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recession and nonprofits

The State of the Nonprofit Sector in 2011

Today the Nonprofit Finance Fund released the results of their annual survey of the nonprofit sector. In its third year, this annual survey is starting to demonstrate some interesting trends.

You can see the full survey results here and download their summary brochure here. They have more than doubled the number of respondents since the first year, this year receiving almost 2,000 responses.

Some of the top-line results:

Nonprofit leaders expect 2011 to be another tough year for their organizations and the people they serve:

  • 85% of organizations expect an increase in service demand in 2011; just 46% expect to be able to fully meet this demand
  • This comes on top of years of increases: in 2010, 77% of nonprofits saw an increase in demand; in 2009, 71% experienced an increase in demand, and 73% of organizations experienced increased demand in 2008
  • 60% of organizations have three months or less of cash on hand; 10% have none
  • Only 9% expect 2011 to be financially easier for the people they serve

But, there are signs of hope:

  • 44% of nonprofits reported ending 2010 with a surplus, a move in the right direction from the 35% who had a surplus in 2009
  • 25% of organizations added to reserve funds in 2010
  • 35% of organizations raised more revenue in 2010 than anticipated

And even further, nonprofits are getting creative about how to meet demand for their services, in fact a majority of nonprofits actually added services, despite these challenging economic times:

  • 55% of respondents added or expanded programs or services
  • 49% increased the number of clients served
  • 47% partnered with another organization to improve or increase services offered
  • 39% reduced annual expenses
  • 36% relied more on volunteers

There was also interesting data around how nonprofits relate to their funders. 58% of nonprofit leaders felt they could have an open dialogue with their funders about program expansion, but only 5% felt they could discuss debt burden, followed by 9% for building reserves. And 23% didn’t feel that their funders would engage in dialogue about any of the topics listed. 50% of respondents would like funders to provide more general operating or capacity support, while 11% asked funders to fund what already works, rather than asking for something new.

There is some really interesting data here. I encourage you to look at the full results.

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5 Nonprofit Trends to Watch in 2011

The end of 2010 is upon us and perhaps this difficult economy is waning as well. It appears that the nonprofit sector may have brighter times ahead. Indeed, the philanthropy that funds it is arguably on the rebound. I’m excited to see what the new year will bring for a sector that has had a very difficult couple of years, but has adapted and innovated despite the challenges.

Here is what I think (hope?) we will see more of in the nonprofit sector in the coming year:

  1. More Confident Funding Strategies: A more confident nonprofit sector will emerge that stops chasing funding, any funding. Instead nonprofits will strive to pick a path and raise money around that path. In so doing nonprofits will increasingly learn to “fire bad donors”, as David Henderson encouraged, and instead strategically go after the funding that integrates well with their long term vision and business model.

  2. Diversified Funding Sources: Along with more confident funding strategies will come more diversification of funding. This diversification will not be just for diversity sake, but because of a growing realization that putting the majority of your funding eggs in one basket (foundation grants, for example) is unwise and terribly risky, particularly given this economic climate. Nonprofits will increasingly become more strategic and savvy about their overall financing structure and in so doing will strengthen and diversify accordingly.

  3. Greater Investment in Organizations: Nonprofit boards, staff and donors will increasingly recognize that “overhead,” or administrative costs, are absolutely necessary to successful program execution. They will increasingly invest in their organizations (staff, technology, training, systems, space) in order to strengthen and grow their impact. The revamp of nonprofit rating systems, like Charity Navigator, that are moving away from penalizing organizations that spend on “overhead” will help move this process along.

  4. Larger Focus on Impact: Nonprofits will increasingly focus on the social change they are working towards, as opposed to the service they are providing. Although it is true that many nonprofits exist to simply provide services to our most needy fellow human beings, there will be an growing demand from funders to articulate how even those services fit into a larger theory of change. It will no longer be enough to be a charity for charity sake, but rather nonprofits must analyze and articulate how their services fit into a larger solution to the problems they exist to address.

  5. More Strategic Use of Social Media: More nonprofits will make bigger, better, more strategic forays into the world of social media, not just because everyone is telling them to do it, but rather because of a realization that in order to get more change done, nonprofits must build support, partnerships, alliances, advocates from outside their own walls. Social media is a cheap, effective and available way for organizations to exponentially expand their force, resources, ability to make change happen. If used effectively, social media can be a tremendous gift to the nonprofit sector.

I think we will start to turn a corner in 2011. The recession has been a wake up call for the nonprofit sector. Those organizations that have recognized the game-changing nature of this economic downturn will emerge stronger, more confident, more capable of creating change.

Photo Credit: ChazWags

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