Identifying strategic growth trends for small nonprofits

A number of years ago I was invited by a small youth justice organization in New York City to help them develop a growth plan to reach and sustain a $2 million+ budget. The organization had incredible, proven, high-impact programs, and they were bringing in funding consistently. But the executive director was drowning in direct reports, board management, and putting out organizational fires. She felt like the organization had been stuck, plateaued at just over $1 million for years. She felt unable to gain her footing, to expand the organization’s programming to meet increasing needs, hire the staff she needed, or even give her current staff the benefits and salary they deserved. 

Our work together was about how to get unstuck and how to grow in a way that could actually be sustained. My plan was to conduct research into best practices around growth for small organizations (under $2 million), and to interview the organization’s funders to gather qualitative insights to flesh out what the research showed about growth strategies and tactics. My specific question: What are the factors that an organization at this stage in its lifecycle should consider if it is interested in sustainable growth?

So why am I sharing this? Because what I found really surprised me. While some research existed exploring growth strategies for mid-sized organizations, I could find almost nothing detailing best practices and growth strategies for small nonprofits. Based on everything that I was reading and the funders I was talking to, conventional wisdom seemed to be that the movement and growth of small nonprofits is random and unpredictable, like throwing spaghetti against a wall. 

Yet as I dug deeper and spent time interviewing and studying the financials, staffing, and board structure of more than a dozen organizations that had grown from six to seven-figure budgets, what I found didn’t comport with conventional wisdom. I’ve since built on that initial research, working closely with over three-dozen small nonprofits, as a board member, professor, strategic planner, and/or consultant.

What I’ve found is that there are in fact meaningful patterns and similarities in the strategies used by small organizations as they seek to scale to 7-figures.I’ll lift up three of the most consistent commonalities here. 

• What got you here won’t get you there.  Growth beyond $1 milion is an important line of demarcation in the lifecycle of a small organization. For leaders who are founders, or have led the organization in a certain way for a long time, the irony is that the success of certain strategies and approaches often results in a continued reliance – sometimes overreliance – on those strategies and approaches beyond their usefulness. We may resist important changes in strategy and operation because the changes make us feel clumsy and vulnerable. The reality is that a $1.2 million organization is not simply a $600,000 organization with more money. What is required to remain operationally healthy and financially stable at $600,000 is different in important ways than at $1.2 million. As organizations grow into 7-figure budgets, they become a different type of organism, requiring different thinking about organizational design, leadership, and allocation of resources. 
• Having a strong bench is critical. Almost all of the executive directors that I’ve spoken with as part of my research into this topic have noted the critical importance of having a strong leadership team. People at the director level should allow the executive director to “get out of the weeds” and move more fully into a strategic fundraising and relationship-cultivation role. While the specific constellation of leadership staff varies between organizations, an effective and empowered leadership team can be a saving grace for both the executive director’s emotional health, and the long term capacity of the organization. Leaders describe the often seemingly intangible, but very real, way in which their strong and high-quality leadership team served as: (1) thought partners to help navigate increasingly significant and strategic organizational decisions, (2) people to take ownership of entire areas of work off of their shoulders, and (3) buffers between them and the rest of the staff.
• The nature and structure of fundraising changes. One of the subtle but noticeable trends that has been common in pretty much all of the organizations that I’ve researched or worked with is that as the executive director’s fundraising role expanded and became more nuanced, the rest of the organization also became more involved in fundraising. For the nonprofits in my initial study, a charismatic executive director often shouldered the brunt of the fundraising burden in the organization’s early stages. However, as the organizations grew, that burden became too much for the leaders to handle along with their other expanding roles. The most effective solution to this problem was to both grow the development staff and make board engagement in fundraising more explicit. On the board level, this meant that the board began to take ownership over its role in expanding the organization’s network and cultivating new supporters and partners.

I share all of this because I believe that the notion that there is neither rhyme nor reason to the movement and growth of small nonprofits can have serious consequences. Most often, it translates into a reluctance on the part of funders and donors to invest in small nonprofits, and a concern that investments that are made may not result in true impact. It can also make it difficult for the leaders of small nonprofits to get buy-in from their boards to make the types of changes to their staff, board, and infrastructure that may be required in order to support healthy growth. Ultimately, there is a method to the madness of growing a small nonprofit.