When I start assessing a nonprofit’s capacity for growth, I’m looking for mismatches: places where the organization’s ambitions, resources and operating model may no longer line up.
And one of the first things I look at is the last three 990s.
A 990 can’t tell me whether an organization is well run or its strategy is sound. But several years of filings can tell me quite a bit about how the organization is built, where it has invested and whether that has changed over time.
I’m not looking for a particular ratio or trying to benchmark every organization against the same model. I’m looking for patterns and, especially, places where the numbers raise questions.
Here are five areas I tend to look at first.
1. Governance: Is it evolving with the organization?
A growth mandate can change what an organization needs from its board. I look at board size and turnover, but also at its overall makeup. Does the board appear to bring a range of perspectives and the mix of experience the organization needs? Depending on the organization, that might include financial management, philanthropy, media, technology, program or sector expertise, among others.
Looking across several years also tells me whether that makeup is evolving. New revenue models, greater complexity, geographic expansion or changing technology and infrastructure needs may require capabilities that weren’t as important at an earlier stage.
Of course, there’s only so much I can infer from names and titles. They can’t tell me about the perspectives people bring, or whether a board is engaged and effective. But they can provide an initial picture of how the board is constructed.
If the organization has changed substantially while its board has remained largely static, or if important capabilities appear to be missing, I want to know whether its governance is equipped to support what comes next.
2. Leadership: Has capacity kept pace with complexity?
I look at officers, key employees and highly compensated individuals. Not simply to see what executives are paid, but to understand the leadership structure and the organization’s investment in talent.
Who is at the senior table? Which capabilities are represented? Has the organization added leadership in finance, development, marketing, operations, technology or other areas as its needs have expanded?
Compensation is part of the picture. I look at it in the context of revenue, organizational scale and the outcomes leaders are expected to deliver. As expectations increase, the ability to attract and retain the talent required to meet them matters. An ambitious strategy paired with a leadership model and compensation structure built for a much smaller or less complex organization gets my attention.
Over three years, that becomes particularly revealing. Revenue, programs, staff and complexity may all have increased while senior structure and talent investment barely moved.
That makes me ask whether the organization has invested in the leadership talent its aspirations require.
3. Resource allocation: Does the expense structure make sense?
I look closely at expenses across the three major functional categories: program services, management and general, and fundraising. There is no single “right” ratio, but the mix can reveal where an organization is investing and where it may be underinvesting.
Is the business side being starved while nearly every available dollar flows to programs? Is administrative expense unusually high for the organization’s size and complexity? Are ambitious fundraising goals backed by meaningful investment in development? And how have those proportions changed?
Sometimes an expense ratio can look almost too good. An organization reporting that 90 cents of every dollar goes directly to programs may sound exceptionally efficient. But an unusually high program ratio can warrant a closer look at how expenses are being classified and allocated. If the economics appear inconsistent with what it realistically takes to run the organization, that’s a question.
I’m not trying to maximize program spending or minimize overhead. I want to understand whether the organization is allocating enough to both the mission and the enterprise required to deliver it.
4. Revenue: How resilient is the model?
Two nonprofits with the same annual revenue can be in very different positions when it comes to growth.
One may have several meaningful sources of contributed and earned revenue. Another may depend heavily on a small number of funders or one dominant revenue stream. Another may have significant assets or an endowment supporting its economics.
I look at both the revenue mix and its direction. Is the organization becoming more diversified or concentrated? Are newer sources gaining traction? Are important sources declining? If diversification has been a strategic priority, has the mix started to change?
The balance sheet matters, too. The level and nature of an organization’s assets, including how much is restricted, can significantly affect its ability to invest, absorb risk and pursue growth.
A substantial endowment can provide enviable stability, but it can also signal a different economic posture. If investment income is doing much of the work of sustaining operations while contributed or earned revenue remains flat or declines, the organization may be built primarily to sustain what it has rather than generate new momentum. That may be exactly the right strategy. But if the stated ambition is significant growth, I want to know where that growth is expected to come from.
5. Staffing and capabilities: What does the organization own, build or buy?
Headcount is useful, but it doesn’t tell me much by itself. I’m more interested in how the organization has chosen to build the capabilities it needs to operate and grow.
How much work is performed by employees versus outside consultants? Which functions clearly exist in-house, and which rely heavily on external expertise? Are important capabilities surprisingly light or absent given the organization’s size and ambitions?
Outsourcing can be an effective way to access specialized expertise without adding permanent infrastructure. But sustained consultant spending can also signal that an organization is buying the same capabilities year after year without building them internally. The reverse can happen, too. Organizations sometimes build substantial internal teams around capabilities that could be accessed more effectively from outside.
What matters to me is whether those choices reflect an intentional operating model.
Over three years, I want to see where the organization has added talent, what capabilities it has built, where it continues to rely on outside support, and where investment hasn’t kept pace.
Those choices tell me a lot about what the organization considers core and whether it has the capabilities its strategy requires.
What I’m really looking for
The most useful thing I find in a 990 is rarely a single number. It’s the relationship between the numbers and how those relationships are changing.
Revenue grew. Leadership capacity barely changed.
Programs expanded. Investment in the infrastructure supporting them didn’t.
Diversification has been a strategic priority for years. The revenue mix looks essentially the same.
The organization became larger and more complex. Its governance and staffing models haven’t moved much.
Any of those patterns may have a perfectly good explanation. But they tell me where I want to start asking questions.
Emily Moyer is the Principal of Impact Ilk Brands, a consultancy designing architecture for growth at mission-driven businesses and non-profits. If growth has to be recreated each cycle, something underneath isn’t working. Ready to address it? Schedule a chat with Emily on this page.
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