Lessons from a Failed Nonprofit

By Joseph Plummer

It takes a special kind of stupid to start a nonprofit on your own. In February 2011, I was that special kind of stupid. I started a 501(c)(3) nonprofit organization more or less on a whim.

As it turns out, you can actually complete most of the paperwork to create an organization and then apply for 501(c)(3) status without talking to a single person. However, before you are granted nonprofit status, your organization must have a board of directors. This begins the expansion of an individual’s vision to other accepting hearts and minds.

Fast forward to Fall 2011, I received the coveted Determination Letter from the IRS granting my organization nonprofit status. At this point, I began talking to schools, nonprofit leaders, elected officials, corporate representatives and university professors with the hope of spreading my vision: solar panels at every school in America. Now four years later in 2015, I have connected with hundreds of people, raised a modest amount of money, and spread my vision a little bit further. I can honestly say that starting my nonprofit was the best decision of my life.

However, there has always been a lingering question in my mind since starting my organization. I once heard someone say that nonprofits should try to make themselves obsolete. So, the question that lingers is: Does your organization need to exist?

When I asked myself this question in 2011, the answer was indisputably yes. This answer is, of course, a combination of truth and youthful spirit. However, after four years, the question is more difficult to answer now.

If I were to approach a nonprofit leader in 2011 and suggest a new initiative, I would have received at best a response like “that’s an interesting idea, good luck." Today when I approach the same nonprofit leaders, the best responses are more like “how can we help?” or “we’re in.” Likewise, in 2011 potential corporate sponsors would rarely return emails or calls. Today most companies with respectable corporate social responsibility (CSR) departments will take meetings with me, though they are still slow to give financial support. This progress is great, but it doesn’t answer the question of whether or not the organization needs to exist.

In 2011, a significant number of our partner organizations either didn’t exist or were also recently founded. I have seen some great organizations die, for lack of a better word, over the past four years. I have also seen some wildcard organizations grow into thriving nonprofits. In my humble opinion, success in the nonprofit sector is a function of luck more than anything else. Creativity, hard work, smart work and intentional networking are also significant factors. In any case, my organization has had a torturously mediocre amount of success. It has received dozens of letters of support from local leaders, numerous small grants ranging from $500 to $15,000, and a couple of awards for innovative programs. However, this mild success also does not answer the question of whether or not the organization needs to exist.

So, given the preceding five paragraphs, I am now going to answer the question: Does my organization need to exist? My answer is no. I say this with pain in my heart, with pride in what I have been able to accomplish, and with a precise understanding of how to create greater impact.

In short, after four years, my organization has not been able to breach $100,000 per year in revenue. And, for the type and size of my organization, the amount of time devoted to unsuccessful fundraising really does not make sense. Furthermore, the connections I have made allow me to keep the momentum toward impact that my organization has created by diverting opportunities to other organizations that have the capacity to capitalize on them in ways that my organization could not.

It is interesting to read the obituaries of failed nonprofits. They are inherently gloomy and disheartening. It is as if the nonprofit leader is falling on his or her sword, accepting the shame of defeat. They say things like “we had a good run” or “thanks for the memories” or “it was fun while it lasted." These final newsletters only serve to reinforce the understandings, and perhaps realities, that our nonprofit sector is weak and that being an entrepreneur is risky and often ends in failure.

The truth is the American nonprofit sector is easy. There isn’t much funding, but there are a lot of nonprofits that don’t need much money to operate. There are a ton of nonprofits that operate on less than $10,000 a year. And, if that is your annual operating budget, you really don’t have to risk much to keep your nonprofit running. The nonprofit sector in America is almost failure-proof. You might not be very effective, but it is very easy for nonprofits to exist in America. Being an entrepreneur in the nonprofit sector is not risky.

My nonprofit has reached the end of its journey, because I believe more impact can be achieved through the consolidation of efforts. Over the next few months, I will be transferring the momentum that my organization has created. The weight of my organization will be transferred to other organizations. The nonprofit sector will be stronger, because of the life and death of my organization.

I have compiled a short list of lessons learned for anyone who is thinking about starting a nonprofit. This is not an exhaustive list, but this should help young nonprofit leaders with some of the basics.

1. Have a co-founder or two.

Starting a business is lonely. You are putting your ideas out into the world, and the world is tearing them apart. You are spending time, money and creativity on making an organization work, and the odds are very much against you. Take the time to find someone that cares as much as you and is easy to work with. This will reduce the risk of depression and failure and ultimately make your organization better.

2. Make your brand and organization name a non-thought.

You never want to hear, “Ohhhhhhh, I get it!” That is an indication that they didn’t “get it” right away.

