Smaller charities grow at a third the rate of large or medium-sized ones; and are more likely to see incomes actually shrink in a downturn

  • Medium-sized charities grow their specifically voluntary incomes even more strongly than larger ones [8% compared to 7%]
  • Yet large charities still retain the edge over medium-sized ones, in terms of overall income growth
  • “Lower profiles and fundraising budgets, reluctance to take risks plus lack of economies of scale, leave smaller charities struggling – not least in a downturn,” says nfpSynergy’s Baker

Compared with large and medium-sized voluntary organisations, smaller charities struggle to grow turnovers in real terms (excl. inflation), even in boom times, and are more likely to actually see their annual incomes shrink during downturns - according to a new analysis of UK charities’ finances over the last three decades (see attached summary slides).

Mean annual income growth in real terms during the period 1980-2008 was 8.5% for larger charities (turnovers over £20m); a remarkably similar 8.5% for medium-sized charities (turnovers £2 million - £20 million); yet a mere 3% for smaller charities (turnovers less than £2 million). Moreover, during the last major downturn - when charities of all sizes tended to reduce their rate of year-on-year turnover growth in real terms - smaller charities were, on average, alone in suffering actual income shrinkage (i.e. negative growth).

Leading not for profit sector think tank and research consultancy nfpSynergy based its study on 550 voluntary organizations of all sizes from analysis using data from “Charity Trends”.

Interestingly, medium-sized charities have tended to show even stronger specifically voluntary income growth than large charities; and were more likely to sustain voluntary income during the last downturn. Mean voluntary income growth in real terms for the period 1980-2008 was 7% for larger charities; a relatively healthy 8% for medium-sized charities; and even 3.5% for smaller charities. Indeed, during a downturn, larger charities and smaller ones have tended to both be at risk of negative voluntary income growth in real terms - medium-sized charities being, on average, alone in avoiding such income shrinkage. Larger charities, however, seem to have been able to draw upon reserves that small charities do not have - the former, unlike the latter, not averagely seeing total incomes shrink in the last downturn.

nfpSynergy’s researcher, Jonathan Baker, said:

“Lower profiles and fundraising budgets, reluctance to take risks plus lack of economies of scale, leave smaller charities struggling to grow income, even at the best of times – and most at risk of actually seeing turnovers shrink in real terms during a downturn. Interestingly, medium-sized charities have slightly outperformed even large ones in terms of specifically voluntary income growth – perhaps due to factors such as prospective donors seeing larger charities as being less “in need”, more able to draw upon their greater reserves or statutory income to prevent the most serious effects of a downturn.”

- end -

 

 

Note to editors:

nfpSynergy (www.nfpsynergy.net) is the UK’s only research consultancy dedicated to the charity sector and not-for-profit issues. It provides ideas, insights and information to help voluntary and community organisations thrive in an ever-changing world. Regularly harvesting the social and charity-related views of public and parliament, media and business - not to mention not for profit organisations themselves - nfpSynergy has a vast and ever-growing knowledge pool from which to extract and deliver insights.

Note to editors:

nfpSynergy (www.nfpsynergy.net) is the UK’s only research consultancy dedicated to the charity sector and not-for-profit issues. It provides ideas, insights and information to help voluntary and community organisations thrive in an ever-changing world. Regularly harvesting the social and charity-related views of public and parliament, media and business - not to mention not for profit organisations themselves - nfpSynergy has a vast and ever-growing knowledge pool from which to extract and deliver insights.

Tags: 

Subscribe

Subscribe to our newsletter.

Summary slides

To download this file please enter your details in the form below and click the Download button.