IF YOUR ORGANIZATION IS NOT GROWING 7% A YEAR, YOU’RE FALLING BEHIND OTHER NON-PROFITS
Tess Richey
Non-profits have enjoyed substantial growth over the past five years. In fact, on average, annual growth rates are 7%, double the rate of the economy at large. While revenue growth rates vary from sector-to-sector, if your organization is not keeping pace, we have a diagnostic tool that may be helpful in understanding why. It can organize thinking about your growth strategies.
Four reasons for slow growth
We see four primary causes for a non-profit’s slow growth. The good news is that most of these causes can be diagnosed with a bit of research and reflection. The bad news is that there is rarely one single cause…it is often a combination of several causes. That makes finding a solution more challenging. All the more reason to tackle the issue analytically.
Here are the common causes for slow revenue growth:
Current revenue strategies are correct but implementation is flawed.
For many non-profits, the mission is compelling. The revenue strategies (such as annual giving, major gifts, corporate sponsorship, and earned income) are sound. But the results are disappointing. In this case, the most common problem is either within the organization’s program offerings or with the fundraising team who may need more capacity or stronger management. You can determine how your program offerings fare with donors, funders, or clients by getting direct feedback from surveys, interviews, or other evaluation techniques. You can get a measure of your fundraising team by comparing their performance metrics against those of peer organizations.
Current revenue strategies are correct but require more time to work.
Sometimes your revenue plans are correct, your implementation approach is right, but results are slower than expected. It is possible that a good dose of patience is required. We have seen, time and again, pressure on development teams to achieve unreasonable revenue targets only to frustrate the fundraisers, create turnover, and perpetuate slow growth. You can determine how much time is reasonable for your revenue objectives by comparing your revenue metrics against standard benchmarks and by comparing your organization to others. A significant amount of information can be gathered from simply reviewing the 990s of organizations similar to yours and better yet, reaching out to peers in other organizations to compare notes.
Current revenue strategies are insufficient for growth over time.
It is also possible that you don’t have revenue strategies that will deliver the growth you want over time. In fact, many non-profits do not have a clearly articulated revenue strategy at all. One of the best ways to test if this is the cause of your non-profits weak growth is to build a detailed revenue plan which includes metrics benchmarked against peers. For most non-profits, there are at least a dozen revenue streams and each can be assessed individually. This will allow you to determine if your strategies have reasonable benchmarks or if you need new revenue strategies. It will also allow you to determine if you have over-extended and should focus on fewer revenue strategies.
Growth is constrained by mission and/or external conditions.
Finally, you may see your mission as vital, but your growth is dependent on sufficient funders feeling the same way. Non-profit sectors grow at different rates because community priorities and conditions change over time. You can’t control external conditions but you can recognize their impact on your planned growth. If you think these external conditions are affecting your revenue goals, you can slow your growth expectations. If you think the conditions may last for some time, you can adjust your mission to increase your opportunity for growth. If you think you can develop more fundable programs within your mission, that may be the path forward.
Here is a chart of these four causes and some common ways to manage them:
At Timberline Strategy, we help non-profit organizations grow. We offer support in developing revenue plans, assessing programs and fundraising performance for revenue generation, providing a “growth audit” as a component of your long-range planning, and assisting with business plans for specific areas of revenue generation. We offer these services in either a consulting engagement or customized workshop format. Let us know if we can assist your non-profit in this critical work.