After decades of working with and for nonprofits, there’s one major takeaway regarding nonprofit competition. It’s not to be taken lightly. As I shared in a recent article, there are nearly 1.85 million existing nonprofits in the United States today. More concerning is that there are 50% more charitable nonprofits today than there were just 12 years ago. As I frequently mention to potential clients, the competition keeps growing, so it should be a major consideration.
Some in the nonprofit sector feel that competition is a “business thing.” Others are so overwhelmed by the latest crisis that they don’t want to consider it. It’s not going away; if anything, it will loom larger in the future as more savvy donors look for organizations to support.
Basically, there are two types of competition of which to be aware: within the sector and external to the sector. On the external side, nonprofits compete for disposable income with major retailers, entertainers, tech services, etc. You’re hoping that donors will give to support your cause instead of spending or saving their dollars.
Within the sector, competition is key because more organizations are competing for basically the same pool of money. According to Giving USA figures, contributions, or total giving as a percentage of gross domestic product (GDP), have labored between 1.9% and 2.1% since 1999. Their report carries a footnote that states, “Prior to the 40-year period 1979–2019, total giving was consistently at or above 2.0 percent of GDP. This percentage fell to below 2.0 percent throughout most of the 1970s, 1980s, and 1990s. Total giving as a percentage of GDP rose to 2.0 percent and above through most of the 2000s but dropped to 1.9 percent from 2009 to 2011. Total giving as a percentage of GDP was at least 2 percent since 2012–2019.”
With those numbers as a backdrop, we can see that the “giving pool of dollars” remains relatively consistent while we continue to add thousands of nonprofits to the sector each year. You might not see them in your community, but with today’s technology, it really doesn’t matter. Some of those new organizations will be making asks of your donors.
The numbers have significant implications for existing organizations but are even more telling if you want to form a new nonprofit. Why? Because it points to the reality that we must be certain the organization is needed, sustainable, marketable, and well-supported before its initial formation.
In consulting with those considering formation, I encourage the development of a “business” plan surrounding the proposed entity. I ask them to think like farmers, gardeners, or forestry managers. Much like these individuals, they need to plant the right seeds to get it right from the beginning if they hope to reap the best harvest. What is it you want to grow? Where do you see the organization when it reaches its full potential?
As they plant those seeds, I encourage them to delve into the realities of these five key areas, which can position them as a more formidable competitor:
They will need a concise and inspiring mission and motivational vision. Why will this organization exist and where will it be in five years?
The Board of Directors will not only need to be passionate about the cause but also able to steer the “what” of the organization. They need to have a big-picture mentality and not micromanage the process. Instead, they should set SMART goals and objectives for implementation by staff and volunteers.
Organizations will not always have the luxury of paid staff in the early stages. They may depend on volunteers to help implement the organization's strategic initiatives. These individuals should be allowed to handle the “how” of the organization with broad oversight.
The who, when, and where of the organization should be outlined in some type of strategic plan. It doesn’t have to be a cumbersome document. It can be a one or two-page map that provides direction. It should answer who is responsible for doing what and when.
What are the desired results? How will the community look different because of what the organization accomplishes? Define these because donors will want to have a grasp on this story to give freely.
It doesn’t matter at what stage an organization is, competition is only a negative component when it is ignored. It can force organizations to raise the bar for their governance and management. It can spur more considerations around donor experience and retention. It can force organizations to take a new look at stagnant ways of doing business. Those who get it will fare better than others.
The primary concern is that you understand the dynamics of the competition and take action today to prevent it from becoming a stumbling block tomorrow