EXECUTIVE  SUMMARY  on    The  State  of  Scaling  Among  Nonprofits  

 

 

 

 

 

 

 

 

Summarizes  four  important  trends  impacting  nonprofit  leaders  and  boards  scaling  impact  in  the  coming  year  and  beyond  

                 

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Veris   Consulting   and   The   Social   Impact   Exchange   set   out   to   determine   the   state   of   scaling  among   nonprofits   to   generate   baseline   data   to   map   the   scope,   range   and   extent   of   those  currently  scaling  or  intending  to  scale  their  impact  —  so  that  we  might  learn  more  about  how  to  exponentially  increase  the  impact  of  “social  solutions  that  work.”  Enclosed  is  a  summary  of  key  findings  and  insights  gleaned  from  our  national  survey  of  over  400  nonprofit  leaders,  nearly  all  of  whom  are  currently  scaling  (75%)  or  intending  to  scale  (22%).    

View  comprehensive  summary  of  key  findings  >  

SNAPSHOT  FROM  REPORT:  NONPROFIT  STATE  OF  SCALING  

Of  those  nonprofits  currently  scaling  impact,  64%  have  been  in  operation  for  more  than  10  years  and  of  those  intending  to  scale,  69%  have  been  in  operation  for  more  than  10  years.    

Though  size  of  budget  and  staff  varies  greatly,  a  sizeable  percentage  of  all  respondents  are  in  some  phase  of  the  scaling  process  regardless  of  size.    

However,  there  are  some  notable  geographic  differences  between  those  who  are  currently  scaling  and  those  intending  to  do  so.    

This  first  of  its  kind  study  reveals  illuminating  findings  on  nonprofits  scaling  intent  and  trends  of   nonprofits   scaling   their   organizations   and   initiatives.   Veris   summarizes   four   important  trends  below  impacting  nonprofit  leaders  and  boards  scaling  in  the  coming  year  and  beyond.  

 “79%  of  nonprofits  are  motivated  to  scale  to    increase  the  number  of  constituents  served,  while    58%  are  focused  on  systematic  change  –  indicating    

a  shift  towards  long-‐term  growth.”  

TREND  #1  Greater  Need  for  Scaling  Effectiveness  An   overwhelming   percentage   of   respondents   (90%)   are   past   the   assessment   stage   in   scaling  their   initiatives.   Under   increasing   pressure   to   deliver   measurable   outcomes,   nonprofits   may  find   themselves   without   the   financial   means   to   conduct   the   reporting   needed   to   measure  return   on   investment   of   various   approaches   to   scaling   and   growth   planning.   And   so   we’ve  discovered   a   catch-‐22   where   nonprofits   are   asked   to   measure   effectiveness,   without   being  given  the  additional  funding  to  grow  to  a  level  where  an  impact  evaluation  would  be  significant.    

Simply   put,   if   the   demand   is   made   to   evaluate   scaling   effectiveness,   investment   in  measurement  reporting  needs  be  part  of  the  overall  funding  picture.    

• While  organizations  are  primarily  focused  on  increasing  the  number  of  constituents  served  (79%),   they  are  almost  as   concerned  about   creating   systematic   change   (58%)   indicating  a  movement  towards  longer-‐term  horizons.  

• Only  a  small  amount  (9%)  of  nonprofits  surveyed  are  promoting  their  model  for  adoption  by  other  organizations,  which  often  is  one  of  the  easier  ways  to  scale  impact.  

• 45%  of  respondents  intend  to  create  impact  beyond  those  they  serve  with  a  focus  on  public  policy  approaches,  while  44%  are  focused  on  partnering  with  other  organizations.  

• Nonprofits   are   attempting   to   scale   and   raise   capital   simultaneously,   highlighting   that   the  sector  is  under-‐resourced  and  lacking  an  effective  system  for  financing  growth.  

• Though  92%  recognize  the  importance  of  a  business  plan,  only  42%  have  one  –  signaling  the  majority  of  nonprofits  need  a  more  disciplined  approach  to  their  scaling  efforts.  A  growth  plan  requires  a  deep  dive   into   industry  trends,  market  demands,  competitor  profiles,  core  capabilities  and  a  feasibility  assessment  –  helping  map  out  a  sound  roadmap  to  success.    

• Nonprofits  currently  scaling  rank  securing  capital  as  their  top  priority,  while  those  intending  to   scale   are   most   interested   in   developing   a   feasible   model   for   scaling   and   receiving  knowledge  about  how  to  scale,  followed  by  securing  capital.  

• Focusing  on  the  how-‐to’s  –  like  business  planning,  strategy  development,  financial  forecasting,  legal  requirements,  etc.  –  remains  just  as  important  as  fundraising  and  financing.  

   

TREND  #2  More  Rigorous  Measurement  Required  Trends  clearly  lead  towards  encouraging  more  rigorous  methods  for  evaluating  impact.  As  such,  there   is  a   strong  need   for  better  education  and  more   funding  dedicated   to  measurement,   so  that  nonprofits  can  evaluate  programs  and  only  scale  those  with  proof  of  results.  

