Giving Compass' Take:

• Nonprofit Quarterly explores how smaller nonprofits can scale in a smart way. Their study of 3,500 organizations found that adaptability and a big-picture approach to funding are keys.

• For those thinking about taking that next step, have you considered the trade-offs detailed here, specifically when it comes to evolving a financial strategy? There are plenty of tough decisions to make.

• In addition to growth questions, here's why most nonprofits aren't quite equipped for the impact era.

Is the path to growth linear, or are there distinct, required inflection points in funding strategy as a smaller or midsize organization grows? And how does a smaller nonprofit need to adapt organizationally as funding needs change over time? To begin to answer these questions, we recently studied a group of fast-growing nonprofits, including The Door. Starting with a sample of roughly 3,500 organizations in the youth-serving and environmental fields, we narrowed our focus to organizations that had doubled their budgets between 1998 and 2008 to reach $10 million to $30 million in annual revenues.

Their stories offer guideposts for how small and midsize nonprofits with ambitious aspirations for growth can find the money to fuel that growth. While the program focus and funding mix of these organizations varied, the key message that stands out is that their leaders made a series of thoughtful trade-offs that put their organizations in a position to navigate the journey to funding their growth over time. In particular, we identified three important types of trade-offs:

  • Early in their growth trajectories, generally before reaching $10 million in annual revenues, they made the decision to prioritize the cultivation of a primary type of funding aligned with their program goals, which meant de-prioritizing less-strategic funding opportunities.
  • They institutionalized the roles and practices required to raise those types of funding over time, often making tough decisions about when they needed to invest in development capabilities over program priorities.
  • Many recognized that their funding strategy might need to change as their growth targets grew, and proactively evolved their funding approach over time, which often required them to accept short-term uncertainty and commit to long-term investments that might not bear immediate results.

Read the full article about tradeoffs nonprofits need to consider when scaling by Peter Kim, Suzanne Tollerud and Gail Perreault at Nonprofit Quarterly.