Stop Building Alone: The Case for Strategic Nonprofit Consolidation (part 1)

You're staring at the budget spreadsheet again.

The numbers don't lie, but they also don't tell the whole story. Revenue is flat; or worse, down. That federal program you were counting on has been delayed indefinitely, if it gets funded at all. The foundation that's been with you for five years just sent an email: "shifting focus to more urgent crises." They didn't say it explicitly, but you understood the subtext. When funders have to choose between workforce development and feeding starving children, you're not going to win that conversation (nor do you want to).

If you're reading this and thinking 'but we're not failing'—you're right. Your outcomes are strong, and participants rave about your programs. You've tried everything the traditional playbook suggests: Diversified your funding sources (which just means you're now writing twice as many proposals for smaller amounts), invested in a CRM system that was supposed to revolutionize donor engagement but mostly just added another software subscription to your overhead, hired consultants who gave you a three-year strategic plan that assumed a funding environment that no longer exists.

And now you're here, running the same mental calculation you run every year: Can we make it through to Q2? What happens if that corporate sponsor doesn't renew? Do I need to freeze hiring? Cut programs? Ask staff who are already stretched impossibly thin to do even more with even less?

These aren't fundraising problems. These are structural problems.

THE PROBLEMS NOBODY PREPARED YOU FOR

You knew nonprofit leadership would be hard. You didn't know it would be this specific kind of hard:

The capability gaps: You're exceptional at one thing and adequate at everything else. Your programs are transformative, but your data systems make funders nervous. Or you have incredible community trust, but when funders ask for your theory of change and impact metrics, you're showing them Excel spreadsheets that don't tell the story you need them to tell. You can't afford to hire the expertise you need, and even if you could, integrating that expertise into your small team creates its own complications.

The succession crisis: Your founder built something remarkable, and now they're ready to move on. The institutional knowledge lives in their head and their relationships. You can hire someone new, but they won't have the funder connections, the community credibility, the board relationships. The transition risk is enormous. And during the 12-18 months it takes to find someone, onboard them, and hope they work out, your organization is in a vulnerable holding pattern.

The funder math that doesn't work: You've watched your revenue complexity increase while your revenue stability decreased. You used to have three major funders covering 60% of your budget. Now you have twelve funders covering 55% of your budget, which means you're doing four times the reporting and relationship management for less money. Each funder wants something slightly different. Each has their own reporting requirements, their own timelines, their own theories about what success looks like. You're spending so much time managing funder relationships that you barely have time to actually run programs.

The competition that isn't competition: There are three other organizations in your region doing work that's adjacent to yours. Not quite the same, but close enough that funders lump you together. You're all chasing the same pool of regional funding. None of you are large enough to really move the needle on the systemic issue you all care about. When that foundation sent the email about "shifting focus to more urgent crises," you know they sent the same email to the other three organizations. Collectively, you're losing $400,000 in regional funding. Individually, you're each scrambling to replace $100,000, which means you're competing with each other for the remaining local dollars.

WHY THE TRADITIONAL SOLUTIONS AREN'T WORKING

You've been trying to fundraise your way out of these problems. More events, more grant proposals, more donor cultivation. You're not alone. You talk to other EDs and hear the same stories. Everyone is running harder to stay in place. Everyone is losing the same funders. Everyone is stretched impossibly thin.

Your team is exhausted. Your board is anxious. Your funders are sympathetic but non-committal. And you—you're the one holding it all together, except you're starting to wonder how much longer you can keep doing this.

These aren't fundraising problems, or even operational problems—they're structural problems.

Here's what nobody's saying out loud: you can execute flawlessly on every best practice in the nonprofit playbook and still find yourself in exactly this position. Because the playbook was written for a world that no longer exists—a world where federal funding was stable, foundation portfolios were growing, and three major funders could cover 60% of your budget without asking you to compete with crisis-driven emergencies for their attention.

The traditional advice—diversify funding, invest in infrastructure, hire strategically—assumes the problem is execution. It assumes you're not doing enough, not trying hard enough, not adapting quickly enough. But what if the problem is that the independent small nonprofit model was never designed to solve the structural challenges you're facing now?

THE OPTION NOBODY TALKS ABOUT

I'm going to say something that would have sounded like admitting failure even five years ago: What if you explored merging with another organization?

Stay with me.

The problems you're facing might be signals that the independent small nonprofit model isn't set up to solve the challenges you're trying to address.

The stigma around mergers has shifted dramatically. In 88 percent of nonprofit mergers studied by the Chicago Metropolitan Nonprofit Merger Research Project, both organizations reported being better off after combining—with "better" defined not as "we survived" but as achieving organizational goals and increasing collective impact. Data from the Sustained Collaboration Network shows 73% of nonprofits that worked together attained measurable success, including expansions in service, increases in funding, and improvements in program outcomes.

