Too Many Nonprofits? Yes! Clueless in Seattle

Feature Articles [1] • March 26, 2009 • forward article

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Elizabeth (Liz) Heath founded and directs the Nonprofit Center [4] in Tacoma, Washington, which serves the South Puget Sound region, and is membership co-chair for the Alliance for Nonprofit Management [5],
a national professional organization. Last year Liz hosted and produced "Reaching Out," a
community television program featuring local nonprofits.

On the way to work this morning I saw a liquidation sale sign in the window of one of my neighborhood coffee shops. This triggered my thinking about the impact of the economic challenges on the nonprofit sector.

This coffee shop has been there for about three years. When they opened I wondered what kind of business planning they had done. A block away is a Starbucks with fantastic staff members who make a point of connecting with their customers. And one more block to the south is an upscale, locally owned market with a great coffee shop. They also have a loyal following.

I live south of Seattle, so three coffee shops in a two-block area might seem to outsiders to be normal for this part of the country. Not really. We love our caffeine, but there is a limit!

Clearly there was a flaw in their planning. I know that they hoped to capture the non-working residents of the area who chose not to frequent the mega-franchise shops or even the market shop (a chain of five stores in the region). How they thought that market was big enough for sustainability baffles me.

So what does this have to do with nonprofits? Every week I get at least one call from someone wanting to start a nonprofit. We have a checklist on our website that includes the need to prepare a strong business/financial plan. Nine times out of ten the caller says something like, "Oh I don't know how to do that financial stuff. I just want to help the stray puppies in my neighborhood."

Sadly many of those callers will, in fact, start nonprofits. And they will garner support, at least initially. And they will bumble along until they suddenly realize that they've run short of money. Then they'll be going to the city or local foundations saying something like, "It's so terrible that the community won't help us. We're in crisis and we need you to give us money."

But will there be a liquidation sign in the window? Hardly ever.

What's with the carbon copy organizations?

In my community there are two organizations with nearly the same name. They have nearly the same mission, and the major fundraising event for each is almost a carbon copy of the other. Yet they won't talk with each other. The boards of each point to the other and say, "We'll cooperate with you if you'll do things right." (translate: "our way")

Will there ever be a merger or even a collaboration? I doubt it.

One more story. A nonprofit tutoring program in this area recently announced it was closing its doors for a month because it had run out of money. In that month the group hoped to raise $100,000 to re-open. Meanwhile, hundreds of children no longer met with their volunteer tutors each week. The board of this organization had been informed of the financial crisis one week prior to the public announcement of closure!

Will these children be left behind? I'm afraid so.

All this points up the flaw in our nonprofit sector. Many of us don't use good business practices, often because we believe that doing "good works" is enough. It is not! The nonprofits that survive will be the ones that practice good management. Those who refuse to do so should go get a liquidation sign and stop wasting the community's money.

We in the nonprofit world sometimes say we have a double bottom line: financial success and a changed world. I would add that we can't change the world unless we have good financial/business management.