Running out of money is not the reason most nonprofit founders fall short of achieving the “impact” they desired in their community.
A zero bank balance may call quits on the effort, but it was dead before that.
Over the last 30 years, I’ve watched dozens of dedicated founders in the US and UK kill off their nonprofit babies. They didn’t mean to, but they embraced one or more of four myths common in the sector.
They may still have run out of money but would have had much better chances of survival if they ignored these myths:
Myth 1: Passion. People fail because they think their passion matters, so they lean in, hoping to inspire others.
Myth 2: Mission. People fail because they think broadcasting their mission statement will build an audience.
Myth 3: Profit. People fail because they don’t have more money coming in than they spend.
Myth 4: Energy. People fail by committing to doing “whatever it takes” to make their nonprofits work and end up burning out before they get results.
Imagine the devastation of working to the limits of your talents and abilities and still failing because you took for granted something you thought was “just part of nonprofits”.
At various points, I made these mistakes, too, and learned the hard way.
Now I’m trying to help founders avoid these mistakes.
I met Tina when she was on the verge of quitting and going back to her old job as a teaching assistant. Her nonprofit was going nowhere, all because she embraced these myths.
Myth 1 - Passion
Nonprofit founders shine with passion. They love to show their passion for the problem they address, from homelessness to addiction to creative arts to animal welfare.
Tina’s passion was reading, or more precisely, literacy. “Reading is the foundation of all academic learning,” she said, eyes wide.
The most poignant perspectives come from those whose passion arises from firsthand experience. These people are genuine heroes. After overcoming these traumas, they choose not to turn their back on them, but commit to facing them head on in service to others, in hopes they too can overcome.
Tina was dyslexic, but they did not diagnose it until she was in middle school. She was slow to learn as a child and flagged for special needs, which exasperated her parents, who knew she didn’t lack intelligence or learning ability. Once Tina got support for her dyslexia, her reading skill quickly caught up with her peers and the world of learning opened like wings. She would pound the table, telling me how much she wanted to avoid this delay for other kids through her nonprofit.
Passion is an intense feeling of desire.
Nonprofits are full of passion, passion, passion!
But passion doesn’t help people. Passion isn’t a bad thing, but it counts for nothing if not translated into getting impactful results. Passion can work against getting results. Why? People who lead with their passion sometimes focus too much on feeling passionate or sharing passion. Passion can obstruct the hard daily work of program development, board development and fundraising to make their nonprofits work. Founders get caught up in the passion as the motivating force. That’s where the fire is. They like to stay warm (who doesn’t?). Aside from warmth, the fire provides little else.
Passion can also blind people to ideas and experience from others who don’t show the same passion. Passion itself becomes a litmus test, an entry code for trust and attention. Nonprofit success requires an open mind, but passion can narrow perspectives. The worst examples I’ve seen are from those with lived experience of the problem they want to address. They insist the way to overcome is the same steps and route they took themselves.
Passion isn’t Purpose. Passion isn’t Grit.
Passion doesn’t create effective programs. Passion doesn’t get results.
In Tina’s case, she got frustrated because people didn’t share her passion for literacy even when they accepted the foundational importance of reading. She got caught up trying to persuade them to be passionate rather than moving on to building an effective organization.
Myth 2 - Mission
Mission doesn’t matter nearly as much as founders want.
Most mission statements are awful. I dread mission statements because they’re so bland. They sound like they’re written either by a committee or a passionate novice because they are.
Admittedly, many jurisdictions require a mission statement to file for nonprofit status, and all Nonprofit 101 guides and courses (in full transparency, including Nonprofit Entrepreneur Academy) spend at least a hot minute on mission statements.
But let’s face it. Mission statements are ornamental. We give them a casual glance, maybe a second look, if we notice something noteworthy.
That is a Good Thing.
No one should pay too much attention to mission statements because they comprise empty words and imprecise language.
People write aspirational, grandiose mission statements that cover an enormous range of activity. When we hear them, we have no clue what their true focus is because mission statements aren’t about intent or focus, they’re about reach and inspiration.
Tina’s mission statement sounded lovely: “Every child can read...” Does that mean tutors, preschool, after school, parental support, professional development for teachers, a new curriculum, or a new mobile app? Tina looked at me blankly, then said, “All the above. Eventually.”
What’s your focus today? What’s your intention?
Tina split her effort between after-school reading groups for first and second graders and a support group for parents of toddlers, where she encouraged them to expose their children to words and letters. I couldn’t have guessed that from her mission statement, nor could anyone else. How many people who would be interested in supporting these programs never learn about them because they took scant notice of a motherhood-and-apple-pie mission statement?
I’d guess 95% or more of current mission statements leave the reader guessing about what programs are on offer and what genuine benefits they can reasonably expect to see right now.
