Nonprofit 411: Size and Success: The Case for Capacity for NPOs

By Kim McCormick, Senior Vice President, McCormick Group

The spectrum of nonprofit organizations (NPO) in the United States ranges from $3+ billion to $250 in annual revenue. The DSC_0303pi-04Ms (1)huge disparity paired with the sheer number (1.5 million) of registered NPOs begs the question, does size matter?


Interestingly, there are two conflicting concepts regarding size. Larger organizations have greater resources to make changes, acquire technologies and train staff, however it’s more difficult to shift system wide. Smaller organizations may shift models easily, yet lack capacity and financial resources to make impactful change. Knowing the sweet spot for your organization’s size can help you deliver your mission more effectively. Unfortunately, many NPOs are busy raising money and managing daily operations. Building capacity for greater impact is the stuff of dreams.

Capacity can be measured by in many ways; stating efficacy in relationship to size is but one. NPOs at an effective capacity level raise more money in relationship to their size than smaller organizations. Comparing average gross revenue to size, research shows that the minimum financial capacity for organizational effectiveness is between $1-5M with $10M being the beginning of the sweet spot for strategic growth.

NPOs raising less than $1-3M simply don’t have the capacity to deliver the brand, attract and train quality employees, implement major programs, deeply invest in technology or significantly impact mission. If that is the case, then how can we build capacity? There are several ways, including:

• Raise more money

• Cut staff, programs and services

• Seek collaborative agreements to broaden the footprint, gain economies of scale and reach more constituents

The focus of a collaboration solution to capacity starts with mission, not money, and is centered on ‘what we can do better together.’


The first step to measuring success requires looking beyond the dashboard to multi-year trends. If a drop is noticeable or the organization is losing impact, volunteers and influence, the reason can usually be traced to capacity. Whether it’s lack of consistent funding, staff, volunteers, lack of “pick your point” there are missing elements that if present would result in positive trends. Additional factors including increased competition, the complexity of managing donors, policy shifts and environmental influences can inhibit success year after year.

Consider the impact of scale. The difference between a $1M versus a $10M organization spending 10% on branding is significant such that to achieve the desired results, the larger organization may only need to spend 7% on branding and have more funds available (in this example $300,000) to invest in strategic objectives. As scale increases, capacities increase simply because of size. There is direct evidence of entities lacking consistent financial capacity and not achieving goals due to weak brand recognition.

Donors relate to an organization on brand, but judge effectiveness on programmatic, fundraising and administration costs compared to monies raised. The larger an organization’s revenues in relationship to their expenses, the more appealing these ratios are to constituents.

Finding success through building capacity can be likened to realizing that you need something, like vegetables to sell at your market. You can either buy land, equipment and seeds, plant and tend hoping your investment pays off; or you can visit a vegetable farmer, get to know her, share resources, create a partnership and start offering high quality vegetables to your constituents quickly and inexpensively. Dream big!

Nonprofit 411: Is a Cause Marketing Campaign Right for Your Nonprofit?

Nonprofit 411: Is a Cause Marketing Campaign Right for Your Nonprofit?

By Ellen Lubell, Attorney-at-Law, Tennant Lubell, LLC

Cause marketing campaigns – also referred to as “charitable sales promotions” and “commercial co-venturer campaigns” – are mutually beneficial collaborations between a for-profit business and a nonprofit charity to increase recognition of the nonprofit’s name and cause, and to generate goodwill for the business because of its association with the nonprofit. It may also generate revenues for the nonprofit and profits for the business.e-lubell-photo

Cause marketing has been around since the mid-1970s. For example, the “Buy One Give One” campaigns involving businesses such as Toms Shoes guarantee that social or environmental good will be done through their charitable partners each time a shopper purchases their products. General Mills and the American Heart Association (AHA) teamed up to give a “heart check” stamp of approval to products such as Cheerios to certify that these products meet certain nutritional standards, thus advancing AHA’s educational mission and promoting sales of General Mills products.

Since cause marketing is intended to have an impact on the success or failure of the nonprofits involved, state charity regulators —typically Attorney General offices—scrutinize these campaigns to assure that nonprofits’ assets are being used appropriately and are not unduly benefiting private businesses.

If you are contemplating a cause marketing campaign for your organization, questions you should ask include:

1. Is the business partner you’re considering likely to be trustworthy and aligned with your interests?

Due diligence is important. Check out your partner’s financial and legal health; investigate its management practices and reputation; find out its record on issues relevant to your mission and ensure that their practices will not prove to be embarrassing; and make certain that you are compatible.

2. Are there risks to the use of your name and logo? The primary resource a nonprofit has to offer to a campaign may be its name. Permitting use of your name may seem like a no-brainer, but consider that the excellence and goodwill it represents—which your organization has developed over time with substantial effort—is exactly what your business partner wants to associate with its brand. If your business partner thinks your name is valuable in the marketplace, so should you. Consider also that the loss of your good name can be extremely costly. If your partner’s products or services become associated with fraud or greed or carcinogens, then so may your organization.

3. Will the campaign require you to undertake activities that will divert you from your nonprofit mission? Consider whether you will need to use your resources and staff in ways that are a greater benefit to your business partner than to you.

