Nonprofit finance study finds majority of nonprofits plan to grow within the next year

Written on Aug 17, 2017

A new study indicates a continuing trend of nonprofits seeking organizational growth. While scaling up is a goal for about 80% of the nonprofits surveyed, the study identified some common considerations that should be taken up before engaging in serious growth, such as the accompanying baggage of increasing administrative complexity, difficulties with risk management, and ensuring compliance.

The Nonprofit Finance Study: Managing Growth, was conducted by Abila, a provider of software and services to nonprofits, associations, and government entities.

"Approximately 80% of surveyed nonprofits say they plan to grow in the next 12 to 18 months," said Dan Murphy, senior manager of fund accounting strategy for Abila, and study co-author. "However, oftentimes, with growth comes increased complexity. For example, managing risk, maintaining compliance, and retaining an organization's unique culture becomes more challenging as organizations adopt a wide variety of growth strategies. Those nonprofits that understand and plan for growth now and in the near future will be primed for success."

Key findings:

  • Growth is broadly defined, but very important for nonprofit organizations. More than four-in-five survey respondents say growth is (at least) very important, and nearly half say it is extremely important. Yet, growth can mean different things to different people, with some defining it by an increase in services and others by an increase in funding.
  • The search for revenue in order to grow is constant. More than half of the survey respondents state that during the remainder of this year (2017), they will apply for new grants, look for new ways to generate revenue and increase fundraising efforts. Seeking new opportunities for grant funding is the top strategy for growth, with more than half saying they are very likely to do this as they grow strategically.
  • Financial professionals worry about the impact of growth on budget planning and training. Around two-thirds say budget planning and training of new staff are at least moderate, if not major, challenges of an organization's growth.
  • Risk management becomes more challenging as organizations grow. Sixty-two percent say as their organization grows, their ability to manage risk becomes somewhat or much harder. This is especially true among organizations with at least 500 employees (75%) or with at least 20 finance employees (77%). And, while virtually all express some level of confidence in the ability to manage risk, just 27% are very confident.
  • Increased fraud risks are a concern to one-in-three. Though most do not think their organization's growth opens them up to greater potential for fraud or accusations of fraud, 33% do think that. Among organizations that bring in at least $10 million in revenue, 42% say the same, as do 48% of those in organizations with at least 500 employees.
  • Growth changes culture and relationships. While many think relationships with major funders and the organization's board improved after growth, they are far more mixed when assessing impact on morale, ethics, and transparency within the organization. Younger employees are much more likely to equate growth with a positive increase in morale.

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