What is the right size for a nonprofit? Knowing what the right size is for YOUR nonprofit is always an ongoing conundrum. There is no standardized scale for nonprofit organizations. We often describe small organizations as having an annual budget under $1 million. Research tells us that about 95% of nonprofits in North Texas are under $1 million.
On the other end of the scale, some of the largest nonprofit organizations in the U.S. are:
American Red Cross, $1.2 billion
Boys & Girls Clubs of America, $2.5 billion
St Jude Childrens Research Hospital $2.3 billion
Salvation Army $2.3 billion
Why the Size of a Nonprofit Matters
Many nonprofits start out small, bootstrapped by the founder and their family and friends. Other organizations have the benefit of support from someone with financial capacity and a passion for the mission.
If a start up nonprofit shows no sign of growth over the first few years, then donors, especially foundations, might wonder if this effort is a passion project for the founder and therefore, not deserving of their funding.
Private and family foundations will often look at a budget size to determine if an organization qualifies to apply for funding and to set the grant award amounts. Many foundations will limit grant award size to a percentage of the annual budget. For example, if the operating budget is $500,000, then a funder is unlikely to award a $250,000 first-time gift. Funders want to avoid being a majority supporter. I serve on several grant review committees, and typically see grant limits of less than 10% of the annual budget.
When to Grow
As a nonprofit evolves and matures, the question of size must be addressed. What would more money mean for your organization? More staff? Bigger and maybe multiple facilities? A bigger geographic footprint? What is the capacity of your board and executive team to lead and manage?
Here are a few examples of when a nonprofit needs to plan for growth:
If your organization sees an unmet need in the community
If your organization has outgrown the current building
Funders are interested in supporting your growth
Other nonprofits are interested in partnering
However, bigger is not always better, nor is small the best solution. Expanding programs to just show growth is detrimental to the nonprofit. Does your organization have a strategic plan that lays out a path for growth and success. If not, then it’s time to develop a strategic plan to guide the organization.
What resources are needed to get to the next level:
Staff, volunteers, and engaged board.
Planning for growth and success will lead to being the right size at the right time to better carry out your nonprofit’s mission.
Michelle Crim, CFRE
Dynamic Development Strategies can help. We offer coaching, grant writing, and fundraising services for our nonprofit clients. We specialize in small to mid-size organizations because we understand your challenges. Please contact us for more information.