Soapbox Engage Blog

Expansion is a major undertaking for any nonprofit. From launching new programs to bringing on additional team members, there are a lot of moving parts to manage as your organization grows.

However, the most important aspect of nonprofit growth is ensuring a solid financial foundation. Of course, you’ll need to raise more revenue and allocate or invest it strategically to fund your expansion. Growth also requires some risk-taking, meaning you’ll need to have enough resources to keep your nonprofit afloat whether those risks lead to rewards or don’t turn out as planned.

In this guide, we’ll discuss four areas of financial consideration that your nonprofit should take into account when planning for growth, including how to:

1. Use Financial Data to Inform Your Strategy
2. Diversify Your Nonprofit’s Revenue Streams
3. Ensure Open Lines of Internal Communication
4. Promote Financial Transparency With Supporters

Growth takes careful planning to achieve, and creating an effective financial plan will help your organization maintain a balance among all of these important considerations during the expansion process. Let’s get started!

1. Use Financial Data to Inform Your Strategy

When you’re trying to grow your nonprofit, it can be tempting to set lofty financial goals to speed the process along. The most effective goals will push your team to reach beyond its previous successes. However, they won’t be so high that they’re out of reach and cross the line from driving into discouraging.

Review the data stored in your nonprofit’s accounting software to get a sense of what your team has been able to accomplish in the past, then use it to inform your spending and fundraising goals as your organization expands. Let’s say that you’ve calculated the initial cost of launching a new program to be $100,000. The grant funding you’ve already secured will cover half of this total, leaving you with $50,000 to raise from other sources.

You first consider hosting a silent auction to cover this cost, since you remember these events have been lucrative for your nonprofit in the past. However, when you look back at your records, you find that the most you’ve ever raised from a silent auction is $27,000, meaning a $50,000 goal would probably be unrealistic given your current fundraising capacity.

Instead, you decide to set your event’s fundraising target at $30,000 to push your team just the right amount. Then, to secure the remaining $20,000, you lay out a plan to solicit commitments from major donors and identify another grant opportunity that could be applied to the program.

2. Diversify Your Nonprofit’s Revenue Streams

Because organizational growth is inherently risky, it’s important to create financial safety nets before you dive in. Rather than putting all of your eggs in one basket by funding your work with just one or two main revenue streams, ensure your funds come from a variety of sources. This way, if contributions from one source fall short of your expectations, you can still rely on your other revenue streams as your organization recovers.

Consider adding the following sources to your nonprofit’s funding model:

• Individual donations. These typically make up the bulk of your organization’s revenue between small, mid-level, and major gifts; event revenue; and in-kind contributions. To make this funding stream more sustainable, encourage recurring giving and work hard to retain existing donors over time.
• Corporate philanthropy. This category includes all contributions to your nonprofit from for-profit organizations, such as matching gifts, volunteer grants, and sponsorships. As with individual donors, the more effort you put into building relationships with corporate partners, the more reliable their support will likely be.
• Grants. Grants are often critical for funding specific programs and projects associated with expansion. Make sure to look for grant opportunities that align closely with your nonprofit’s needs, write strong proposals, and properly manage your grants to maximize your success.
• Investments. While investments aren’t the most profitable revenue stream in the short term, they help grow your nonprofit’s long-term savings and assets. According to Infinite Giving, nonprofits can (and should!) open brokerage accounts just like individuals can, as well as invest in stocks, bonds, and even cryptocurrency.

Make sure to account for all of these sources in your nonprofit’s operating budget so you can properly allocate the funds toward your expansion initiatives.

3. Ensure Open Lines of Internal Communication

Nonprofit growth is a collaborative process, and most major decisions will likely involve several different individuals, including:

• Your leadership team to lay out the strategic plan, prioritize activities, and delegate tasks to staff members on various teams
• Your board of directors to provide oversight and approve each course of action
• Financial professionals, like your nonprofit bookkeeper and accountant, to interpret financial data and make recommendations accordingly

When you have open and transparent communication among all of these groups, you can make sure your whole team is on the same page as you create and execute your growth plan. Schedule regular meetings for all key players and standardize procedures for communicating among team members in between to help everyone stay informed on recent developments.

4. Promote Financial Transparency With Supporters

Just like in your internal communications, external transparency is essential for keeping your supporters informed throughout the expansion process. After all, their donations and engagement fuel your nonprofit’s growth!

Let donors know what new projects are in the works and how you’re funding them. This will increase their confidence that they’re supporting a proactive, dynamic organization that will use their contributions to make an even bigger difference in the community—which may lead them to give more.

To keep your nonprofit accountable to its supporters as it grows, publicize the following financial documents:

• Tax returns. As Jitasa’s Form 990 filing guide explains, all nonprofits’ tax returns must be publicly available for three years after they’re submitted. While interested donors can find your organization’s recent Form 990s through the IRS website or your state government, you can make it easier for them by publishing the returns on your website.
• Annual reports. Most nonprofits include a section in their annual reports summarizing their financial activities for the year. You might also choose to attach your organization’s financial statements as appendices to the report in case donors want to learn more.
• Audit results. If your nonprofit undergoes an independent financial audit when preparing for growth, communicate to supporters that an audit took place and the key changes you’re making as a result to show that you’re taking your organization’s financial management seriously.

When you explain your nonprofit’s financial practices to your supporters, always emphasize the impact that the decisions will have on furthering your mission—after all, that is the main reason you’re expanding your organization and that they’re contributing their resources!

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Nonprofit growth requires a lot of effort to accomplish effectively. However, if your organization sets data-driven goals, develops a sustainable funding strategy, and communicates transparently with internal and external stakeholders, your expansion will likely go much more smoothly. Remember to keep collecting data as you implement the above strategies so that the next time your nonprofit is ready for growth, you can look back on this experience to inform your future plans.