Why Financial Distress Doesn’t Mean A Nonprofit Is Broken, Just Undercapitalized

BusinessWhy Financial Distress Doesn’t Mean A Nonprofit Is Broken, Just UndercapitalizedByRyan Dewey Smith,Forbes Books Author.for Forbes BooksAUTHOR POSTExpertise and opinions of authors published by ForbesBooks. Imprint operated under license. | Paid ProgramMay 19, 2026, 11:35am EDT--:-- / --:--This voice experience is generated by AI. Learn more.This voice experience is generated by AI. Learn more.Most nonprofits haven’t professionalized their business acumen.gettyThe 2025 National State of the Nonprofit Sector Survey Findings, produced by the Nonprofit Finance Fund (NFF), was titled Essential, Enduring, and Under Strain: The Nonprofit Sector’s Strength and Struggle in a Shifting Landscape. It’s a bleak title, and the report presents some frightening results from more than 2,200 survey respondents, including a startling number (36 percent) ending 2024 with an operating deficit, the highest percentage that NFF has seen over the past ten years of its survey data. Respondents reported that pressure on their infrastructure was a result of needing to “navigate three colliding crises: inflation, government funding cuts and delays, and growing demand.” This report from 2024, the most recent year with full data available, showed that 85 percent of respondents expected demand for services to increase in 2025. Spoiler alert: They were proven right.While it’s true that nonprofits are operating in a difficult period and many are seriously financially stressed, my assessment isn’t doom-and-gloom. That increased demand for services reflects a broader national environment in which a combination of factors—some cultural, some financial—are pushing more people into need, but it also shows that people recognize that nonprofits are excellent at what they do. Very few nonprofits suffer a crisis in mission. Most have professionalized their knowledge base, staff, and programs to a high degree. Years of increased demand, alongside inflation and cuts in government funding, have forced t...