When Nonprofits Should Consider a Merger

It’s common for there to be a negative connotation around the word “merger” in general, but maybe less so for nonprofit organizations. When you think of organizations merging, you might think it’s because one side is struggling to make ends meet. While that certainly could be true, you could also be an NPO in good standing looking to merge with another organization to add new programming. There’s two sides to every coin.

Since the process of a merger is too laborious to make any rash decisions, let’s go over a range of scenarios for when nonprofits should consider a merger.

The Funds Aren’t There

Our economy may not be in the same state as it was in 2008, but that doesn’t mean funds are rolling in for your organization. You could have widely popular programming, but the size of your nonprofit leaves you unstable financially. Organizations that merge don’t always have an identical mission. In this instance, you could consider merging with a larger, financially stable nonprofit that lacks the type of programming you provide.

Reducing Competition

It’s pretty rare for a nonprofit to be the only of its kind—even in your own community. Often you see organizations differentiating themselves in many ways, but all after the same end goal: clean water, effective after-school programs, disease prevention, etc. The list goes on.

With nonprofits, competition has a slightly different meaning. There isn’t (or shouldn’t be) the ill-will you see with for-profits trying to earn your dollar, but it’s still competition because you’re fighting over the same donation dollar, especially if you have similar missions. You’re going to find yourself in situations where you’re fighting for donations from an organization that’s completely different from you, but may have the same overarching theme in your mission. You provide distinct programs and services, but run into trouble because you’ve become too easy to confuse. This is where both organizations could combine their powers, form one solid board – and continue to provide the same range of services.

Loss of Senior Staff

Executive Directors get the majority of the pressure in an organization, especially when things aren’t going well. But that comes with the territory. If an ED leaves on their own accord, or if the board of directors lose trust in them, that leaves an organization in a sticky situation – especially if they’re a smaller nonprofit.

Instead of finding a new Executive Director that will face that same sort of pressure to turn things around, a board may turn to another organization with a similar mission. This is of course situational, and depends on what kind of struggle your nonprofit faces. Weigh your pros and cons of hiring a new ED vs. a merger before you start those discussions.

Combining Skill Sets

This could easily fit as a bullet under “Reducing Competition.” When you look to merge in an effort to reduce competition in your nonprofit marketplace, you instantly increase the talent you didn’t have access to before. Instead of two teams of fundraisers calling upon the same donors asking for funds, your team has now grown and can start to segment and expand your donor list. Or maybe it was one organization that excelled in fundraising, while the other had the superior programming. Think of how effective and efficient you could be after merging.

While this is only the starting point in regards to when nonprofits should consider a merger, we’ll dig deeper into the nitty-gritty of nonprofit mergers in future articles. In the meantime, be sure to start changing your mindset on the negative connotation of mergers. In no way are they a sign of failure. You’re doing what you can to save, better and grow your organization.

When Nonprofits Should Consider a Merger

Randy Hawthorne

As the former Executive Director and Editor for Nonprofit Hub and a Professional Certified Marketer, Randy shares his passions of marketing and education with nonprofits to help them implement marketing and organizational leadership principles so they can grow their organizations. Randy lends his marketing and organizational leadership expertise to a number of nonprofits in his community. Outside the office, Randy works with high school and college students and mentors young professionals to develop their leadership and entrepreneurial skills.

June 19, 2015

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