Building Nonprofit Financial Capacity: The Impact of Revenue Concentration and Overhead Costs

Building on the impressive body of research on issues of nonprofit revenue choice and mix, this research empirically tests Foster and Fine’s claim that revenue concentration contributes to the growth of nonprofit organizations. Using National Center for Charitable Statistics (NCCS) digitized data (1998-2003), the authors test whether revenue concentration is a viable revenue-generating strategy that can help bolster a nonprofit’s financial capacity. Overall, study findings refute the mythology of revenue diversification; the authors find that implementing a revenue concentration strategy generates a positive growth in one’s financial capacity—in particular, a growth in one’s total revenue, over time. Contrary to the prevalent charges laid at the door of high administrative and fundraising efforts by some, the authors find that in order to support financial capacity growth, nonprofits must make positive investments in favor of administrative and fundraising support but not in the form of high executive salaries.

Nonprofit and Voluntary Sector Quarterly |  

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