Understanding the nonprofit lifecycle is the key to identifying the transitional points that can be opportunities to expand an organization’s capacity to serve the community they set out to help.
Simply put, capacity is a nonprofit organization’s potential to effect meaningful change. Building capacity is necessary to accomplish an organization’s mission in a way that is both cost-effective and impactful.
Peak capacity requires solid infrastructure, strong and supportive leadership, adequate staffing, strategic programming, and sound financial and fundraising systems. Reaching the ideal mix of these elements requires knowledge of a nonprofit organization’s growth cycle. Here, we break down each stage of development.
The Nonprofit Lifecycle Stages
Stage I: Ideation
An idea is generally sparked by observing a void in a community – a problem urgently in need of a solution. Enthusiasm and imagination abound, but the organization is not yet formed. Perhaps an individual (often the Founder) or a group of people are involved at this informal stage.
Stage II: Origination
Origination is the stage when an idea becomes action. A nonprofit corporation is formed and a board of directors is appointed. Other people are brought into the fold to begin the task of effecting change within a community in need. Most likely, all members function as leaders, making decisions as a unit. The application for tax-exempt status is submitted.
Stage III: Expansion
At this stage of growth, the nonprofit is officially tax-exempt and the focus begins to turn to funding and programs. Workloads likely grow but become manageable by bringing on an executive director who will take on the responsibility of organizational operations and day-to-day decision-making. Programs are expanding to reach more constituents in need. The team begins to set down deeper roots into the community, allowing them to bring in sufficient funding and diversify revenue sources.
Stage IV: Solidification
At this stage, the team has found its stride. Financial and fundraising systems are well oiled and highly tuned to the mission. Organizational culture may have evolved to include formal rules and expectations. While an organization may be operating at peak efficiency, communities can evolve rapidly, meaning the nonprofit risks being out of sync with its community. This does not necessarily mean a nonprofit will become irrelevant; rather, this is an opportunity for an organization to reevaluate and shift its focus to meet its community’s needs.
Stage V: Reinvention or Decline
This can be a period of revitalization – when an organization truly becomes dynamic. The issues of the day and needs of the community are reevaluated, which may lead to major or minor tweaks to the mission or merging with other nonprofits. Reinvention serves as an opportunity to see the organization in a new light, revealing greater possibilities for charity and community change. During this phase, some organizations will find renewed purpose whereas others may determine that it is time to celebrate a job well-done and close up shop.
What stage of the nonprofit lifecycle is your organization currently experiencing? Every point in the cycle presents unique challenges and opportunities. To ensure your organization can evolve and thrive, contact our seasoned attorneys at LFNP – The Law Firm for Non-Profits. For over thirty years, LFNP has helped nonprofits create a solid legal and business infrastructure that supports and sustains an organization’s mission in every stage of its development.