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The Goldilocks Stage for Nonprofits




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:

  • Diversified funding

  • Development plan

  • Strategic plan

  • 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.



Cheers,


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.


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