Social change work is hard and frustrating and wonderful and terrible; it is also, at times, funny, quirky and just plain fascinating. With this blog we hope to capture all that goes into what we do at Capital Good Fund, and we invite you to join the conversation!

Wednesday, September 17, 2014

Financing Nonprofit Growth, Part 1: Why Growth?

The issue of sustainable nonprofit growth is so central to my thinking--and, I believe, so crucial to the well being of our planet and the people and plants upon it--that I want to devote a series of posts to the topic.  Specifically, I'm going to look at how a nonprofit finances its growth as compared to a for profit; the unique barriers we face; potential solutions; and other things to consider, such as what point should one reconsider the tax status of one's social venture, or any regulatory or policy changes that might spur more growth in the social sector.

Why Growth
First, let me get the obvious question out of the way: why worry so much about growth?  Look, this debate has been hashed and rehashed ad nauseam. Some people argue that small organizations are better attuned to local needs, or that large nonprofits are too corporate, inefficient and bureaucratic to be effective; others argue that there are simply too many nonprofits with overlapping services.

 Here's where I stand: no matter what you think and no matter how you look at it, the nonprofit sector is neither succeeding quickly enough, nor on a grand enough scale, to warrant self-congratulation.  Whether it's poverty, hunger, environmental degradation, homelessness, domestic violence, cancer research or education reform, our space is littered with lots of small, localized success stories and weighed down by national statistics that belie the optimism contained within our glossy brochures and annual reports.

I don't care how you define growth.  I don't care if you find a way to serve 10 more ex-offenders in the Mount Hope neighborhood of Providence or if you make loans to 100,000 more low-income families nationwide.  What I do care about is that the growth result in true social change, that it be sustainable, and that it lead to wider impact--be that through direct service, a replicable model, more collaboration, a policy change, or something else.  Put another way, I'm not impressed by an agency that has the data to show it has helped 10 families move out of poverty unless they can show other agencies how to do the same.  That's how I define growth: do it yourself and / or show others how to do it too.  (This is also why I am such a passionate believer in the Creative Commons; our Financial Coaching Curriculum, for instance, has a Creative Commons license, making it available to anyone, for free, so they can use and improve it and then share with others). Nonprofits exist for the public good; those that hoard knowledge do so in direct contravention of the spirit of what a charitable organization is supposed to be.

Okay, let's assume that if you're still reading you agree that we need to see growth in the sector. I'd now like to invite you to call up any nonprofit executive you know--hell, just call up a nonprofit executive you don't know!--and ask them what their biggest challenge is.  The ones who tell you something other than money are either lying, deluded or lucky.  How do I know?  Over the past five years I've interfaced with hundreds of execs, all of whom have expressed the same thing: they don't have the money to hire good people, to build out their data systems, to market their products and services, to evaluate their impact, to scale up.

So if you are with me on the growth thing, and you trust me on the financing thing--I know, I'm asking a lot of you here!--then it isn't a stretch to argue that the fundamental question is how to finance nonprofit growth.  For the next post in this series I will talk about the various options nonprofits have when looking to grow, and compare those to the menu of financing approaches available to for profits.

Comments are welcome, as always!

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