Health & Human Services Non-Profit Merger

From Instability to Sustainability: A Nonprofit Merger Success Story

Background

Amidst increasing nonprofit consolidation, the client engaged Curtis Strategy to navigate significant financial and operational challenges. A previously completed organizational assessment had already established a key long- range recommendation: for the organization to identify and partner with a larger Chapter to ensure its sustainability and achieve vital economies of scale.

Challenge

Our client faced a combination of critical challenges that threatened its operational viability and long-term mission fulfillment. The most immediate was profound financial instability, creating an urgent need to address its cash position to maintain essential services and meet ongoing expenses. While swift restructuring and cost-cutting measures provided temporary relief, these were recognized as insufficient for enduring sustainability.

The fundamental challenge lay in establishing a new operational and financial model that could ensure lasting stability and support growth in an environment marked by rising costs, the necessity for technological investment, and increased competition for resources. Compounding this was the crucial task of identifying a strategic partner that not only possessed financial strength and operational capacity but also shared our client’s core values and cultural ethos, ensuring a truly synergistic and beneficial consolidation.

Solution

Curtis Strategy was engaged to assess the financial and operational position of the organization and provide recommendations for sustainability. We worked with the Executive Committee and Leadership with the purpose of building a deep understanding of the problems and developing clear and concise recommendations to overcome the challenges.

The data review uncovered several findings:

  • Financial analysis revealed declining revenue, substantial losses, and depleted cash reserves, creating an urgent need to address cash flow.
  • The 2024 budget projects a significant revenue increase, but its achievability is questionable.
  • Fundraising efficiency is healthy overall, but reliance on underperforming events poses a risk.
  • Program expenses are increasing (as are total expenses) but the distribution of expenses does not align to program size or capability/ bandwidth
  • The current payroll obligation is unsustainable due to significant revenue declines and increasing expenses in recent years.

Based on these findings, immediate action was recommended to restructure for sustainability, including closing one of their programs, eliminating office space, and reducing payroll expenses. A long-term solution involving a merger or affiliation with a larger organization is also recommended to leverage resources and support. Both options could be pursued simultaneously to ensure the organization’s viability and long-term financial stability.

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