We Do Need More Nonprofits
Updated: Aug 28
Each day in America 394,982 people are seriously considering starting a nonprofit. OK. I made that number up. And, it is probably low.
Have you had your turn? Is today your day? If you have thought about starting a nonprofit, you've probably found resources about the nuts and bolts of how to start a nonprofit (legal incorporation, IRS 990 information, etc.). You've also likely seen a number of articles or comments on chat boards arguing that we don't need any more nonprofits -- there are too many already!
I'm here to say we do.
Nonprofits exist to help address social issues. Have we solved our social issues? No. Not even close. So, there is work to do. And, while there is some truth to the warnings from the naysayers, it isn't the entire story.
But Most Nonprofits Fail!
Yes. Yes, they do.
"[D]ata from National Center on Charitable Statistics reveals that approximately 30% of nonprofits fail to exist after 10 years, and according to Forbes, over half of all nonprofits that are chartered are destined to fail or stall within a few years"
Guess what else fails at high rates? For-profits.
"According to data from the Bureau of Labor Statistics, as reported by Fundera, approximately 20 percent of small businesses fail within the first year. By the end of the second year, 30 percent of businesses will have failed. By the end of the fifth year, about half will have failed. And by the end of the decade, only 30 percent of businesses will remain — a 70 percent failure rate."
Starting and successfully running an organization that provides a product or service is hard. We don't teach people how to do it anywhere. And, yeah, I went to B-school and took entrepreneurship classes. B-school teaches you a bunch of pieces. What it generally doesn't teach you is how to put them all together and move at both a sprint and a marathon pace depending on what is needed.
What you are probably more likely to hear in the B-school segment of the world -- definitely in the entrepreneurship corners -- is stories about how many times successful entrepreneurs have failed. Failure is part of the process.
We don't tell people not to start for-profits because it is hard -- we just tell people it is hard. Brace yourself. The same is true for nonprofits.
But There are Too Many Nonprofits
"Existing organizations, particularly those that rely on outside funding in the form of donations and grants, are already competing for scarce dollars. Many of them are struggling to survive, let alone to thrive."
An often repeated refrain is that there are too many nonprofits -- which usually means that there isn't enough money to go around to support them, that existing organizations are struggling, and we already have too many organizations doing the same thing.
While these things may be true. The idea that there are too many nonprofits and people shouldn't make new ones does not follow.
We Were Here First; There Isn't Room for You!
The argument that there isn't enough money and existing organizations are struggling takes a position of protecting existing money and power relationships in the nonprofit/philanthropy sectors. It is essentially an industry protective position (which happens predictably in every industry, and the nonprofit world is an industry). More insidiously, 80% of nonprofits are white-led. The number jumps to 90% for the largest nonprofits in the United States. Arguments, attitudes, and policies that reinforce the power and protected status of existing nonprofits are in service of white supremacy. Also, the argument belies an interest in organizations over outcomes, which is not the alleged goal or purpose of nonprofits.
There Are Too Many Groups Doing the Same Thing
Another common retort to people wanting to make a new nonprofit is that other groups are probably doing what you want to do so we don't need another group doing the same thing. Again, this is something that is a caution for for-profits, but not a deal breaker. The same should be true in the nonprofit world. Maybe a new group can do it better. After all, the world changes all the time. Many nonprofits are still woefully behind on thinking about and utilizing the power of technology.
A related piece of advice that has always driven me completely bonkers is the suggestion that if you have an idea, find a group that does something like what you do and approach them with your idea. The world is a big place, so I guess this must have worked some time in some place, but mostly I am thinking -- ummm what? If you think about all the other narrative about how many nonprofits are barely surviving how do you think they are going to be able to make the space to pivot and start a new program that just came in the door from some random person they don't know? What are they even thinking? What would most nonprofit staff be able to say to those suggestions? Are they suggesting that senior management meet with everyone with an idea to see if they want it?? I just can't imagine how this would work well in practice.
We do need more good, impactful nonprofits. We don't have nearly enough of those.
We Need More Good Nonprofits
Most of the arguments that are against new nonprofits are focused on the industry -- not on the issues or the people being served. It also doesn't talk about the fact that nonprofits can actually earn revenue and not be totally dependent on foundations. The arguments often also implicitly say only large budget nonprofits are "successful." And, of course, ignore the politics and race dynamics of supporting existing organizations over all else.
But the truth is, we aren't short on social issues that need to be addressed. There is much more work to be done. We need new leaders with new ideas. Existing nonprofits are not built to nurture or support new leaders with new ideas. So, where is that energy going to come from? New nonprofits.