4 Challenges Nonprofits Face in 2025

Nonprofit organizations play a vital role in promoting social change, uniting people to support their communities and work toward common goals. Today more than 10 million nonprofits are in operation across the globe, with about 1.5 million in the U.S. alone — and many of these organizations continue to grow as they feed, shelter, educate and provide myriad services to people in need.

But it’s not easy for nonprofits to stay afloat, in large part because they often depend on donors and grants for funding. In fact, only about 50% of nonprofit organizations thrive, with about 30% folding in less than 10 years, according to the National Center for Charitable Statistics.

Nonprofit organizations face a mix of funding obstacles, technology shortcomings, leadership issues and collaboration difficulties. But with the right planning, processes and technology in place, nonprofit organizations can boost their donations, expand their contributor pools and increase their impact on their communities.

Key Takeaways

• Nonprofit organizations are invaluable for promoting and advocating for social change.
• Many organizations struggle with issues surrounding fundraising, technology, leadership and collaboration.
• Managing these challenges requires careful planning, revamped processes and putting the right technology in place to track data and automate manual processes.

4 Main Nonprofit Challenge Types and How to Overcome Them

Today’s nonprofit organizations are encountering new and enduring roadblocks to achieving their goals. For instance, nonprofits often struggle with attracting donors, preventing high turnover among staff and forging collaborative partnerships. Plus, many fall short when it comes to the technology needed to speed up their processes and improve their performance.

In the midst of an ever-changing nonprofit landscape, tackling these challenges by fortifying internal processes and prioritizing innovative solutions is key to achieving an organization’s goals so it can execute its social mission.

1. Funding Challenges

Many nonprofit organizations encounter funding challenges, ranging from an inability to retain donors to a struggle to properly resource services — all of which can impair their ability to operate effectively and serve the needs of others.

• Difficulty cultivating donors: Over the past 20 years, the number of nonprofit organizations has increased at a rate of 1.4% annually, on average, making it increasingly difficult for any particular nonprofit to attract the attention of donors and encourage them to steer their own limited resources to a certain cause. As competition for donations grows, it’s important for organizations to continually reexamine their strategic vision and update their mission statements to ensure that they are tailoring their messages to donors interested in their specific causes. In addition, nonprofits should brainstorm novel ways to raise awareness and boost funding, such as pursuing private and government grants, increasing the number of fundraising events they host and refining strategies to manage customer relationships to retain loyal donors.
• Difficulty measuring impact/outcomes: One-quarter of nonprofits do not have a system in place to measure program impact, making it difficult for them to evaluate their fundraising efforts and determine the true effectiveness of their initiatives. To help organizations gain a more thorough understanding of the performance of their charitable programs, nonprofits should conduct an impact assessment. This kind of assessment requires building a framework for conducting an evaluation, determining key performance indicators (KPIs), training staff on how to measure and track KPIs, collecting data and sharing findings across the organization’s network.
• Difficulty acquiring and retaining donors: Acquiring and retaining donors is vital for nonprofits’ growth and establishment of consistent revenue streams. However, nonprofit organizations constantly struggle to find ways to secure new donors and build loyalty so people will continue to donate regularly and on a long-term basis. Because donors want to know that their contributions have made a difference, organizations should use social media to post regular updates about the lives their donations are touching and publicly acknowledge and thank donors for making these achievements possible. This helps to both create a sense of community and communicate the nonprofit’s impact, which may in turn encourage recurring donations.
• Government laws and restrictions: Nonprofit organizations risk fines, penalties, loss of tax-exempt status and damage to their reputations if they do not comply with federal, state and local laws and regulations. To comply with all regulations related to operating nonprofits, organizations should fully understand federal and state guidelines, submit the necessary documentation to register their nonprofits, and maintain and update records as necessary, including proper accounting records.
• Decreased private donations: Nonprofit organizations may periodically experience a decrease in private donations. For example, an economic downturn may limit donors’ disposable income, or donors may feel disconnected from the nonprofit’s cause or experience a shift in their giving priorities. To combat a drop in private donations, organizations should continually develop new strategies for acquiring and retaining donors. They should also strengthen relationships with current donors through increased communication and adapt to donor preferences by inviting feedback and making appropriate changes.
• Increased demand for services: When nonprofit organizations experience a sharp rise in demand for their services, it’s an indication that the work they’re doing is important — yet this also poses several challenges. Because many nonprofits operate with limited resources, an increased demand for services can put a strain on funding and staff time, for starters. To solve for this, organizations should consider installing enterprise resource planning (ERP) software to automate a variety of day-to-day processes and manage the data that expands as the organization grows. In addition to adopting ERP, revamping an organization’s strategic plan may involve examining current and future staffing capabilities, reprioritizing services for the groups with the greatest needs, considering new funding possibilities and pursuing opportunities for new collaborations and partnerships that can bridge the gap in resources.

