Most people start a not-for-profit organization because they have a passion for helping others. With a big dream and a small budget, it’s easy to get so caught up in good deeds that you forget about the business end of running an organization. Understanding how other nonprofits succeed and where they fail can help you avoid the same pitfalls.
What Percentage of Nonprofits Succeed?
As with any business, nonprofits might fail after the initial excitement of a launch date. Older reports estimate around 30% of charitable organizations fail after 10 years. The numbers fluctuate, depending on the economy and a variety of other factors.
Currently, one of the biggest reported challenges is staffing issues. Around 63.62% of nonprofits said they had trouble filling open positions. The best way to ensure success is to focus on what your not-for-profit company can do to ensure the organization has long-term health. Here are the top challenges and how to overcome them.
1. Finding Excellent Staff
The shortage of laborers isn’t exclusive to nonprofits. The lack of workers has been dubbed the “Great Resignation.” There are more open positions than there are people to fill them. Since many charities don’t have the funds to offer high wages and compete with big corporations, they may struggle to fill positions in high demand, such as technology positions.
Look for perks you can offer that for profit companies may not, such as extra time off or the ability to bring your child or dog to work with you.
2. Raising Enough Funds
The COVID-19 pandemic created a different global economy than prior to the pandemic. People spend less money than they did before and often focus on things that are lasting or essential. The way they donate to charities may have changed. Past donors may no longer be supporters of your cause or may have shifted their funds elsewhere.
Most organizations have changed rapidly since 2020 and must keep up with shifts in technology and the way people donate. About 70% of major donors reside in the United States, but may give around the globe based on causes they care most about.
3. Churning Staff
High staff turnover is a concern in the nonprofit industry. People may feel passionate about changing the world as they graduate from college and enter the workforce. Their philanthropic attitudes encourage them to take on a lower paying position to make a difference.
However, as reality hits and the bills pile up, they may move on to better paying positions in corporate America. One thing you can do is pay your staff the industry standard so they have no reason to leave for another position. Additional fundraising may help meet revenue needs to accommodate salaries.
4. Balancing Remote Workers
There’s been a shift in how many people work from home, but the advantages of having most of your staff work remotely is that you’ll save money on office space. You’ll also need resources to create a strong team.
The challenges of updating technology to allow for remote staff include getting data on the cloud and ensuring staff has excellent security on their home computers.
5. Preventing Fraud
When you’re starting a nonprofit, every penny counts. Making sure you have enough checks and balances to prevent employee theft is crucial to protecting your assets. Pay attention to any red flags that indicate fraudulent activity, such as checks made out to new vendors or unbalanced books.
Be careful who gets access to the organization’s funds. Also be aware of vendors you enlist help from. There are countless stories of companies paying a contractor upfront to build or renovate and never showing up to do the actual work. Once a huge chunk of money is gone, it’s almost impossible to get it back.
6. Keeping Up With Technology
A limited staff and funds means it can be difficult to keep up with rapidly changing technology. For example, you might have heard of ChatGPT, but aren’t quite sure how it might help your nonprofit run more productively.
Hire third-party vendors who serve multiple charities to reduce costs rather than hiring your own IT team. Look into taking on interns who will work for the experience and may understand the latest technology because they just studied it in school.
7. Ignoring Competitors
Even in the nonprofit sector, every charity has competition. Perhaps someone starts something similar or you’re just competing for funds from the same pool of donors. If you aren’t aware of the fundraising activities of your closest competitors, you could lose contributors and wind up with fewer funds than your organization needs to survive.
8. Lacking a Growth Plan
In the early days of founding a new organization, the focus is often on brand awareness and developing a vision. However, failing to create a long-term growth plan can leave the charity floundering as it grows.
Who will make the decisions after the initial founding? How many board members and what power do they have? How do you overcome cash flow issues? Have a Plan A, Plan B and even a Plan C to ensure you have no chance for complete failure.
Find Long-Term Success With Your Nonprofit
Sometimes the thin line between success and failure is determination to find a way no matter what. When you’re facing difficult times, lack of employees, cash shortages or any other challenges, remember why you started your charity in the first place. With a little focus and remembering your mission, you’ll be able to get through difficult times and come up with creative solutions.
Eleanor is editor of Designerly Magazine. Eleanor was the creative director and occasional blog writer at a prominent digital marketing agency before becoming her own boss in 2018. She lives in Philadelphia with her husband and dog, Bear.