Results and impact come from programs. They have nothing to do with the broad brush, over-arching mission statement whose main purpose is grabbing your imagination.
Honestly, though, most mission statements are too vague to motivate anyone’s imagination. They remind me of overcooked vegetables that have lost their color and flavor. We know veg is good for us, but soft and gray, no thanks. Nonprofit founders who network soon discover their mission statement inspires no one.
What matters is how well your programs get results. People are always happy to hear about your results. People will back solutions that work.
Covid proved the limited value of mission statements. Executive Directors and Board Members used the phrase “consistent with our mission” when faced with altering their programs or prospective mergers, but their decisions revolved around their programs and activities, not missions. Food banks, arts programs, mental health services and out-of-school programs merged with others who served the same community, or with organizations providing similar services in neighboring areas.
Nonprofits are what they do, not what they say they want to achieve.
Myth 3 - Profit
This myth shouldn’t have any traction at all, yet it persists. I blame “nonprofit” and “not-for-profit” for implying nonprofits, in fact, don’t need to make a profit.
The idea of not making a profit doesn’t survive 30 seconds of scrutiny.
Untold millions of donors, volunteers, Board Members, staff members and program managers at foundations cling to the fiction nonprofits cannot, should not or don’t have to make a profit.
Organizations spending more than their revenues and savings will die, simple as that. Most nonprofits don’t have savings. Founders invest their personal resources to keep the organization alive, typically longer than they should.
Nonprofit tax status means not distributing profits to shareholders like a for-profit company does.
All nonprofit profits, known as surpluses, must remain in the organization. The kicker people miss is not nonprofits can have surpluses, they must.
Every year, if not every accounting period, nonprofits should have higher revenues than expenditures.
This no-profit-needed myth is so pervasive, however, it infects decision making in three adverse ways that undermine a nonprofit’s viability.
First, nonprofits set their fundraising targets to match their budgets, rather than aiming for 10, 15 or even 20 percent higher. Fall short of raising your budget and you’ve baked in an overspend and the need for painful cuts. Without a reserve, you’re in the same boat next year (if you’re still around). Tina never sought to do more than cover her costs and pay herself back, believing this attitude was appropriate and consistent with nonprofit ethos.
Second, without reliable profits, nonprofits back down from investments. Board Members often have solid for-profit experience as business owners, lawyers, accountants, and bankers and understand investing in their own businesses, but balk at even modest uplifts like software upgrades or (gasp) salaries and benefits.
Third, nonprofits don’t account for their costs against impact. As a simple example, imagine an after-school reading club where costs are the same with five kids or 50, then the outcome-related cost drops the more participants attend. Like most nonprofits, Tina never took the next step of working out the optimal number of participants that allowed her to get the best results without diluting the experience. This optimal number determines the program’s return on investment. Too few nonprofits perceive their income and expenditure this way. Tina didn’t and had no way of linking her costs to her program’s effectiveness.
Myth 4 – Energy
Nonprofits demand that founders “do whatever it takes”.
This myth is the worst of all. It’s the biggest killer of nonprofit startups, laying waste to founders’ passion, mission and profit.
When I first met Tina, she felt burned out. I knew firsthand exactly how she felt.
“I’ve put everything into this nonprofit,” she said. “It’s affected my marriage, my relationship with my kids. It’s put a lot of strain on close friends who were there to help, and I’ve got nothing to show for it but an empty bank account.”
I’ve lost count of the number of times in my career that I’ve teetered around burning out in pursuit of a lofty goal. I would do crazy hours six days a week, then crash at weekends. Holidays turned into sleep-a-thons. Or that pesky cold or flu I’d kept at by finally caught up with me and ruined the kids’ hopes for a day with dad. But come Monday, I was out early and unsure when I’d see them in the week. At one point, they called me “Mom’s friend Kev”.
When nonprofit founders tell me, “I’ll do whatever it takes,” my response is — please don’t.
Founders convince themselves that they should never rest in pursuit of their mission. Nothing could be further from the truth. Our nonprofits cannot solve long-standing entrenched social problems overnight. Go to bed. The work awaits you in the morning.
We can make a flash of impact with a burst of energy, but that’s not a sustainable approach to change. Nonprofits are an ultra-ultra-marathon rather than a sprint. There is rarely a finish line in sight.
My top recommendation to building an effective nonprofit is looking after yourself well. Focus on the basics like 7-8 hours of sleep, regular exercise, plenty of fruits and vegetables, modest alcohol, and a bit of disconnected down-time to turn off completely.
Then come back refreshed, ready to ignore suicidal myths and instead focus on programs and results, networking, storytelling and growing your base of supporters.
Tina hasn’t quit completely. She’s resting and recovering, in body and bank balance. When she’s ready, she knows what not to do.