You work extremely hard to see your nonprofit go. Most days, you yearn to see your nonprofit take off and make a better tomorrow for all. While this is the dream, the reality is a bit tougher, and making ends meet is not easy. The slightest shakeup can mean the difference between head-above-water and the reverse.
That said, there are nonprofits who have run their organizations into the ground. Whether on purpose or unintentionally, they ended up making serious mistakes that others can definitely learn from.
Hopefully, avoiding the list below will keep your organization running longer and, with a bit of luck, more prosperous.
Too many liabilities
Money is the starter for this list. When your nonprofit maintains more assets than liabilities, you would be hard-pressed to ever fail. Assets can be seen as physical currency, guaranteed to keep you in the black. Conversely, when your liabilities greatly outnumber your assets, your organization will most likely need a lifeline to be rescued.
Most often, this is done through the purchase of buildings. It could be a long time before that debt gets paid, and if there is a tight year, meeting mortgage obligations for both buildings now may put you in the red where you cannot recover.
Operating in the red
Speaking of red, many nonprofit founders open their organizations believing that they want to do good and make a difference. While the intention is great, they don’t really focus on ‘profit’ (as in keeping the organization running without debt) as for-profit companies do. While one measures success in currency, nonprofits focus on other outcomes. On occasion, this can be a problem when some nonprofit founders concern themselves solely on what they are consuming and not what they are doing. When this happens, it is the same as starving the organization.
Poisoning the revenue mix
Finding and developing the right mix of resources as revenue streams will always nourish a nonprofit. But if a nonprofit focuses too much on one revenue source and an overreliance on too many can really do harm to the point, it can be fatal.
Diversifying income is normal for nonprofits, and while it is a balancing act, it will keep the nonprofit moving forward. This could be a problem as over diversifying can leave you spread too thin. If one or more falls by the wayside, you will struggle to replace them and may end up with fewer revenue sources, which are easier to bring on board but may not mesh with your mission or cause. While you may look good by bringing in these new streams, damage to your brand may cause others to move away from your nonprofit. By the time that damage is done, it will be too late to save the organization.
Dehumanizing your donors
It was great when you first started and knew the names of every donor and more about their families, and in turn, they knew all about you and your cause and have supported you from the start. This is great until you receive many, many donors, and you lose that personal touch with them. If you are not careful, your nonprofit will slowly drift from knowing each donor and caring, to caring for donors, to understanding your donors less and less. Treating them like a number will surely lead to donor abandonment.
Unable to grow up
Young organizations die more often than older ones, mainly due to not having mature processes internally than the older nonprofits. A seasoned grant writer is more efficient and effective than a new one to the team. An executive director who knows which people to reach out to for assistance in growing the nonprofit will mature the organization quicker. Both of these experienced members will no doubt document their processes in order to hand them over when the time comes. This is how nonprofit organizations conquer the liability of newness.
Cutting the connections off
While operating in the red is one way to stop a nonprofit from lasting long, another is by lacking a connection with community players. Nonprofits need to maintain connections with donors, partners, suppliers, regulators, media, and sector advocates. When the pipeline of communication is cut off, the groundswell of support will slowly dry up. Each of these must be nurtured individually.
An organization’s greatest asset (one of them) is its reputation. Without a good image, the nonprofit may stand to lose face quickly. Whether by scandal, fraud, embezzlement, etc., the erosion of trust, the one currency every nonprofit needs to survive is permanently gone, it is only a matter of time before the organization folds.
Underinvest in your volunteers
Many nonprofits have been knocked down a notch or two in this scenario. Volunteers are vital to any nonprofit organization. They remain the lifeblood of support, outreach, brand reputation, etc. In order for volunteers to shine, smart recruitment, task matching screening, training with supervision, all must be done to support the volunteer. Additionally, open and positive communication, recognition, and evaluation are required for positive engagement.
Avoiding the above examples will definitely help keep you in the black and keep your nonprofit moving forward each day, on its way to achieving great success!