Since the recession, nonprofits’ struggle to raise revenue has increased dramatically. Governments slashed funding as deficits grew thanks to the collapse of government pension systems and decreases in tax revenue. In response, nearly fifty percent of organizations surveyed by the Urban Institute’s Nonprofit-Government Contracts and Grants: Findings from the 2013 National Survey reported experiencing a drop in local, state and/or federal funding. At the same time, interest rates dropped leading to a decrease in private foundation investment returns. Many responded by reducing their donations. The recession also led to a decrease in corporate revenue; in response, many corporate leaders cut their marketing and foundation budgets.
At the same time the number of nonprofits has grown dramatically increasing competition for remaining funds. According to the Nonprofit Quarterly, the number of nonprofits reporting to the IRS increased by 24%, from 2000-2010 to a total of 2.3 million. https://nonprofitquarterly.org/policysocial-context/23359-infographic-what-is-driving-nonprofit-sector-s-growth.html
As nonprofits saw revenue decreasing, the demand for services rose exponentially. The recession led to millions of families losing their homes or selling them at a loss. Some lost their job and were unable to find another with a similar salary. Many of them were forced to work at lower or even minimum wage.
Over the last year, many government leaders have announced the end of the recession, but its effects linger. Although, foundation investment return is starting to rise, many determine their total gifts by averaging the returns of the last three or five years. These averages limit the effects of current growth. Further, many foundations continue to see an increase in the number of proposals they receive.
The increasing number of nonprofits is also leading to an increase in the number of solicitations many individual donors receive. The increase is doubled with the use of email. Not only are these generous individuals and families receiving requests from two sources and new organizations, but their friends are also asking them to give to their favorite charities. Many report they are sick of the constant barrage of appeals, even from the nonprofits they feel passionate about.
Thankfully there is a silver lining for nonprofits and the millions they serve. Many nonprofit leaders are creatively developing new revenue generating sources. Additionally the internet is providing new tools to reinvent other methods. Finally, many states are creating new revenue generating organization forms. All of this activity is leading to social enterprise; limited, liability, low profit (LLLC) and benefit corporations; crowd funding, and social investment. With all of these new opportunities, smart leaders are trying to stay in front of the curve and educating themselves and their donors.
Developing these revenue sources requires resources and dedication. How do leaders decide which ones are right for their project or program, if the method is efficient, and how to develop the infrastructure needed? We will begin to explore these questions in the next post.