Nonprofit Lifecycle

Do you know what stage your organization is in the nonprofit lifecycle?

All organizations go through changes.  These changes are caused by both the internal and external environment and cause the organization to grow and decline over time.  It is important to understand where your organization is so that you can better plan for the future.  Governance, strategy, impact, and organizational risks all vary depending on what stage of the lifecycle your organization is in. 

Nonprofit Lifecycle Model

The original nonprofit lifecycle model was introduced in the mid-1990s by Susan K. Stevens.   It assumes that nonprofits follow a developmental path similar to that of human beings.  There have been many adaptations of the lifecycle model but in its basic form it follows these stages:

Start-up.  The start-up stage occurs when the nonprofit is first created.  A group of individuals have a passion to start an organization and are excited to move forward.  At this stage, the founders and board members are hands-on in not only creating the mission and programs but also putting operations into place.  Challenges at this stage may include limited external support and a lack of expertise or formal knowledge.

Growth.  The second stage is the growth phase.  The organization is becoming more established in the community, the board is likely growing and including more diversity, and an Executive Director has been hired.  This stage normally includes the establishment of processes and systems with a goal to make the  organization sustainable.  Challenges at this stage may include a lack of organized structure and turnover due to a sense of being overwhelmed.

Maturity.  During the maturity stage, programs are at their peak.  There is a focus on continuous improvement with possible expansion, collaboration, and strategic alliances to create a greater impact.  The board is more policy and strategic focused and the founding Executive Director is likely no longer with the organization.  There is also a high degree of financial diversity and established relationships with multiple funders.  Challenges at this stage may include too much or not enough control by the board or staff, conflict between founding and new members, and the fear of slowing creativity.

Decline.  During the decline stage, an organization will either renew itself or dissolve.  Organizations normally reach the decline stage when they have not adapted.  In order to renew the organization, it must revisit its foundation (vision, mission, programs, or structure).  If the organization can renew itself, it can find itself back in the growth stage.  Challenges at this stage include the inability to address challenges, stress about change, and the departure of staff and volunteers.

Dissolve.  If the organization is unable to renew itself, it will find itself in the final stage of the lifecycle.  The board will be forced to decide on whether it should shut its doors or merge with another organization.  Mission creep or the failure to adopt to change normally put an organization into this stage.  Challenges at this stage include a lack of financial support, lack of leadership, and overall low morale.

Contributed by: Carrie Minnich, MAcct, CPA | Partner | DWD CPAs & Advisors