Navigating Growth: Opportunities and Obstacles in the Nonprofit Sector

By Luke Pierce, CPA, Audit Manager at Blue & Co.

Sector Growth and Financial Strength

Over the past decade, the nonprofit sector has experienced exponential growth in the United States. Total combined assets of the nonprofit sector have grown from $7.3 trillion in 2015 to over $14 trillion as of early 2025, which represents an average compounded annual growth rate of 6.7 percent. This increase is driven largely by strong investment returns within that time span, which not only resulted in increased value of investments held by nonprofits but has also led to increased charitable giving.

In 2015, there were approximately 1.5 million nonprofits incorporated in the United States. This figure has now grown to over 2 million, most of which are incorporated as a 501(c)(3) organization. Social media has been a significant contributor to this increase as it provides a medium to raise awareness of social and environmental issues, which has inspired a multitude of nonprofit entrepreneurs. In addition, social media can be leveraged as a tool to generate fundraising at little to no cost, alleviating what had historically been a significant barrier to both entry and prolonged success.

Employment at nonprofits has grown by 33 percent since 2008, highlighting nonprofits’ growing role in the labor market¹. Beyond paid staff, approximately 76 million Americans volunteered at nonprofit organizations at some point between September 2022 and September 2023.

Sector Challenges

Nonprofits inherently face many financial difficulties, as fulfillment of their charitable mission is often not conducive to a strong profit margin. A nonprofit’s services are constantly in demand from their beneficiaries, which results in less cash being available for long-term strategic investments and less money available to pay staff wages that are competitive with the for-profit sector. This, in turn, results in higher turnover at nonprofits and increased difficulty in replacing job vacancies, especially for specialized roles. While volunteers provide immeasurable help to nonprofits in both efforts and cost savings, nonprofits often face difficulty planning their schedules based on volunteers due to the frequency of no-shows and volunteer burnout.

In addition to financial difficulties arising from beneficiary and labor demands, post-COVID inflation has added further strain to nonprofits’ income statements. According to the Consumer Price Index, the average annual rate of inflation in the United States from the start of 2021 to the end of 2024 was approximately 5.2 percent. Comparatively, the average annual rate of inflation from 2010 to 2020 was approximately 1.8 percent. The prices of software and commercial rent, two of the most significant non-labor expenses for nonprofits, increased at a rate even higher than overall inflation from 2021 to 2024.

Donations are the primary source of revenue for most nonprofits. Donations are generally cyclical, with spikes around November and December, while most nonprofits’ expenses are consistent throughout the year. In addition to annual trends, donations also have a positive correlation with economic health. The better the economy, the more excess money people have, and the more they are willing to donate. In times of economic turmoil, donations tend to decrease. Inversely, this is also a time in which demand for assistance from nonprofits increases, particularly for organizations that provide human services and public society benefits.

While there may not be costs directly allocable to incurring donations, there are indirect expenses to attract and retain donors. Individual donors, corporations, and governments all have a finite pool of resources that they are willing or able to donate, and there are numerous applicants for those donations. In 2024, approximately 47 percent of nonprofit leaders identified donor acquisition as their organization’s greatest struggle for success. At the government level, recent federal budget cuts led to the cessation of certain grants that many nonprofits had relied on.

Conclusion

At a macro level, the nonprofit sector has never been stronger; however, nonprofits face many hurdles to fulfilling their charitable missions. Strategic goals for prolonged success vary by specific industry within the nonprofit sector. Blue & Co. has experience with many industries across the nonprofit sector, and we are available as a resource to provide insight and guidance. Contact your local Blue & Co. advisor today to learn how we can help your organization achieve its goals.

Sources