Does Austin Have Too Many Nonprofits?

So, does Austin really have too many nonprofits? I believe we do. But don’t pass judgment on my opinion just yet. Please read on for some explanation and a few qualifications.

A recent Greenlights study sought to get to the bottom of the debate regarding the number of nonprofits in Austin. The study was covered in a recent Statesman article and in the current Giving City Magazine edition. Our study’s key findings, based on data from the IRS and Guidestar.org, are the following:

• The Austin MSA does have more nonprofits per capita than any city in Texas and the southwestern U.S.
• More specifically, Austin has more nonprofits per capita than national averages focused on education, the arts, and the environment/animals
• Austin’s nonprofits are disproportionally small (using budget size as the metric) compared to national averages

So does this mean we have a problem in Austin? Not necessarily. A large number of small nonprofits is in many ways a good thing, resulting in a great deal of innovative problem-solving, volunteer engagement, and flexibility to respond to changing community needs (and boy do we have those here!). At the same time, this data likely is resulting in our overall nonprofit sector being less than efficient with donor dollars, individual nonprofits being more at risk and less stable (especially during times of crisis, economic or otherwise), nonprofits being less able to make a large-scale impact on a particular community issue, and even nonprofits being less able to attract funds from outside the community.

So is Austin in need of a little nonprofit merger mania? Not necessarily. First, there are many ways, short of outright merger, that nonprofits can take advantage of strategic collaboration to achieve greater economies of scale and mitigate some of the challenges we’ve identified. Nonprofits can share resources like office space, office equipment, vehicles, etc. They can collaborate on programs and events to save costs and increase impact. They can even enter into formal shared services agreements whereby they might pool their purchasing power for certain goods and services or even co-hire certain staff members. Second, mergers can be time-consuming and can cost money in the short term, potentially taking focus off of service delivery. Finally, mergers have to makes sense from many perspectives (e.g. organizational culture, programmatic fit, finances, funders, etc.) before they can truly be successful.

In many cases, however, we believe two or more organizations should consider a thoughtful, careful analysis of whether formal collaboration or outright merger can be a solution to an organization’s challenges. Such analysis should be thorough, and we’ve found that it works best when an independent party with merger experience is engaged to help facilitate the process. Austin has a history of many successful mergers, including ones that resulted in organizations like Lifeworks, SafePlace, Bookspring, Any Baby Can, United Way of Williamson County, and many others.

So in summary, the fact that Austin has more than our share of nonprofits (and smaller ones at that) is at the same time a great benefit and a significant challenge. Sector-wide, we can benefit from more funders, board members, and nonprofit leaders stepping back and identifying ways in which greater strategic collaboration might help us to better address community issues. And for many individual nonprofits, more serious consideration of strategic partnerships and even mergers would likely result in stronger, more sustainable organizations.

For more ideas and examples of how strategic collaboration might make sense for your organization, register for this upcoming Greenlights workshop on the topic, or contact us here at Greenlights.

Matt Kouri
Executive Director