Noticeable differences in funding between the smallest charities and the rest

I just discovered Grassroots Civil Society, the Scope and Dimensions of Small Public Charities, released in 2010 by the Urban Institute.

In the report, authors Elizabeth Boris and Katie Roeger hoped to shed a bit more light on the smallest reporting public charities. Accounting for three out of ten of all public charities, these small organizations weighed in with total revenues, expenses and assets below $100,000.

I’ve written a lot about the special role these tiny organizations can play in our social fabric. (Eg. See Hope Dignity and Quality of Life are also valuable outcomes, even when measured in hours.) While this report wasn’t designed to look at social impact, any nod toward this large segment of nonprofits is welcome as all attention lately seems to be focused on being or getting big.

What particularly struck me was the difference in the revenue types of these small organizations. Small public charities rely heavily on private contributions ( 52.7%)  while the sector as a whole depends largely on fee for service revenues (67.1%).

Small charities also receive 16.8% of income from “other revenue” which includes net income from special events, gross profit from sale of inventory and other revenue (my guess is that those special events make up the bulk of this income) — the percentage for the category overall is 2.1%. According to the report, these patterns have been pretty consistent over the 10 years studied.

I’m infinitely interested in understanding how organizations grow. While an article like How Nonprofits Get Really Big helped shed a lot of light on nonprofit growth, it doesn’t address the path between start-up and reaching that qualifying $50 million in revenues.

I think it would be very interesting to understand how these revenue patterns shift by size of organization and also whether the numbers are consistent within particular types of organizations (arts, environment, social service) regardless of size or if the revenue proportions hold as size changes.

Why bother with all this data? I don’t think we do nonprofits a service by prescribing remedies that ignore the huge differences among us and act instead as if the sector were a monolith. I welcome more research that can help us better understand the similarities and the vast differences in the sector.

P.S. Check out other studies at the Urban Institute. You might want to start with Nonprofit Governance in the United States, an exhaustive look at our boards.

7 responses to Noticeable differences in funding between the smallest charities and the rest

  1. Sandra Sims

    Gayle, you make some excellent points. There are huge differences in the way small nonprofits and large organizations operate. The culture and mindset is often different at the small nonprofit level, especially in rural or small communities. There are many lessons they can learn from the larger organizations, but growth often comes in baby steps.

    • Gayle Gifford Post Author

      Sandra, Thank you for your thoughts, especially mentioning rural and small communities. One of the other questions that lingers for me is the relationship (or lack of access) of many small organizations to persons of wealth and how that affects their ability to raise resources and grow. Of course, many of the smallest organizations will always be small — which makes sense — like neighborhood associations or sports programs. I’m waiting for the research that really takes a strong look at the impact of class, ethnicity and race on nonprofit growth, and how government funding fits into that mix.

  2. Sherry Truhlar

    Gayle, you are so right that nonprofits have vast differences. I often see organizations try to apply a growth technique that worked for another without considering why it worked or how the organizations are different. That kind of study on a micro-scale study can help individual organizations.

    I’ll wait to hear what research you discover that provides a macro-answer.

  3. Tammy Zonker

    Brilliant points, Gayle. These prescient observations on the operational and revenue differences in small/large nonprofits are spot on. Also love your inquiry regarding the dynamics of ethnicity, race, funding mix, etc.

  4. Sandy Rees

    I find that way too many small nonprofits rely on one special event after another, until all their time and energy is used up. Some are intimidated by the techniques used by “big” nonprofits. I think the answer lies somewhere in educatiing them about appropriate fundraising strategies for their size and resources (not only money, but Board, image, and overall community support).

    Sandy Rees

  5. Kivi Leroux Miller

    I focus on helping those smaller nonprofits, so I’m really interested in your take on this. Thanks for sharing, and hope you’ll keep blogging on this topic!

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