Follow-up: Non-profit sector contraction predictions?

carnacAt the end of 2011, I predicted in a year-end blog post that the non-profit sector in the United States would see the continuing trend of “non-profit failures, mergers, acquisitions and strategic alliances“. Last week, I thought it would be fun to look back and determine if my prognostications where off-the-mark and by how much.

Here is some of what I found:

  • The Chronicle of Philanthropy reported in March 2012 that sector contraction was real. They pointed to the IRS revoking the tax status of 272,000 non-profit organizations. They also pointed to the economic slow down and its effect on wealthy people establishing fewer foundations.
  • The NonProfit Times also reported in March 2012 that the number of applications for tax-exempt status is down.

In reality, I found it very difficult to find a lot of data pointing to sector contraction. However, I did find lots of interesting little facts such as:

  • Non-profits account for more than 9% of all wages paid in the United States.
  • Non-profits also account for approximately 5.5% of the United States’ GDP.

Click here to see a snapshot of all sorts of other interesting little facts about your sector.

So, is the sector contracting? Is this a larger trend? Will we see more bankruptcies, mergers, etc? Was I right at the end of 2011?

I think so.

In fact, if I had to bet, I would totally double down on this 2011 year-end prediction.

Why? I simply point to the following passage that I read in “The Nonprofit Almanac 2012“:

“Another noteworthy trend is the gap between income and expenditures, which was negative for 8 of the 10 years covered, rising to −$65 billion by 2010. It appears that the growth of the sector is being financed by borrowing or drawing down of reserves, trends that are likely to weaken affected parts of the sector over the long haul.”

On a personal note, I trust my eyes and my ears. I cannot remember a time when I’ve seen so many non-profit organizations struggling to make ends meet.

Some of you may be wondering if I have any tips for non-profits who are experiencing financial crisis and facing down insolvency? Sure, go hire yourself an amazingly talented executive director. I’ve never seen any agency “turn it around” without a truly talented CEO.

What do your eyes see? Are there non-profits in your community struggling or going out of business?

Here’s to your health!

Erik Anderson
Founder & President, The Healthy Non-Profit LLC
www.thehealthynonprofit.com 
erik@thehealthynonprofit.com
http://twitter.com/#!/eanderson847
http://www.facebook.com/eanderson847
http://www.linkedin.com/in/erikanderson847

3 comments

  1. No doubt I’ve seen this, Eric. In consulting throughout 2011, I worked with a number of nonprofits that were “struggling.” One, in particular, went through the process of carefully vetting and hiring a new CEO, and I’m waiting to see what their results are in 2013. Their situation had been touch and go financially for three years prior to the new hire. All the nonprofits I can think of in town that are not struggling…have tremendously gifted CEO’s.

    1. Great hearing from you, Karen! I hope all is well by you. Thanks for weighing in on such a difficult topic. I, too, have been seeing much of the same things. When I talk with other consultants such as you, they are also saying the same thing. One consultant actually used the analogy of “a dam about to break”. This just tells me that the non-profit sector isn’t out of the woods yet with regard to tough economic times. In fact, we might just be on the verge of seeing the REAL, lasting effects of the economic crash of 2008. We’ll see!

      Best of luck and Happy New Year!

Leave a Reply

Your email address will not be published. Required fields are marked *