EXECUTIVE SUMMARY on The State of Scaling Among Nonprofits

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1 EXECUTIVE SUMMARY on The State of Scaling Among Nonprofits Summarizes four important trends impacting nonprofit leaders and boards scaling impact in the coming year and beyond Integrity & Objectivity You Can Count On

2 Veris Consulting and The Social Impact Exchange set out to determine the state of scaling among nonprofits to generate baseline data to map the scope, range and extent of those currently scaling or intending to scale their impact so that we might learn more about how to exponentially increase the impact of social solutions that work. Enclosed is a summary of key findings and insights gleaned from our national survey of over 400 nonprofit leaders, nearly all of whom are currently scaling (75%) or intending to scale (22%). View comprehensive summary of key findings > SNAPSHOT FROM REPORT: NONPROFIT STATE OF SCALING Of those nonprofits currently scaling impact, 64% have been in operation for more than 10 years and of those intending to scale, 69% have been in operation for more than 10 years. Though size of budget and staff varies greatly, a sizeable percentage of all respondents are in some phase of the scaling process regardless of size. However, there are some notable geographic differences between those who are currently scaling and those intending to do so.

3 This first of its kind study reveals illuminating findings on nonprofits scaling intent and trends of nonprofits scaling their organizations and initiatives. Veris summarizes four important trends below impacting nonprofit leaders and boards scaling in the coming year and beyond. TREND #1 Greater Need for Scaling Effectiveness 79% of nonprofits are motivated to scale to increase the number of constituents served, while 58% are focused on systematic change indicating a shift towards long- term growth. An overwhelming percentage of respondents (90%) are past the assessment stage in scaling their initiatives. Under increasing pressure to deliver measurable outcomes, nonprofits may find themselves without the financial means to conduct the reporting needed to measure return on investment of various approaches to scaling and growth planning. And so we ve discovered a catch- 22 where nonprofits are asked to measure effectiveness, without being given the additional funding to grow to a level where an impact evaluation would be significant. Simply put, if the demand is made to evaluate scaling effectiveness, investment in measurement reporting needs be part of the overall funding picture. While organizations are primarily focused on increasing the number of constituents served (79%), they are almost as concerned about creating systematic change (58%) indicating a movement towards longer- term horizons. Only a small amount (9%) of nonprofits surveyed are promoting their model for adoption by other organizations, which often is one of the easier ways to scale impact. 45% of respondents intend to create impact beyond those they serve with a focus on public policy approaches, while 44% are focused on partnering with other organizations. Nonprofits are attempting to scale and raise capital simultaneously, highlighting that the sector is under- resourced and lacking an effective system for financing growth. Though 92% recognize the importance of a business plan, only 42% have one signaling the majority of nonprofits need a more disciplined approach to their scaling efforts. A growth plan requires a deep dive into industry trends, market demands, competitor profiles, core capabilities and a feasibility assessment helping map out a sound roadmap to success. Nonprofits currently scaling rank securing capital as their top priority, while those intending to scale are most interested in developing a feasible model for scaling and receiving knowledge about how to scale, followed by securing capital. Focusing on the how- to s like business planning, strategy development, financial forecasting, legal requirements, etc. remains just as important as fundraising and financing.

4 TREND #2 More Rigorous Measurement Required Trends clearly lead towards encouraging more rigorous methods for evaluating impact. As such, there is a strong need for better education and more funding dedicated to measurement, so that nonprofits can evaluate programs and only scale those with proof of results. Only 39% of nonprofits scaling have measured the impact of their work. A large number (59%) are using self- reported studies, the rigor of which remains unclear. Only 12% have done third- party studies, and 2% have conducted a randomized control trial. There are potential negative consequences from this lack of rigorous evaluations, including less credibility with prospective donors, which can make fundraising that much harder. TREND #3 Increased Importance of Board Engagement The importance of board engagement has truly come to the forefront, with increased participation in everyday operations and decision- making. Investments in boards are a critical factor in strengthening nonprofits, supporting scaling efforts and driving strategy. Growth plans are particularly board- driven, with many nonprofits turning to experienced board members who have successful grown organizations in the past, to actively guide this process. In fact, 78% see their boards as the #1 resource in informing their strategy on scaling impact. 78% of nonprofits rely on their boards to inform strategy and decision- making while nonprofits with $25M+ budgets, rely more heavily on evaluation study results for guidance. Boards should be truly integrated into their nonprofit s operations, properly informed of the status of an organization and the environment in which it functions. There is a heightened emphasis on board development and recruiting a diverse board that reflects the communities served and expertise required to reach scaling goals.

5 TREND #4 New Challenges in Raising Scaling Capital Not surprisingly, raising the capital needed to fund nonprofit scaling continues to be a challenge. Only an average of 17% of funds required have been raised by those conducting capital campaigns, making securing sufficient capital the top focus area for most nonprofits scaling. Surprisingly, only 24% have started fundraising even though 75% are currently scaling. Overall, the sector lacks an effective system to access the capital needed to scale. Organizations are asking for more money to support efforts to scale, with 25% needing $5M or more and 9% requiring at least $20M. However, 76% of respondents are not actively fundraising, with an even higher rate among smaller nonprofits (89%). Shockingly, only 8% have raised 50% of their goal and 39% have raised no funds to date. From shrinking government support and increased competition to limited access to lines of credit, the research identified over 15 fundraising challenges. The research found limited awareness of the role intermediaries serve in raising capital, with only 11% of nonprofits surveyed working with intermediaries. Interestingly, only 37% of growth funding is coming from government, the traditional source of scaling capital. Individuals now make up 72% of funding sources for scaling efforts.

6 VERIS CONSULTING specializes in outsourced financial management and survey research for nonprofits and social enterprises. Its Outsourced Accounting and Financial Management Practice draws upon specialized expertise to improve bottom line results and enable nonprofits to grow revenue and control costs. Veris provides objective, hands- on consultation through interim CFO services, outsourced accounting, financial assessments, and executive search helping nonprofits take control of their finances and advance their missions. Its Survey Research Practice delivers valuable insights through benchmarking, compensation and satisfaction surveys as well industry trends and business intelligence studies. HEADQUARTERS Plaza America Drive, Suite 300, Reston, VA LOCATIONS Washington, DC Jacksonville, FL Miami, FL THE SOCIAL IMPACT EXCHANGE is a national membership association dedicated to building a capital marketplace that scales high- impact social solutions to improve the lives of millions. The Exchange creates the conditions for breakthroughs to go big in order to deliver impact where it is needed most. Together, more than 4,000 Exchange members are making it easier for philanthropic giving to achieve major positive change by supporting strategies that improve lives and change systems. By creating standards to evaluate impact, identifying and tracking highly effective nonprofits, and enabling significant collaborative funding to scale up top social interventions, the Exchange helps foundations, donors, business, and government increase the power of giving to achieve greater social good. HEADQUARTERS 122 East 42nd Street, 17th Floor, New York, NY Veris Consulting, Inc. & Growth Philanthrophy Network. All Rights Reserved. Any part of this report may only be reproduced in any form by citing Reproduced with permission from Veris Consulting & Growth Philanthrophy Network.