Most nonprofits haven’t professionalized their business acumen.
getty
The 2025 National State of the Nonprofit Sector Survey Findings, produced by the Nonprofit Finance Fund (NFF), was titled Essential, Enduring, and Under Strain: The Nonprofit Sector’s Strength and Struggle in a Shifting Landscape. It’s a bleak title, and the report presents some frightening results from more than 2,200 survey respondents, including a startling number (36 percent) ending 2024 with an operating deficit, the highest percentage that NFF has seen over the past ten years of its survey data. Respondents reported that pressure on their infrastructure was a result of needing to “navigate three colliding crises: inflation, government funding cuts and delays, and growing demand.” This report from 2024, the most recent year with full data available, showed that 85 percent of respondents expected demand for services to increase in 2025. Spoiler alert: They were proven right.
While it’s true that nonprofits are operating in a difficult period and many are seriously financially stressed, my assessment isn’t doom-and-gloom. That increased demand for services reflects a broader national environment in which a combination of factors—some cultural, some financial—are pushing more people into need, but it also shows that people recognize that nonprofits are excellent at what they do. Very few nonprofits suffer a crisis in mission. Most have professionalized their knowledge base, staff, and programs to a high degree. Years of increased demand, alongside inflation and cuts in government funding, have forced them to streamline their services so that they are targeted, efficient, and effective. The “strength” in the NFF report title is every bit as important as “struggle.”
What most nonprofits haven’t professionalized is their business acumen, particularly their understanding of sophisticated financial approaches to maximizing access to capital. They have a mindset (one that is exhausting for nonprofit leaders) that beats the bushes for the old standby: philanthropists moved by good. Meanwhile, they have neglected the dominant mindset: investors looking for a return. Simultaneously, they have held on to the stubborn, stoic “no one gets us like us” mindset, which leaves them always paddling to reach the shore rather than deciding to join with their peers and build a lifeboat. The result: undercapitalization.
Innovation in Action
There are many wonderfully generous philanthropists among us, but let’s face it, their voices are the exception rather than the norm at a shareholder’s meeting. And government funds to reimburse service providers, until you are the one requiring the services, that’s a hard pill to swallow.
So how do we fill the coffers? First, instead of thinking the system is broken, we need to adopt the entrepreneurial mindset that has guided growth in modern for-profit sectors. Start-ups, including many one-time start-ups that are now members of the Magnificent Seven, didn’t raise capital in the conventional ways. And once they legitimized investors’ confidence in their value, they began scaling to meet investors’ expectations by acquiring other start-ups. Beyond growth mindsets, companies like these rethought how systems worked and what represented economic value.
What happens when nonprofits start thinking like entrepreneurs? What changes when they realize that they’re not just stronger when they stand together as a consolidated lobbying force, but that they can pool their balance sheets and grow their capital reach? I can tell you because I’ve done it. In December 2024, Inperium, the nonprofit constellation I founded, entered the municipal bond market with a $175 million cap. We worked tirelessly to educate prospective investors on why our model worked and why Inperium’s affiliates created a services portfolio that was profitable and sustainable. They got the message. We received orders totaling $1.9 billion. The innovative thinking behind our entrance into the bond market firmly demonstrated that nonprofits were worthy of investment; the facts were there; we just had to tell our story effectively.
The majority of the nonprofits in Inperium’s constellation were undercapitalized prior to affiliation, some to the point of being on the brink of closing their doors. Beneficiaries of the power of innovation and collaboration, those are distant memories. And without the burden of undercapitalization, they are capable of expanding vital services and rejuvenated with new ideas to increase the value they bring to people’s lives. In a changing world, they have learned how to change with it.
Leave a comment