But—and this is critical—mergers are hard. Culture clashes derail more nonprofit mergers than financial problems do. The path from "this could work" to "this is working" requires more honesty and harder conversations than most leaders expect.

WHEN A MERGER COULD ADDRESS WHAT YOU'RE FACING

The geographic ceiling: Resolution Project faced exactly this challenge. They'd built a proven fellowship model supporting young social entrepreneurs, but scaling internationally would have required years and millions of dollars to build infrastructure from scratch. Meanwhile, Enactus—a 50-year-old organization with presence in nearly 100 countries—had just announced they were shutting down operations due to financial challenges in 2023.

Here was the question: Should Resolution spend 10+ years and millions trying to build what Enactus had already built over five decades? Or should they step in with $2 million to revitalize Enactus's network and gain immediate access to 40,000 young social entrepreneurs across six continents?

They chose the latter. Resolution committed over $2 million to rebuild Enactus Global and merged their intensive fellowship model with Enactus's established educational programming. The result? They achieved in months what would have taken them a decade to build independently: a combined organization now reaching more than 40,000 young leaders annually with comprehensive support from concept through scaling.

The succession crisis: United Cerebral Palsy of Chicago faced this when their CEO announced retirement. Rather than conducting an executive search and hoping the new person could maintain critical relationships, they explored a merger. UCP and Seguin had operated separately for over sixty years in disability services. They spent five years building trust before formally merging. Today, in one of Illinois's toughest funding environments where chronic delays force providers to close, the combined organization operates more effectively than either could alone.

The capability gaps: Where you're excellent at programs but weak at fundraising, or strong at community relationships but lacking data infrastructure; these are the complementary strengths that make mergers work, but only when both organizations are honest about what they bring and what they need.

WHAT YOU NEED TO KNOW BEFORE YOU START

If you're considering consolidation, three critical questions deserve your attention:

1. Mission alignment: Can you articulate the combined "why" in two sentences or less? If it takes a paragraph to explain why you're merging, you probably shouldn't. What impact are you trying to amplify? What problems could you solve together that you can't tackle alone?

2. Funder reality: Here's the harsh truth nobody mentions early enough: organizations with overlapping funders rarely receive double the funding post-merger. If two organizations with the same major funder merge, that funder often maintains their total giving level. You might effectively delete half your revenue. Transparent conversations with funders need to happen early—not to ask permission, but to understand how they view strategic consolidation.

3. Culture fit: This is where most mergers fail. Research shows that cultural misalignment—not financial problems—is the primary reason nonprofit mergers don't succeed. Be honest about your real culture, not your aspirational one. Are you entrepreneurial or compliance-focused? Do decisions happen quickly or through extensive process? Do you prioritize innovation or stability?

Your cultures won’t be identical, and that’s fine. But can you honestly answer: What are our cultures now? What would our merged culture need to be? And is it even possible to get from here to there? Build trust through uncomfortable honesty. Share your real challenges, not just your success stories. Ask potential partners to do the same. If they can't be honest about their struggles during exploratory conversations, they won't be honest when it matters most.

One more critical point: bring your board into this conversation early. You don't need their approval to explore, but you need their understanding of why you're even considering this. Boards that aren't brought along early can become the reason deals fall apart late.

LOOKING FORWARD

I've spent thirteen years in nonprofit leadership across four countries. I’ve seen that  the leaders who create lasting change aren't the ones protecting their organizations—they're protecting their missions. They're the ones willing to ask uncomfortable questions while they still have the resources and relationships to make strategic choices rather than crisis-driven reactions.

Here's what I know from working with fast-growing nonprofits: difficult conversations work best when someone helps you see what you can't see from inside your organization. When you're too close to the work, it's nearly impossible to distinguish between protecting your mission and protecting your institution.

That's where I come in. I help mission-driven leaders build the operational infrastructure that makes bold visions sustainable—whether that means scaling independently, forming strategic partnerships, or exploring consolidation. I specialize in working with nonprofits with budgets between $500K-$10M who are hitting growth ceilings.

My approach: I get in fast, take ownership of implementation, and build systems that last beyond our engagement. Former clients describe my work as bringing "incredible clarity of thought," "tons of courage," and the ability to "challenge the status quo in a very sharp way" while moving quickly and kindly.

If you're running the same quarterly budget calculation wondering how you'll make it to Q2, or if you're stretched impossibly thin managing twelve funders instead of three, the question isn't whether you should explore alternatives—it's whether you'll explore them while you still have the leverage to negotiate from strength.

In today's resource-constrained environment, every small nonprofit should be able to articulate why independence serves their mission better than collaboration or consolidation. If your answer is "because we've always been independent" or "because our founder built this," you might be operating from institutional ego rather than mission clarity.

Consolidation isn't the answer to every funding challenge. But it might be the answer to yours—if you're willing to have the conversation before you're forced to have it.

Ready to explore what strategic transition planning could look like for your organization? Let's talk.

Read Part 2 for a practical guide on how to evaluate if consolidation is right for you.