THE FUTURE OF PHILANTHROPY | How Smaller Nonprofits Can Thrive and Achieve Resilience in a Changing Philanthropic Landscape

Throughout this year-long series, we’ve been covering a wide range of challenging issues facing development teams across the nonprofit sector. And it’s fitting that we end with a substantial segment on smaller nonprofits, because they make up the bulk of the nonprofit community: according to the National Council of Nonprofits, there are more than a million charitable nonprofits in America, employing 12 million people, and 97% of them run on less than $5 million per year.

No doubt, these are challenging times for all nonprofits, and smaller organizations may feel these challenges even more acutely, given constraints on funding and staffing. Yet, smaller organizations have their own unique strengths, and they are a critical source of support for their communities, which are counting on these organizations to find a path to sustainability and resilience.

Here are a few thoughts drawn from our panel discussion and across the entire Future of Philanthropy series:

• Size as a superpower – Smaller organizations can be much more flexible and adaptable than larger organizations, where staff work in silos and the change process can be slow and cumbersome. When a need or opportunity arises, smaller nonprofits can pivot quickly to pursue avenues for growth. And smaller organizations are often much closer to the communities they serve, which can create sharper, more actionable insights as well as stickier relationships. As a first step toward being more sustainable and resilient, it’s important for smaller organizations to take stock of what they do well and recognize that being small can actually be a source of strength.
• Integrating programming & philanthropy – At smaller nonprofits, the close working relationships of senior staff mean that programming and philanthropy can grow together in strategic fashion. The panelists in our roundtable all work in smaller organizations, and all are targeting robust growth in the coming years, partly by finding that “sweet spot” where programming need and opportunity meet funder interest and passion. Smaller nonprofits are uniquely positioned to proactively create such opportunities to fuel growth that’s sustainable.
• Individual giving at all levels – While the entire nonprofit sector grapples with America’s increasing wealth concentration and the rise of the mega-donor, it’s important that smaller nonprofits not give up on individual small-dollar donors. Because smaller nonprofits are so close to their communities, they can have an advantage in grassroots giving and are often ready-made for strategies like crowdfunding. These are often unrestricted funds, improving the flexibility of the organization. And a pool of steady, loyal donors may be the best place to start cultivating major gifts, rather than cold-calling people unfamiliar with the organization and its mission, hoping to find that one game-changing, mega-donor.
• Technology is an essential enabler – Small teams seeking broad financial support and deep community engagement will need leverage, and the best way to get it is through technology. Funding tech resources can be a challenge, but there are many powerful, cost-effective platforms available to help with things like email marketing, wealth screening, and other key tasks. In addition, for bigger-ticket items like CRM systems, pursuing capacity-building grants and in-kind donations of tech services can help smaller organizations acquire the resources they need. But if the goal is to grow your impact—and have an effective individual giving program—then it’s hard to see a way forward without technology being part of the strategic plan.
• Expanding income opportunities – One of the funding strategies that too many smaller organizations leave on the table is earned income: things like licensing, service offerings, merchandise, or social enterprise projects. There are tax rules for how much “unrelated” income a nonprofit can earn, but within the scope of what’s allowed, reliable earned income streams can help offset pressure on philanthropy and provide an added dimension of financial flexibility.
• Collaboration is the future – There is power in numbers, and through collaboration, smaller nonprofits can improve access to resources while potentially extending their impact. As funding models shift, particularly on the foundation side, smaller organizations will have to get comfortable with things like joint program development and funding, and shared governance and oversight. Shared back-office resources in areas like HR, legal, and technology can be a cost-effective way to add capacity. Whatever ways your organization may look to collaborate with others to extend your impact, it’s clear that the “go it alone” era for smaller nonprofits may be coming to a close, giving way to a new era of interdependence.
• Listening to the community – Smaller nonprofits are very close to the communities they serve, which is a critical source of market intelligence about needs and opportunities. The panelists in our roundtable all said that their growth strategies were heavily influenced by feedback and insights gained from the communities they serve. So, community engagement needs to be front and center in any plan aimed at fundraising sustainability and growth.
• Board composition and function – Different organizations will need different things from their boards – whether an ‘advisory’ board, a ‘working’ board, or a ‘strategic’ board. Some organizations may opt for a steering committee, which would be distinguished from a board by not having strict governing responsibilities, such as fiduciary responsibilities. All small nonprofits share a need for thoughtful, transparent dialogue with their boards, which is only possible when board roles, responsibilities, and expectations are clearly defined up front. For six specific priorities in building and managing boards, see ALG’s governance article from a few months back.
• Break out of the scarcity mindset – Just because an organization is small, that doesn’t mean it can’t be creative and innovative. In fact, smaller organizations may be better positioned than larger ones to rethink and reorient to meet new challenges. Even if your organization may feel constrained in financial and operational resources, you can still operate out of an abundance of creativity and innovative thinking—a resourcefulness that lets you imagine new paths to outgrow scarcity and create a sustainable, resilient organization.

In our roundtable panel, all of our participants were enthusiastic about the growth possibilities for their own organizations, and those of similar size and scope. Far from being pollyannish, they all recognized the challenges ahead, but they also offered insight into how smaller nonprofits can build a strategic roadmap to financial sustainability and greater impact.

One of our panelists said that his most important lesson in fundraising was that he was a “storyteller.” And I think that smaller nonprofits perhaps need reminding of the most powerful parts of their own story.

Precisely because they are smaller, these organizations are more flexible and adaptable, with a more direct path to harnessing their creativity. They can pivot and innovate quickly. They can engage deeply and personally with their communities. They can collaborate and succeed through interdependence more easily.

Today, as the entire nonprofit sector restructures and realigns, smaller organizations need to reimagine themselves, starting from this position of strength—recognizing that they are a big and necessary part of the bedrock of American life.

Contributing author:

Tim Child, Founding Senior Associate, Aspen Leadership Group

NEXT UP on October 14: We wrap up this year-long series on the future of philanthropy with insights from ALG’s Founding Partner, Ron Schiller, and Philanthropy Practice Lead, Don Hasseltine. They’ll review the vast landscape of philanthropic challenges and opportunities we’ve covered so far, and offer their thoughts on where the profession, and the nonprofit community, goes from here.

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