The nonprofit sector has a saturation problem. For too long, we have equated ‘starting a nonprofit’ with ‘making a difference,’ but the math does not add up. Each year, approximately 100,000 new nonprofits are formed in the United States. When thousands of small entities vie for the same finite pool of talent and capital, impact is diluted, not amplified.
At Transform Consulting Group, we receive many requests from individuals who are interested in starting a nonprofit. They see a need in their community and want to make a difference. Nearly every time, we encourage the individual to not form a new nonprofit but instead to collaborate with an existing nonprofit.
Four Reasons Why We Need Collaboration Over Creation:
- The Resource Constrained NonprofitThe vast majority of U.S. nonprofits are small, operating with annual budgets of less than one million. Further, a large portion of those nonprofits are considered “very small” with budgets under $50,000. Small nonprofits often struggle to diversify funding, possess fewer staff, and have less specialized roles. These small organizations are critical for community services but often operate with limited financial capacity, making them more vulnerable to funding shortages and limiting their impact.
- The Cost of Competitive Philanthropy
When thousands of small-scale entities vie for the same finite pool of philanthropic and government dollars, the funding pie isn’t necessarily getting larger—it is just being sliced into smaller, less effective pieces. This creates a hyper-competitive environment where nonprofit organizations spend disproportionate energy on funding acquisition (donors, sponsors and grants) rather than program delivery, ultimately diluting the financial power of the sector.
- The Infrastructure Trap for Small-Scale Nonprofits
Many new nonprofits remain micro-sized, lacking the infrastructure to move from grassroots activity to measurable, systemic change. These organizations often become trapped in a cycle of high administrative overhead relative to their impact. Without the foundational systems of an established entity—such as dedicated HR, legal support, and modern IT—small nonprofits struggle to provide the transparency and data-driven results that modern donors demand. The data highlights a clear advantage for longevity. While nearly 50% of nonprofit startups fail within their first five years, established organizations demonstrate remarkable resilience and growth capacity.
- The Human Capital Crisis
A social mission rests on two pillars: sustainable funding and high-caliber governance. As the number of nonprofits climbs, the competition for visionary leadership, board membership, and volunteers have reached a crisis point. This is not a lack of merit, but a lack of capacity; the talent pool is simply spread too thin to support the rigorous oversight required today.When the sector is oversaturated, qualified leaders must divide their attention across dozens of similar boards, creating a “leadership drain” that weakens the entire ecosystem. It is vital to recognize that while the passion for change is universal, not everyone is meant to be a founder. Lasting impact often comes from those who contribute their time, talent, and treasure to strengthening proven models rather than starting from scratch. By prioritizing existing structures, we ensure that specialized expertise drives progress instead of being consumed by administrative startup costs.
The Case for Collaboration: Why Collaboration over Creation Makes More Sense
Starting a nonprofit is one way to ignite change, but collaboration is often more effective for sustaining it. By joining a regional coalition or an advisory board or providing direct support to existing nonprofits through giving or volunteering, leaders can bypass administrative hurdles and maximize existing resources to solve complex issues.
TCG specializes in this transition from isolated activity to collective impact. By aligning nonprofits, government, and businesses around a shared vision, we help partners pool diverse perspectives and resources for meaningful, sustained results. If you are looking to learn more about collective impact work or how to support existing nonprofits, we would love to help you! Contact our team to schedule a discovery meeting!
See our next blog in the series: Wait! Read this Before Starting a Nonprofit.
