June 11, 2007 | Read Time: 2 minutes
Charities that want to grow quickly often have to turn to less-than-legitimate methods to boost their revenue.
William Foster and Gail Fine of the Bridgespan Group in Boston studied the growth of 144 organizations that were created after 1970 and now regularly earn at least $50-million in annual income and found that those groups succeeded, in large part, because they stuck largely with a single source of income that is aligned closely with their charitable missions.
The results of the study, How Nonprofits Really Get Big, was published in the Stanford Social Innovation Review.
But Dan Prives, a nonprofit finance expert, has studied the data a bit more closely and found some other traits that mark the 144 organizations in the Bridgespan study.
Mr. Prives, writing on his blog Where Most Needed, notes that four of the five largest organizations in the study rely heavily on donations of products and services and 19 of the groups receive at least one quarter of their revenue from donated goods.
“These new organizations are simply transporting donated goods to other charity organizations, not to the final recipients, it’s a bit misleading to credit these organizations with the value of the goods they carry,” Mr. Prives writes. “Nevertheless, the one best way to become a very large charity very quickly is to act as a middleman distributing in-kind donations.”
Mr. Prives also notes that several of the organizations in the study are charities that focus on credit counseling or down-payment assistance for homebuyers — a type of organization that has come under scrutiny by the IRS.
“So perhaps the most reliable way to create a huge charity it to come up with a plan to make money and then get the IRS or Congress to endorse it as a charity,” he writes.
Is Mr. Prives’ assessment of the Bridgespan study on target — or too harsh? Click on the comments link below this post to share your thoughts.