• Only  39%  of  nonprofits  scaling  have  measured  the  impact  of  their  work.  • A   large  number   (59%)  are  using  self-‐reported  studies,   the   rigor  of  which   remains  unclear.  

Only  12%  have  done  third-‐party  studies,  and  2%  have  conducted  a  randomized  control  trial.  • There  are  potential  negative  consequences  from  this  lack  of  rigorous  evaluations,  including  

less  credibility  with  prospective  donors,  which  can  make  fundraising  that  much  harder.  

TREND  #3    Increased  Importance  of  Board  Engagement  The   importance   of   board   engagement   has   truly   come   to   the   forefront,   with   increased  participation   in  everyday  operations  and  decision-‐making.   Investments   in  boards  are  a  critical  factor  in  strengthening  nonprofits,  supporting  scaling  efforts  and  driving  strategy.  Growth  plans  are   particularly   board-‐driven,   with   many   nonprofits   turning   to   experienced   board   members  who  have  successful  grown  organizations  in  the  past,  to  actively  guide  this  process.    

In  fact,  78%  see  their  boards  as  the  #1  resource  in  informing  their  strategy  on  scaling  impact.  

• 78%   of   nonprofits   rely   on   their   boards   to   inform   strategy   and   decision-‐making   while  nonprofits  with  $25M+  budgets,  rely  more  heavily  on  evaluation  study  results  for  guidance.  

• Boards  should  be  truly  integrated  into  their  nonprofit’s  operations,  properly  informed  of  the  status  of  an  organization  and  the  environment  in  which  it  functions.  

• There  is  a  heightened  emphasis  on  board  development  and  recruiting  a  diverse  board  that  reflects  the  communities  served  and  expertise  required  to  reach  scaling  goals.  

TREND  #4  New  Challenges  in  Raising  Scaling  Capital  Not   surprisingly,   raising   the   capital   needed   to   fund   nonprofit   scaling   continues   to   be   a  challenge.   Only   an   average   of   17%   of   funds   required   have   been   raised   by   those   conducting  capital   campaigns,   making   securing   sufficient   capital   the   top   focus   area   for  most   nonprofits  scaling.  Surprisingly,  only  24%  have  started  fundraising  even  though  75%  are  currently  scaling.  

 

Overall,  the  sector  lacks  an  effective  system  to  access  the  capital  needed  to  scale.    

• Organizations  are  asking  for  more  money  to  support  efforts  to  scale,  with  25%  needing  $5M  or  more   and   9%   requiring   at   least   $20M.   However,   76%   of   respondents   are   not   actively  fundraising,  with  an  even  higher  rate  among  smaller  nonprofits  (89%).  

• Shockingly,  only  8%  have  raised  50%  of  their  goal  and  39%  have  raised  no  funds  to  date.  • From  shrinking  government  support  and  increased  competition  to  limited  access  to  lines  of  

credit,  the  research  identified  over  15  fundraising  challenges.  • The   research   found   limited   awareness   of   the   role   intermediaries   serve   in   raising   capital,  

with  only  11%  of  nonprofits  surveyed  working  with  intermediaries.  • Interestingly,  only  37%  of  growth  funding  is  coming  from  government,  the  traditional  source  

of  scaling  capital.  Individuals  now  make  up  72%  of  funding  sources  for  scaling  efforts.    

   

 

VERIS  CONSULTING  specializes  in  outsourced  financial  management  and  survey  research   for  nonprofits   and   social   enterprises.   Its  Outsourced  Accounting   and  Financial   Management   Practice   draws   upon   specialized   expertise   to   improve  bottom   line   results   and   enable   nonprofits   to   grow   revenue   and   control   costs.  Veris   provides   objective,   hands-‐on   consultation   through   interim   CFO   services,  outsourced   accounting,   financial   assessments,   and   executive   search—helping  nonprofits  take  control  of  their  finances  and  advance  their  missions.  Its  Survey  Research   Practice   delivers   valuable   insights   through   benchmarking,  compensation   and   satisfaction   surveys   as   well   industry   trends   and   business  intelligence  studies.  

HEADQUARTERS  11710  Plaza  America  Drive,  Suite  300,  Reston,  VA  20190  www.verisconsulting.com  •  703.654.1400  

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THE  SOCIAL  IMPACT  EXCHANGE  is  a  national  membership  association  dedicated  to  building  a   capital  marketplace   that   scales  high-‐impact   social   solutions   to   improve  the  lives  of  millions.  The  Exchange  creates  the  conditions  for  breakthroughs  to  go  big  in  order  to  deliver  impact  where  it  is  needed  most.  Together,  more  than  4,000  Exchange  members  are  making   it  easier   for  philanthropic  giving   to  achieve  major  positive  change  by  supporting  strategies  that  improve  lives  and  change  systems.  By  creating   standards   to   evaluate   impact,   identifying   and   tracking   highly   effective  nonprofits,   and   enabling   significant   collaborative   funding   to   scale   up   top   social  interventions,  the  Exchange  helps  foundations,  donors,  business,  and  government  increase  the  power  of  giving  to  achieve  greater  social  good.    

HEADQUARTERS  122  East  42nd  Street,  17th  Floor,  New  York,  NY  10168  www.socialimpactexchange.org  •  212.551.7954  

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