The name that I came up with for my organization was Three Birds. The idea behind the organization was that we were using renewable energy as a catalyst to address three issues simultaneously (education, environment and economy) -- essentially hitting three birds with one stone. This is a nice idea that is great for long conversations with your significant other in front of a fire with a bottle of cheap wine, but when you are meeting a potential funder or organizational partner for coffee, the explanation of what your organization name is all about eats into what might only be 10 minutes of meaningful conversation time.

Also, when deciding on a name for your organization, stay away from metaphors about killing birds, especially when you are working in an environmentally-related profession. And, make sure you are not unintentionally referring to a Bob Marley song.

3. Focus on product: If you have great ideas, turn them into products.

Great products sell themselves. If your organization has a great product, it will sell itself and carry your organization. All you have to do is show people the product in action, and the consumer will do the rest.

Great ideas are different: When you tell someone about a great idea, it will cause them to think about it and in some cases talk about it. And that is a good thing. But it is very hard to convert ideas into money, which is what you need as an organization to survive.

You can sell data, you can sell products, you can sell services, and you can make your ideas part of those things. But you can’t sell ideas alone, because in order for someone to buy an idea, they need to know what the idea is. The nonprofit sector is great at thinking and providing the world with ideas. Most nonprofits advocate, but the great nonprofits are the ones that make themselves obsolete. You can advocate for clean water or you can create a low-cost, portable, easy-to-use water filtration system. Choose wisely.

4. Don’t pitch. Swing.

In the nonprofit sector, you have to fundraise constantly. This means pitching day-in and day-out. This is the inherent failure of the nonprofit sector. The sector that is clearly the least corrupt and most pure is required to spend half its time (at least) begging (whether you are a startup or not).

According to Bloomberg, 8 of every 10 new businesses fail within 18 months. If you are an entrepreneur, this shouldn’t cause you stress. This should give you some relief. What if at the beginning of your endeavor, God were to tell you with 100 percent certainty that you were going to fail and your organization would not exist within five years time? This to me would be an indication that you shouldn’t spend your time and creativity on pitching, but rather on creating great products and solutions. If you are going to be an entrepreneur, recognize that failure is inevitable. Let that give you some peace of mind. And then swing for the fences.

5. Reputation matters.

In the nonprofit sector, the organizations that are competing for the same funding as yours are also the organizations you are most likely to collaborate with. Don’t piss them off. Don’t alienate them. Market to them. Once you have your great product, show them first. They will validate your work and often sing your praises to funders. Your colleagues in other organizations, especially in the nonprofit sector, are your greatest advocates.

6. Funders need to be educated.

Funders aren’t stupid; they just don’t know. Most funders are far from the front lines. They haven’t a clue what is going on from day to day in the world of social change. As a nonprofit leader, you are in the fray every day. Funders need to know where your ideas are coming from. Anecdotes, data and site visits are all great ways to educate funders about what your organization is doing and the impact it is having.

7. Adopt mentors.

People don’t like giving away money, but people love to give away advice. And you need it just as much as the money. Young entrepreneurs especially need wisdom. Find people with scars and ask them how they got those scars. Ask a thousand questions. If you start to hear people say, “Wow, you really thought of everything.” Then you’ll know you’re doing it right.

8. Social media is great for awareness, and pools are great for holding water.

Recognize that social media is not the answer to your funding problems. Social media is really effective at building and sustaining awareness. And, sometimes social media can make some pretty extraordinary things happen. But, for the most part, social media doesn’t move the needle. Steer yourself and your organization away from ideas that rely on social media. Think of social media as a given or a base in a broader integrative marketing strategy.

9. Shrink your board.

Many nonprofits use their board of directors to fundraise, advocate and extend their network. This isn’t a terrible idea, but remember what the primary role of the board is supposed to be: governance.

Governance gets difficult when you have a large board. Unless you have a great network of willing fundraisers and advocates, just focus on making governance as easy as possible. This will reduce headaches as the organization grows. Get governance right, and then think about how the board can help fundraise and network.

10. Volunteer programs don’t scale.

Volunteers are great for one-day events. But they become less reliable for week-to-week engagement. Life happens. Relying on volunteers makes your programs and organizational work less consistent and tougher to plan. Accept the love, time and creativity from volunteers, but don’t build a program around it.

11. Understand the difference between a small bet and a big bet.

Spending 1 percent of your budget on an unsuccessful crowdfunding campaign might be considered a small bet. Spending 40 percent of your yearly budget on prototyping new demonstration tools and products might be considered a big bet. Just remember that any bet you make as an individual or an organization is a small bet when considering the scale of our global challenges.

Image credit: Flickr/yevkusa

Joseph Plummer is a degree candidate in the Executive Master of Natural Resources (XMNR) program at Virginia Tech, expecting to graduate in May 2016. He is the founder of The Three Birds Foundation, a non-profit organization that worked with schools and school districts on renewable energy and sustainability initiatives.