Ringing The Fire Alarm: How Badly Are You Undercapitalized?

By Laurence A. Pagnoni, MPA

Many nonprofits are under-capitalized. We’ve known that for years, but recent analysis by Nonprofit New York shows that many are also fiscally insolvent!

In New York City, 10% of nonprofits are insolvent. For health and human services nonprofits, 18% are insolvent.

As many as 40% have virtually no cash reserves; and over 40% have lost money over the last three years.

Estimates show that less than 30% are financially strong.

What Can You Do?

First, determine the financial condition of your organization. If you already know, build on that knowledge to advance your revenue program. If not, develop an immediate curiosity about your agency’s financial health and determine what funds you need to raise and for what.

Secondly, commit to analyze the funding resources of at least ten peer agencies and share the results with your top staff and/or finance committee. What did you learn from the analysis about funders that should be funding you?

Third, commit to full funding of your revenue program because without the revenue your mission is dead on arrival. Your revenue program fuels your mission, a cursory knowledge of how to raise significant revenue will not do.

How committed are you to advance your revenue program? Your answer must be specific, not abstract. You must define what a new dimension on fundraising performance (Peter Drucker’s definition for innovation) looks like. Do you really have a choice?

I welcome your insights and am responsive to your questions. Because of the urgency, I am willing to give you free feedback on your revenue plan (or just the executive summary), a five page limit.

PS I have a new book coming out very soon, March 12 to be exact. All I can say is that it will make you think twice, thrice, and more. Stay tuned.

We welcome your comments about this post on the LAPA blog.

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