I was able to get away for a couple of weeks this past month for some R & R, which included a short trip to Sante Fe with my wife, Carol, and a five-day bike tour with friends through Utah and Western Colorado. This much-needed downtime cleared my head and re-energized me to do better for my team members, clients, and the nonprofit community.

Nonprofit lifecycles

I ran across a book, “Nonprofit Lifecycles,” by Susan Kenny Stevens. Susan Kenny Stevens has served as an organization development consultant, Board member, and CEO for nonprofits. With that being said, she does a masterful job of relating growth-stage theory to nonprofit organizations.

Growth-stage, or lifecycle theory, has been around for a long time but is more often discussed and used in the context of small- to mid-sized businesses. More specifically, she outlines seven lifecycle stages that are clearly definable for nonprofits:

  • IdeaScreen Shot 2014-06-26 at 7.29.50 AM
  • Startup
  • Growth
  • Maturity
  • Decline
  • Turnaround
  • Terminal

Each stage presents its own set of predictable challenges. We’ve discussed these challenges and how they relate to outsourced accounting services in the article, How Your Nonprofit Can Benefit from Outsourced Accounting Services.

The most dynamic stage is growth and is defined as the transition between startup and maturity. Also, this stage is characterized by the mission and programs having taken hold in the marketplace, but where service demand exceeds the organization’s structural and resource capabilities.

Typical challenges include:

  • Too much to do, too little time
  • Developing Board ownership
  • Creating a strategic focus
  • Developing and identifying distinctive competence
  • Beginning to formalize the organizational structure
  • Diversifying revenues and
  • Tracking financial results.

To achieve and build capacity at each stage requires the complete balancing and alignment of the nonprofit’s programs, management, governance, resources and systems. Some semblance of this equilibrium is necessary for the organization to move onto the next stage.

Growth-stage nonprofits

Due to the fact that capacity is not balanced, not all startups reach the growth stage. Similarly, not all growth-stage organizations reach maturity.

For startups and early growth-stage organizations, providing outsourced accounting services and basic financial reporting at a professional level fulfills a vital resource component of capacity. Additionally, it helps the CEO focus on the mission, programs, and fundraising.

For later growth-stage organizations on the road to maturity, we may continue to provide accounting services but work on a collaborative basis with an internal bookkeeper or administrative specialist. Moreso, these organizations also require more sophisticated processes and systems. Thus, an opportunity to provide more robust permanent financial management software and consulting services arise.

Mature nonprofits

Reaching maturity is a major milestone in an organization’s lifecycle that presents a whole new set of challenges. However, the key characteristic is the professionalization of functions with trained specialists taking on key roles. Further, the organization becomes more important than any single individual.

It is not unusual for the “founder” to not make the transition along with some of the early staff. In terms of our role, we consider helping nonprofit’s getting their financial house in order earlier than later puts them ahead of the game. Because of such, we happily take on a more consultative and maintenance role.

To learn more about outsourced nonprofit accounting, please visit our Guide. You can also contact us with specific questions.