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Common Reasons Why New Nonprofits Fail And How To Avoid It: Part One

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With one and a half million tax exempt nonprofits in the United States alone, it’s not surprising that thousands of nonprofits fail each year. Forbes states fifty percent will hit the wall in the first twelve months. Other data suggests it’s less, with the National Centre For Charitable Statistics putting the figure nearer thirty percent.

Either way, the numbers indicate that even in regular times, no-one is guaranteed success. Why a nonprofit fails is as much an important question, as it is to ask how one might have navigated a safe course to succeed.

It’s a sad truth that some nonprofits fail, but at least by understanding these pitfalls we can all better adapt, survive, and ultimately thrive.

Here are the first five common issues to address — ones I’ve seen and even experienced in my own working life in the nonprofit sector.

1. Not keeping up with technology

Failing to remain up to date with the latest technologies can be a sign of stagnation. We can’t all be Bill Gates, but we can at least accept that technological advances are important. Too often nonprofits believe because they have an virtuous mission, they will surely be OK. The problem is others will be paying attention, and neglecting technology and online progress significantly increases the chances of being in that thirty to fifty percent fold.

If you’re not sure what this means to your area, reach out to those in the tech world and ask questions. More often than not, experts are keen to help good causes, and will share advice about changes and opportunities.

2. A reluctance to invest in unglamorous infrastructure

New nonprofits often hesitate to invest in anything but the front line services, proving their worth to early supporters. However noble a goal this is, it leads to serious problems down the line. Before long the backstage operations upon which sustainable growth builds, become underdeveloped. Leading to stagnation and ultimately limiting operational scope.

It’s natural to think donors need to know that every cent reaches the coalface. Yet how can you dig coal out of the ground without first investing in the machinery, the man power, the pit head and the railroad to move it?

To be a successful nonprofit you need to focus on infrastructure as much as the delivery of service; the two are the same. It’s longevity which matters.

Your donors will respect long game investment, as much as the instant satisfaction of providing the core mission.

3. Failing with the founder

Businesses and nonprofits share this common bug bear. When one person drives the organization, it can be hard for the oxygen of new ideas to circulate.

Nonprofit founder’s syndrome is tricky to combat. Businesses and nonprofits are rarely democratic. All too commonly “Just do what I say!” goes as an unstated policy and counterproductive policy.

Side effects of this can result in:

  • Scaring off potential talented employees and volunteers.
  • New ideas become harder to implement.
  • Structural issues that are obvious to others, get sidelined, as the person at the top refuses to see their relevance.
  • Donors can sense a nonprofit with one person’s ego all over it. They are more likely to want to see the mission accomplished, not the founder’s sense of self importance inflating.

A pushy founder can sabotage their own efforts when they start to believe the mission is one and the same as themselves. The truth is there will be many people willing and wanting to support a good cause, with every bit as much talent and dedication.

Founder syndrome puts a throne where there should be a round table and chauffeur where there could be a team bus.

4. Hollowing out at the center

This is when nonprofits fail to establish a clear set of ethical standards from the beginning.

Even with a staff of one, a definite mission statement, code of practice, clear ideas on what the nonprofit stands for and what standards are expected, is vital.

We’re all dealing with important financial, ethical, and personal information. Making sure everyone who you contact or take on board is compatible with your core code of practice, is a moral and legal obligation.

There needs to be some sort of evaluation that these standards are adhered to. Your nonprofit’s reputation is the most valuable asset you possess. It’s non refundable, so protect it! It isn’t an afterthought, as I’ve watched some assume. It’s a lot easier to hire the right people ahead of time, than it is to remove the wrong ones from your cause later.

5. The small details count

When you enter a doctor’s office you expect certain surroundings, a standard of care, and manner.

If they reach out to examine you with dirty fingernails and stains across their shirt, you’re immediately making judgements.

No matter how high the standard of care and however good the physician is, you will feel like they weren’t as professional as you had hoped for. At every stage your nonprofit will face similar superficial evaluations.

Putting the effort into the small details makes a huge difference: like professional communication, the logo, and an up-to-date website with interesting content.

It really isn’t a matter of financial resources to keep the small details in good order. It merely takes an awareness of adding extra effort where needed. It will be noticed and it will draw eyes and support your way.

Even though nonprofits fail there are always new ventures taking shape, new missions to fulfill. Learning from those who tried and ultimately failed, is as crucial as studying how others succeeded. In this way we keep growing and making a difference in the world, which is all that which ultimately counts.

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  • Kristen Hay

    Hi Walid, this post is highlighting reasons why some new nonprofits struggle or fail so others can keep those areas in mind when starting out. Here are some additional resources for new nonprofits on raising funds/getting funding: | | | |
  • Walid Marzouk

    All good advice but how do you raise the money to start building the infrastructure when you start if donors insists on annual report, healthy back statement, match funding and a prove that you have already been successful in raising fund ??
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