2. Technology Challenges

Increased use of technology enables organizations to expand their footprints, reach additional audiences and improve efficiency. However, budgetary constraints often cause technology investments to fall low on the priority list, ultimately creating a series of challenges for nonprofit organizations. Without up-to-date technology, innovation, operational efficiency and data security often suffer. In addition, if the user experience is poor, some donors will take their contributions elsewhere. With regard to technology, nonprofit organizations may find themselves dealing with:

• A lack of adequate resources: Nonprofit organizations operate under tight budgets, so obtaining funding for new technology infrastructure, software applications and ongoing maintenance can be difficult. If nonprofits have inadequate access to technology resources, they should prioritize technology planning to identify their critical needs and determine how to allocate resources appropriately to continue to grow and thrive in the future. Nonprofits should also consider adopting cloud-based platforms for data management and mobile-friendly apps and websites that allow donors to engage with the organization and easily contribute.
• Outdated software/technology: Outdated software and technology pose numerous challenges for nonprofit organizations. Lagging technology may affect the efficiency of volunteers and staff members, and nonprofits also run the risk of technical glitches and security incidents, which can compromise donors’ ability to make contributions. Rectifying outdated technology should be a top priority for nonprofits. As much as they can, leaders of nonprofits should invest in tools that allow staff and volunteers to work more productively and that give supporters the ability to make donations easily.
• Providing services and programs remotely: The COVID-19 pandemic demonstrated the need for nonprofit organizations to pivot quickly and offer services remotely, but some organizations are still stymied by budget constraints and skills gaps in their efforts to make remote options available. The benefits of investing in remote operations, however, are many. By providing services and programs remotely, organizations are able to expand their reach with new potential donors, improve flexibility and convenience by offering access to programs from home, and better scale their offerings. Organizations should consider technologies that support videoconferencing, digital fundraising and opportunities that support staff and volunteers who work remotely.
• Rapidly changing technology: Technology advances constantly disrupt a wide range of industries, and the nonprofit sector is no exception. These organizations must navigate a gamut of available digital fundraising platforms and tools to determine which of them best aligns with their fundraising goals. To stay on top of rapidly changing technology, nonprofits should seek to remain informed about emerging technologies, develop a technology plan that aligns with their fundraising goals and seek support from those with relevant experience to provide guidance.
• A lack of technological expertise: Pursuing new technology solutions is futile unless the individuals implementing and managing them have the expertise to use them effectively. In addition, accounting principles for nonprofits will differ from those for for-profit companies, so hiring experts familiar with the latest accounting trends and able to manage the accounting cycle for nonprofits is crucial. Nonprofits should either seek out experienced workers or provide training to upskill current staff; in so doing, the organization can ensure that new technologies are appropriately selected, properly implemented and effectively used.

