Friday, February 02, 2007

A familiar looking story

The other day someone asked me if I would comment here on the announced closure of a particular non-profit. It wouldn't be appropriate for me to do that by name given that I work for a prominent foundation in the same region.

It was not a group that I knew or have had any professional dealings with, meaning I have no more information to go on than their public statements, website, and annual tax returns posted on Guidestar. That's obviously limited data, in particular it offers no meaningful information about the impact of their programs. But then that limited public information seemed to paint such an obvious and familiar outline that I did write the following by email:

I see annual revenues veering wildly up and down the last few years [literally doubling and halving from year to year], which added to their public comments about loss of foundation funding strongly suggests they were still (more than a decade after their founding) largely reliant on foundation grants to exist. I see little evidence of any organization-building -- the mission and lists of accomplishments are all over the map, no evidence of any coherent strategic or business plan, etc.

It's the non-profit equivalent of looking at a 20-year-old restaurant and realizing that the owners were still running it like a 2-year-old one. I'm sure any program officer at any foundation would agree with that sad assessment, and hence I suspect that the foundations that had been incubating them finally gave up on it. A non-profit enterprise which after 15 years still hasn't done anything about diversifying its revenue stream has no more likelihood of succeeding than a 15-year-old law firm that still gets all its revenue from three repeat clients. Had I been asked a couple years ago for advice on this group it would have been basically, "You're failing because you're running the business into the ground, and the foundations will give up on you any day now."

Note I said "incubating", because that is what foundations do -- we are not a permanent revenue source and anyone who thinks we are is very new to this sector. Foundation grants are only an eighth of all charitable support in this country and corporate is only a bit more. Individual donors are where the long-term sustainable money is, and individual giving to nonreligious non-profits in this country is now close to $200 billion a year and still rising steadily -- so any non-profit with a reasonable track record of mission product can build an individual donor base, and doing so ain't rocket science. I can't tell why they failed to do that but it sure looks like they did....If more-detailed financials revealed sizeable individual-giving support and no more than half the annual budget coming from foundations then I'd have to change my diagnosis, but I'd happily bet you a nice dinner that they wouldn't.

I could have added that in addition to now analyzing non-profits regularly as a foundation officer, I know exactly whereof I speak on the above issues from direct sad experience. None of which is to suggest that I think the above analysis is anything but a quick gut reaction, it's certainly not based on anything close to the level of information that I'd collect in my professional capacity.

Now with the disclaimers out of the way, I believe some experienced folks read this blog a bit, so what do you think? Does it sound like I'm jumping too quickly to a conclusion, or does that off-the-cuff autopsy ring true?


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