4. Are there legal compliance requirements associated with the campaign? Massachusetts charitable solicitation laws require you and your business partner to register with the Attorney General prior to commencement of the campaign, to file a written contract setting forth the terms of the campaign, and to prepare and maintain final accountings to demonstrate compliance with regulations. Make sure your partner understands that transparency and regulators are the norm in the nonprofit world, that limits will be placed on the way it can promote its brand, and that you will need to approve promotional materials that bear your name.

Is a cause marketing campaign right for your nonprofit? Engage your organization’s Board and senior staff and make sure the campaign will advance your mission.

Nonprofit 411: Negotiating a Major Gift—Respectfully

By Diane G. Remin, President,


Setting the Stage:  You just asked for a gift, and received a response that falls into one of three broad categories:

  • Yes. That one is easy.
  • “Let me think about it”—and all its variations, e.g., I have to talk to my <fill-in the blank>. “Let me think about it” is not a trigger to negotiate. Ask questions. The donor may simply need time to think. If you are uncertain, then err on the side of caution:  don’t negotiate.  But do schedule a next visit.
  • No way: “There is no way in the world I/we can do that” or “I/we can’t possibly afford that much.”  You are listening for an absolute “no” that will be expressed through the words, voice tone and body language. It’s time to negotiate.

The following are not immediate negotiation triggers:

  • “Wow, that’s a lot of money.” This is an observation, not a definitive statement that the donor can’t or won’t make the gift. Respond with an “impact statement,” e.g., “With that gift, you will be <fill-in the blank>.”

Tip:  Refrain from inserting your own money values into the conversation.  A seemingly empathetic reply of, “Yes, that is a lot of money,” may encourage the donor to recalibrate. Focus on impact: “A gift like that will <example of what the gift will accomplish>” or “You will be making a big difference.”

  • “I wasn’t expecting that.” This is an expression of surprise that can mean many things. Keep the focus on the project and on how involved the donor wants to be in the opportunity you presented.
  • “How did you come up with that number?” Respond with known interest in the organization/work, not process: “We know how much you care about <nonprofit or the particular program/project> and thought you would want to take a leadership role” or “thought this might be the level at which you would want to be involved.”

3-Step Donor-respectful Negotiation Strategy

Note:  Although the principles apply to gifts of all sizes, this 3-step process was designed with gifts under $1M in mind.

  1. Try a timing solution: If you asked for the gift as a lump-sum, e.g., for an outright $100,000, test a timing solution: “Would you be able to fund this project the way you’d like to if we spread your gift over time—would $25,000 a year for 4 years for a total of $100,000 make it possible?”
  2. Reduce the ask amount by 50%: If timing doesn’t get you to “yes,” then halve the amount and re-ask.

Why 50%?

  • If the donor could come close to the amount you asked for, you wouldn’t hear an emphatic “no way.”
  • Even if 50% is still too high, it’s clear you are listening.
  • It doesn’t feel like haggling.

3. Invite the donor to name an amount: If a 50% reduction doesn’t do it, then ask the donor at what level s/he would like to             participate: “So John, I know you would like to support the initiative…. Tell me what amount works for you.”

Whether or not a gift results, this simple, respectful negotiation strategy insures that the donor and solicitor feel good at the conclusion of the conversation.


Nonprofit 411: The Importance of Defunding Clauses in Leases

By Samuel Nagler, Krokidas & Bluestein

Sam Nagler

Imagine this nightmare scenario: your organization, through no fault of its own, loses its funding for a particular program. That funding was the source of your rent payments under the lease of the space from which you operated the program. You have an unsympathetic landlord who says “that’s not my problem” when you explain the situation. You miss a lease payment, and the landlord’s attorney sends you a notice to the effect that you are responsible for the full amount of the lease payments that would have been due under the remaining several years of the lease, all in a lump sum. Though you are relieved when the landlord finds a new tenant for your space who is actually willing to pay a higher rent, that relief is short-lived since under a 2007 Supreme Judicial Court case, so-called rent acceleration clauses may be fully enforceable even if the landlord has found a new tenant.

If government funding is the source of rental payments under a lease, a defunding clause – a clause that allows the tenant to terminate the lease based on loss of funding – is essential. There are many nuances involved in the drafting of a defunding clause. For example, you will want the clause to apply to a partial defunding that impacts your ability to make further rent payments, not just to a complete defunding. Ideally, the clause should specify that the determination as to whether the partial funding cut was of such significance that you can no longer make lease payments is one made solely by you, since you certainly know your organization’s financial and operational constraints better than the landlord does. However, even if your landlord agrees conceptually to a partial defunding clause, it may insist on an objective standard (such as a specified percentage cut in funding, or at least a “reasonableness” standard) for determining whether you can no longer make lease payments. The length of the notice period is also commonly negotiated. If the funding source does not give you much notice, you may not be in a position to give the landlord any greater notice. However, landlords will often insist on ninety days or even more notice. These are but two of the issues that arise in negotiating defunding clauses.

You may ask why any landlord would agree to a defunding clause when the tenant’s termination of the lease does not excuse the landlord from making its mortgage payments. While such a provision may be a deal-breaker for some landlords, from my own experience of over thirty years, landlords generally acquiesce (albeit reluctantly), especially if they are convinced that the prospective tenant’s board of directors requires that every lease contain a defunding clause. Landlords who take the time to learn a bit about your organization, your history of success, and the essential nature of the services you provide, can generally obtain enough comfort to agree to a defunding clause in some form.

Krokidas & Bluestein LLP is an affiliate member of the Massachusetts Nonprofit Network. Learn more about our affiliate members here.

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