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Why Start-up Nonprofits Fail

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In my role at Purpose Aligned Consulting, start-up nonprofits seek my help. I love the energy of new organizations, the passion, the desire and the willingness to work. However, I am often saddened by the state that many of them are in when they come to see me.

I understand. I once was part of a start-up nonprofit. We were passionate. We created amazing programs. Threw fundraisers. Served the kids who needed us. We provided a great program and enriched the community. However, despite our love, our energy and our skilled program development, after five years were forced to close the doors. Here are a few reasons nonprofits fail- and how to avoid these common pitfalls.

1. No long term financial planning

So, you’re going to throw events? Waiting on that grant funding? Have a wealthy benefactor? These are all great ideas, but are they one-time tactics, or strategic plans? Running a nonprofit is running a business. If you don’t have a solid, diverse plan for generating income, you will fail.  Period.

If you haven’t done so already, make a business plan. Then use it! For useful resources check out the Grant’s Space list of templates, articles, and links.

2. Weak leadership

A strong nonprofit CEO or ED must have head for business, know how to manage money and raise funds. If you don’t like spending your days doing business development, accounting, and fundraising, you might not be best suited to running a non-profit.

But there’s hope! Weak leadership can be improved through capacity building and a robust team. Take classes. Recruit a kick ass board. Hire a consultant or business management employee. Consider a shared leadership model and release these tasks to others who are best suited to this work.

3. Competition

I live in a city that has thousands of great, effective nonprofits. Yet everyday, it seems like I meet someone who wants to start his or her own organization. If you have not already completed a competitor analysis, do it today. Be honest. Be brutal. And consider that you may need to shift, change, or merge your organization based on the results. I’ll say it again, running a nonprofit is running a business, and competition matters.  Here’s a worksheet to help!

4. Trying to do everything.

I recently met with a tutoring agency. Well, they said they were a tutoring agency. They also taught soccer, did sex education, provided mentoring, did college prep work, offered mental health services, had weekend activities, provided basic needs, and much more. At the same time, their volunteers were burned out, high school students had stopped attending, and they had no impact data for the services they were offering.  Eeek!

Instead of trying to do everything, develop solid data collections methods and use the information to find out more about your impact. Trimming an organization may be difficult, but organizations that do everything, end up doing nothing well. Find your sweet spot and work to improve it.

What other reasons have you seen for nonprofit failure?

Kerri Drumm, from Purpose Aligned Consulting loves helping start-up nonprofits stick around! Connect with her today for your free initial conversation and needs assessment.

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After fifteen years in the nonprofit sector, Kerri Drumm founded Purpose Aligned Consulting in 2014. She has experience on three continents, in two languages and on literally thousands of mission-driven projects and programs.