3. Leadership Challenges

In a 2021 survey(opens in a new tab) of nonprofit organizations, 64% of respondents said a top challenge lay in recruiting staff and board members, 63% complained of limited staff capacity and 61% said they struggled with high staff turnover. Common hurdles among nonprofit leaders include:

• Difficulty recruiting: Leaders struggle to recruit individuals to join their organizations for reasons including an ineffective recruitment strategy and insufficient compensation for staff. To improve recruitment, organizations should create a strong mission statement to attract high-caliber candidates, ensure that job descriptions are accurate and expectations are understood, and reexamine their salary scales and benefits packages.
• Limited staff capacity: If nonprofits operate with limited staff, they run the risk of encountering employee burnout, high staff turnover, a lack of expertise among staff members and more. When nonprofit teams are lean, it’s important for leaders to perform an internal assessment of priorities to determine their ability to meet their needs. In addition, leaders should explore whether roles and responsibilities can be consolidated and whether additional volunteer opportunities might extend the nonprofit’s capacity to get work done.
• High staff turnover: Staff members leave nonprofits due to burnout, low pay and poor flexibility, among other reasons. High staff turnover has a significant impact on nonprofits, since leaders often find it’s not only expensive and time-consuming to recruit and hire new employees, but staff productivity may decline and the morale of the remaining employees may suffer. To combat high staff turnover, nonprofits should communicate with staff about any plans to fill open roles and ways to address underlying issues. They should check in with staff regularly about their current workloads, review competitive pay data to make sure they’re paying employees appropriately and equip teams with the tools they need to do their jobs efficiently.
• Lack of strategic direction: To ensure the health and success of nonprofits — particularly during uncertain economic times — nonprofit leaders must make smart, calculated decisions about the health of the organization and its ability to balance long-term, mission-related goals with daily management. To create the right equilibrium, nonprofit leaders should work closely with their board members to assess any necessary changes that must happen, communicate obstacles that have been encountered and identify opportunities as they arise.
• Lack of leader succession plan: Just 29% of nonprofits have a written succession plan in place, according to a 2021 survey of nonprofit board leaders. Succession plans are important to ensure a smooth transition when an individual in a leadership position leaves the organization, whether or not the departure is expected. To cope with leadership succession, nonprofits should develop an emergency leadership transition plan to outline how duties will be delegated in the event of a transition. Organizations should also consider how current staff will be cross-trained and develop a time line for managing transitions during leadership successions.
• Difficulty recruiting quality board members: Many nonprofit organizations struggle to recruit the qualified senior executives they need to lead them and drive success. Such professionals are in high demand, often receiving limited compensation packages compared with the private sector but requiring a complex skill set that combines business acumen with program management and strategic thinking. To improve the recruitment of candidates to fill board positions, nonprofits should clearly describe the job, offer compensation and benefits that align with industry standards and consider cultivating internal talent through development programs.
• Lack of engaged board members: The board’s involvement is key to the success of nonprofits, but organizations may have to contend with disengaged board members who don’t fully understand their responsibilities, feel unfulfilled in their roles or lack the resources they need to be successful. To effectively engage board members, organizations should set clear expectations about their roles and responsibilities, prioritize regular communication and celebrate their wins to establish confidence and trust.

4. Collaboration Challenges

The long-term success of nonprofit organizations requires partnerships with other organizations and entities, according to accounting firm BKD’s “2022 State of the Nonprofit Sector” report. These partnerships enable different organizations to share knowledge and resources with one another, cross-promote causes to bring new donors and volunteers to organizations, and create opportunities for shared programming, such as events, webinars and training. Nonetheless, many organizations wrestle with building healthy and effective relationships with leaders of other organizations. Some common challenges include:

