Starting a nonprofit organization is seen as something noble or admirable, with many individuals or groups looking to establish one as a way of making a positive impact on society or leaving a legacy for future generations. However, many of those who seek to create nonprofits often lack the complete knowledge or a concrete plan on how to run it, which can set them up for failure and unable to make significant impacts on the causes they care about.
According to Cathryn L. Dhanatya, Ph.D., co-founder and CEO of Growing Good Inc., she has observed this in a large majority of people she talks with about starting a nonprofit. For example, most are uninformed about the fact that they may need to register to fundraise in 41 states plus Washington DC, and it costs a significant amount annually to maintain that registration. Furthermore, nonprofits that raise over a certain financial threshold may need to be independently audited annually, which is another huge operating and personnel cost. Dhanatya says the lack of knowledge in these things serves as a major stumbling block for scaling and sustaining these organizations.
There are five common problems she’s identified in the sector, namely lack of understanding about the costs involved, unrealistic time frames for projects, lack of familiarity with their donors, overreliance on the ‘spray and pray’ approach, and not being able to articulate their value proposition and mission across their organization.
As such, Growing Good is working to inform nonprofits and the people behind them about the various realities in the nonprofit sector, equipping them with the skills and training to succeed and maximize their positive impact on society.
Dhanatya says this is especially important with numerous headwinds in the sector, such as the present volatile economic climate, with various business and geopolitical shocks resulting in donors reducing their giving budgets as well as being more meticulous in choosing who they give to.
She says that nonprofits should think in the longer term, such as diversifying their sources of funding. This includes not just relying on one type of donor, as well as creating more stability over time, making sure funding and operations are well-aligned. While nonprofits dream of a six- or seven-figure donation, many of them don’t have the infrastructure for that. In other instances, a nonprofit might go viral due to being mentioned or linked to a celebrity, but their website isn’t equipped to handle the sudden influx of visitors, causing it to go down and losing out on donors. It’s extremely hard, if not impossible to change a donor’s first impression of an organization, so it’s important to make the experience as seamless and positive as possible.
“My work goes beyond instructing nonprofits on how to raise money,” Dhanatya says. “I help them realize the need to have the infrastructure to make sure that donors have a good experience with them, as well as how to cultivate and sustain donors. This includes how to speak to them and create value propositions that resonate with them, so that they feel like they’re getting a benefit back. There are also numerous regulatory concerns, especially in the US, so they need to protect themselves against certain types of liability. These can be really daunting, especially for people who just want to do good work and are unfamiliar with the realities of the nonprofit space.”
Dhanatya says diversification is incredibly important for nonprofits, especially in today’s market. This diversification includes having different sources of funding, such as various types of events and approaching multiple sources for grants. Sticking to just one method can be very risky, as if this avenue dries up, then, chances are, the nonprofit goes under.
She also says that smaller nonprofits would benefit from getting fewer but larger donations rather than numerous smaller ones, as the latter is more time-consuming and expensive to maintain and manage. As nonprofits are required to keep records of all donors and ensure their data is secure, a single $5,000 check is easier and more efficient to process compared to 1,000 donations of $5 each.
“I’ve also observed that, when people say that they want to start a for-profit business, others assume that they have a business plan in place, with a concrete product or service that they will provide. They also need to have some idea of how to obtain capital, how to create a revenue stream, and how to manage costs to turn a profit. However, they don’t expect that from nonprofits. I’ve met so many people who just want to do something good and go all-in without a plan. I want to educate people that a nonprofit leader should have a business mindset in order to ensure their organization’s sustainability,” Dhanatya says, adding that sustainability includes setting up relationships with multi-year donations, to ensure a steady income instead of having to constantly fundraise every single dollar, every year.
Another important factor that nonprofits need to consider is the source of their donations. For example, a cancer charity accepting donations from a tobacco company would be an incredibly bad look, which could end up ruining the charity’s reputation. In the world of nonprofits, reputation and trustworthiness are paramount, as donors will not give money to an organization deemed toxic or suspicious.
“I really believe that people want to do good in the world, and I want them to be successful,” Dhanatya says. “But, I want them to do it the right way, so that they can be successful and sustainable, not just a flash in the pan. They need help in figuring out how they can maximize their impact, and it’s not always starting a nonprofit. There are other ways, such as helping raise money to donate to an existing nonprofit for a specific cause. They can also sit on a board of a foundation or a hospital, providing their time and expertise. There’s different ways that people can realize their passion and help out, resulting in actual, tangible, positive impact to society.”
