprofits fail, statistics from the NCCS/Urban Institute tell us, “Over the five-year period from 2000 to 2005, 16% of organizations that filed IRS Form 990s in 2000 failed to file in 2005. This means that they either dropped below the $25,000 filing threshold or went out of business.” So, what did the organizations that thrived do differently from the organizations that failed, and what does this look like for a smaller organization?
I think that it comes down to this:
Successful organizations expand their passion for the mission to include passion for the organization.
Passion for the nonprofit organization includes activities that devote time to more than mission and programs. These activities include engaging a working board, developing a five-year strategic “business” plan, developing a grants strategy, investing in tools and staff, and collaboration with other nonprofit organizations. There are a plethora of articles, webinars, and resources on each of these activities. I suggest using GrantStation’s free PathFinder tool as an aid to your research, and investing in GrantStation’s Online Education webinars. I also found this blog on “Budget Planning: 5 Reasons Why Nonprofits Fail Financially & How to Avoid Them” by the National Executive Service Corps very informative.
The small organization that I met with, over its 10 years of existence, moved from all-volunteer to employing one full-time and one part-time staff, invested in CRM donor software and grant research and management software, and changed the makeup of its board to include both those with experience in the core mission and individuals with expertise in marketing, systems, banking, business, and community organizing. They acted in a transparent fashion, keeping donors apprised as to their expenditures for overhead costs, and made sure to explain why these expenditures would ultimately support the mission.
At GrantStation, thanks to the State of Grantseeking Survey and Reports, we can quantify the differences between a very small-sized nonprofit with a budget under $100,000 and a small-sized nonprofit with a budget between $100,000 and $500,000. In other words, what is different between a very small organization that may not have the capacity for sustainably and a slightly bigger yet still small organization?
Of course, budget is the driving factor—more money means more ability to hire staff and spend time on support activities beyond mission programs. Here is how this data looks from a demographic and grantseeking activity point of view, starting with the median annual budget size.
The increase in budget size didn’t happen overnight; you can see that very small organizations are generally younger than small organizations.
The increased budget sizes reported by small organizations turned into greater numbers of staff, compared to very small organizations.
The increase in staff sizes is reflected in greater overhead and administrative costs for small organizations than for very small organizations. Investing in organizational infrastructure will indirectly support mission.
The bigger budget and staff sizes of small organizations translated into more time to dedicate to grantseeking. Organizations with small budgets submitted more grant applications and won more awards than did very small organizations. And the median largest award size went up quite a bit as very small organizations grew into small organizations.
Most grantmakers more frequently funded small organizations than they funded very small organizations. This was often due to the correlation between budget size and organizational age; grantmakers interpret age as a measure of organizational sustainability. The one exception to the rule of thumb is “other grant sources.” These funders include religious organizations, the United Way, donor-advised funds, civic organizations, and tribal funds, all of which are often willing to invest in the success of younger, smaller, local organizations.
Organizational sustainability, capacity, and growth really are not buzz words limited to describing big million-dollar organizations. A small organization can demonstrate all those qualities and be successful within its scope. Just remember, success comes from passion for both mission and organization.
Ellen Mowrer is president and COO of GrantStation, a premiere online funding resource for organizations seeking grants throughout the world. Providing access to a comprehensive online database of grantmakers, GrantStation helps nonprofit organizations, educational institutions, and government agencies make smarter, better-informed grantseeking decisions. GrantStation is dedicated to creating a civil society by assisting the nonprofit sector in its quest to build healthy and effective communities.