• Building partnerships and collaborations: Building partnerships and collaborations can be an obstacle for nonprofit organizations that struggle with differing missions and goals, an unwillingness to share resources and a reluctance to maintain open lines of communication. To build better partnerships and collaborations, nonprofits should start small to test how a partnership might work, clearly defining the objectives and benefits of the partnership and remaining in close contact with the leaders of the other groups to make sure everyone remains on the same page.
• Lack of communication: When organizations in a partnership don’t communicate well, problems can arise. Partner organizations may not have a clear understanding of each other’s objectives and goals, productivity can suffer, problem-solving often diminishes and, ultimately, interest in engaging in a partnership dwindles. To improve the success of collaborations, nonprofits should develop a communication plan that outlines a regular cadence for scheduling meetings and other quick check-ins to share ideas and resources.
• Competition for funding and resources: The number of nonprofits has grown steadily over the past 20 years. As a result, organizations are constantly in competition with one another for funding, staff and other resources. For many, generating the same financial support year after year is a tough grind. To better position themselves, nonprofits should revisit their strategic vision and mission statements to make sure they are as clear and specific as possible in order to reach donors who are interested in that particular cause. In addition, nonprofits should consider increasing the number of fundraising events they host, find new ways to reach out to potential new audiences and actively work on strategies to retain loyal donors.
• Maintaining organizational identity: A common challenge for a nonprofit organization engaging in a collaboration is an ensuing, unanticipated divergence from its established mission. This could happen when a nonprofit is in a partnership with an organization that doesn’t quite mesh with its mission or goals, for example. To maintain organizational identity, nonprofits must seek out partnerships that are a good fit, making sure its goals align with the collaborator’s goals and that the partnership has the potential to enhance both organizations’ ability to achieve their missions.

NetSuite Helps With Nonprofit Challenges

Nonprofit organizations face potential funding, leadership and collaboration challenges, but the right technology can help groups get ahead of potential issues. NetSuite Nonprofit is a unified business management solution that helps nonprofits manage their end-to-end operations with a single application that includes integrated nonprofit accounting, fundraising, constituent relationship management, enterprise resource planning, inventory management and more. This solution has helped hundreds of nonprofits grow resources, reduce costs, better target and engage constituents, build relationships and expand the support they need for long-term success. In addition, through NetSuite’s Social Impact program, the company provides eligible nonprofit customers with cloud technology, product discounts, hands-on services and informative workshops.

Nonprofit organizations face a variety of funding, technology, leadership and collaboration challenges. However, if they address potential difficulties by creating best practices, making process improvements and implementing technology, nonprofits can build stronger relationships with their partners, achieve their fundraising goals and make a more positive impact in their communities.

Nonprofit Challenges FAQ

What challenges are nonprofits facing in 2025?

Four of the biggest challenges nonprofits are facing today include struggles with fundraising, insufficient or outdated technology, leadership and staffing shortfalls, and difficulties with collaborating with partners.

What causes nonprofits to fail?

Nonprofits may fail for a variety of reasons. These include a weak business plan, unrealistic expectations, a lack of leadership, insufficient financial resources and an inability to adapt to changing circumstances.

How do nonprofits measure their impact?

Measuring an organization’s impact involves building a framework for conducting an evaluation, determining measurements and key performance indicators (KPIs) that reflect the organization’s impact, training staff on how to measure and track key KPIs, collecting data from a variety of sources, and leveraging data and other resources across an organization’s network.

What are some strategies for successful nonprofit leadership?

Successful nonprofit leaders should provide teams with learning opportunities and staff growth, build a strong culture through team-building activities, learn how to delegate to avoid micromanaging and burnout, and hone their communication and technical skills.

What is the role of volunteers in nonprofits?

Volunteers play an important role in nonprofit organizations. The use of volunteers saves the organization money, helps increase donations, boosts visibility, improves advocacy for the organization and diversifies the skill set within the organization.

How do nonprofits collaborate with each other and with other organizations?

Ways nonprofit organizations may collaborate with each other and other organizations include sharing content or partnering with other groups on research reports; cross-promoting events and other programs to bring new donors and volunteers into the fold; and collaborating on shared programming, such as webinars and training.