Why Nonprofits Fail? 5 Reasons You Want to Know (2024)

Nonprofits start with great intentions. They want to change the world and make a measurable impact on their communities. However, the sad reality is that many nonprofits will close their doors before they get the chance to do that.

So, why do nonprofits fail? Let’s take a look at some of the most common reasons why nonprofits fail and some strategies you can use to avoid and overcome these challenges. Let’s get started.

Nonprofit organizations are critical to society because they help individuals and communities meet their basic needs. They fill in gaps to provide access to things like education, health, social services, and so much more.

These resources are often free, helping to provide help to those who are in need. At their core, nonprofits empower underserved communities, helping them rise above their circ*mstances to achieve more.
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Save the Children is a great example of a nonprofit that does this. They focus their efforts throughout the world to help provide relief and access to food and educational resources to children and their families.

There are all different types of nonprofits, all of which are developed to help better the world in which we live. Unlike businesses, they’re not driven to make a profit but instead to advance their mission.

Without nonprofit organizations, many people would go without, so it’s critical that we preserve their spot in society. However, there are some common—yet avoidable—challenges nonprofit organizations often face that can lead to their downfall.

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Unfortunately, despite their good intentions, there is still a high nonprofit failure rate. In fact, the National Center on Charitable Statistics reports that about 30 percent of all nonprofits will close within 10 years of operations—and that’s not because the problem they’re working to address has been eradicated.

While a nonprofit closing its door could be for any number of reasons, below are some of the top things that commonly cause nonprofits to fail.

Lack of Funding

The most common reason why nonprofits fail is a lack of funding.

Nonprofit organizations cannot fulfill their missions without adequate funding. Of course, many nonprofits get used to making a lot happen on a shoestring budget; however, that doesn’t mean fundraising shouldn’t be a top priority.

In addition to funding their community work, nonprofits also need funding for things like staff salaries, office rent, and marketing so that they can operate effectively.

Unfortunately, many new nonprofits may not have clarity on how to secure funding through things like donations or grants. Even with the best intentions, a lack of funding will lead most nonprofits to fail. Not having a clear fundraising strategy will result in exhausting the limited resources and causing stress to the organization.

No Plans

One of the biggest mistakes nonprofit organizations make is only focusing on the big picture. They have identified a big gap in the community that they are looking to solve and they know what the issue is, but they don’t know how to go about solving it.

Essentially, they have no plan.

Even though their goal isn’t to make a profit, nonprofits are businesses, and they need to be run like one. Too many nonprofit leaders don’t view it that way, which often causes them to be unprepared.

Without a proper nonprofit business plan in place, it will be incredibly difficult to actually solve the issue at hand.

When you see a need in a community, it can be hard to not just jump into action, but taking a step back to create a plan will make your organization much more effective in the long run.

Burnout

Another reason why nonprofits fail is because their staff falls prey to burnout. This often goes hand in hand with unrealistic plans. As organizations take on more and more work, their staff can quickly feel overwhelmed.

Unfortunately, nonprofit employees can often be overworked. Depending on the specific work they’re doing, they may face high-stress situations or be exposed to difficult circ*mstances. This can be disheartening, and they may lose sight of the greater mission.

As you look to prevent burnout, make sure that you’re fully staffed, that you check-in with your employees, that you make them feel appreciated, and that you provide them with the right resources they need to succeed in their roles. These strategies can make a big difference.

Not Evolving

Times change, and so do the needs of the community! Nonprofits need to keep up or be left behind. Unfortunately, so many nonprofits cling to what worked in the past that they forget to focus on the future.

Perhaps your nonprofit was able to land a big grant one year. That’s great—but you shouldn’t expect or rely on the same win the next year.

It sounds silly, but this is one of the biggest challenges for nonprofits. They get too comfortable. They use the same fundraising strategies, social media tactics, or annual events instead of trying new ways to reach donors, build their brand, and engage with their community.

If you don’t evolve, you run the risk of becoming redundant, and soon, you won’t have the financial or community support to keep going.

Now that you know some of the most common reasons why nonprofits fail, here’s what you can do to avoid these same pitfalls.

Create a Fundraising Strategy

A big part of your strategic plan should be your fundraising strategy.

You’ll want to outline the different tactics you are going to use and create a calendar for when you’ll deploy them. You don’t want too many campaigns overlapping, as this will often yield a lower ROI.

Instead, look at the year ahead and plot out strategic asks. For example, if you run a breast cancer organization, you will likely want to run big campaigns in May around Mother’s Day and in October since it’s Breast Cancer Awareness Month. These can be your flagship fundraising events, and throughout the year you can run smaller campaigns.

Remember to check metrics on campaign performance and adjust where needed. As you set your strategy, don’t forget to use different platforms and channels.

And don’t forget about corporate sponsorships, giving societies, and grants! Each of these can be great fundraising sources for your organization.

Set a Strategic Plan

Your strategic plan will serve as your organizational guiding light, helping you focus your operations on effective and impactful solutions.

Your nonprofit strategic plan should include:

• Clear mission and vision statements to guide your organization, giving all employees greater purpose and an overall goal to work towards. These statements should inspire all you do.
• Goals and objectives that help support your overall mission. These should be achievable. At the end of the year, you’ll measure your success by how much you were able to accomplish.
• Tactics to help you achieve your goals. These should be actionable and specific, outlining exactly how you will achieve your goals.

If you do not have a comprehensive organizational plan in place, your operations will lack clarity. When your staff doesn’t know what their goals are or how to reach them, you will minimize the impact you can make in the community.

You can check out this post for a more in-depth explanation of how to create a strategic plan for your organization.

Foster Appreciation

Since burnout is such a big problem in nonprofits, you want to proactively take steps to make your employees feel appreciated.

Make it a regular process to thank your staff personally for their contributions. Send a personal email or drop a small thank you card in the mail. Check in with them on their workload and see if there are areas you can streamline or reduce it.

You don’t always have to spend money to make your employees feel seen and heard.

Innovate, Innovate, Innovate

Don’t be afraid to reinvent yourself to keep up with the times.

Does your branding look out of date? Is your mission statement no longer true? Can you expand your outreach using new social media channels?

Taking steps to be innovative in your approaches will help set your nonprofit apart from others in the market. The worst thing a nonprofit can do is get too comfortable.

When trying new approaches, make sure you’re capturing metrics so that you can see what’s working and make adjustments as needed.

Your audience and communities are evolving, and you need to keep up with them.

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Unfortunately, it’s common for nonprofits to fail. Dreams can only take you so far if you lack the structure, funding, and strategies to make them a reality.

You can avoid these common downfalls by creating plans, innovating, and fostering an environment where all feel valued. There are many resources out there, including our blog, to help nonprofits succeed.

Nonprofits play a vital role in supporting communities—don’t let these mistakes stand in the way of furthering your important mission.