Why Nonprofits Are Being Forced to Think Like Brands

Nonprofit organizations in the United States are navigating a funding environment that has changed faster than most were prepared for. The pressures are arriving from more than one direction at once. According to the National Council of Nonprofits, 73% of nonprofits surveyed report increased demand for their services. At the same time, 66% report concerns about their financial stability, and 30% say they have reduced staff size. The demand is rising while the capacity to meet it is falling.

The AP News via Barchart coverage documents the scale of the disruption. The Urban Institute found that $267 billion was granted to nonprofits from all levels of government in 2021. At least 18% of nonprofits across every sector report receiving government grants. Federal agencies have moved to claw back billions of dollars already awarded to nonprofit groups, leaving organizations that had built their budgets around those funds to absorb the loss.

The second pressure is quieter. Giving USA notes that individual giving remains the cornerstone of philanthropy, accounting for nearly two-thirds of all charitable giving. But donor participation continues to decline. Fewer households are giving, even as the total dollar amount has held steady at the top.

The two pressures converge on the same organizations. Nonprofits that built their operations around government grants now face a funding source that is less predictable than it has been in decades. Nonprofits that built around individual donors face a donor base that is shrinking in number.

That convergence is where Wendy Leatherberry works. Leatherberry is an independent consultant with 25 years in fundraising, development, and grant strategy. She has worked with organizations operating on budgets under one million dollars and organizations operating on budgets above twelve million. Her work spans grant seeking, grant prospecting, communications, and advocacy.

Her argument is direct. Nonprofits have historically been able to treat their public identity as secondary. That era is over.

"A lot of organizations didn't need to think about their brand because the people who needed to know already knew," Leatherberry says. "They had a relationship with a funder. The grant came through. The work got done. The public never had to be part of the equation. That is not the environment anymore."

The change is structural, not cyclical. Candid reports that the median foundation payout rate has remained at 5% for five years. That ceiling limits how much grant funding can expand to fill the gap left by federal cuts or declining donor participation. The money is not going to arrive from the same sources in the same volume.

Leatherberry says the response has to include diversification. Grants remain a piece of the picture. They are not the whole picture. Organizations that relied on one or two revenue streams, or on a single government contract, now face the cost of that concentration.

"Diversity of funding is always in the best interest of an organization," Leatherberry says. "Sometimes it is not necessary. When it is not necessary, it does not get done. Right now it is necessary. So now is the time."

She points to a local youth center she works with as a practical example. The organization does substantial work inside a school district. Many residents do not know it is an independent nonprofit. They assume the social worker they spoke to is a district employee. The organization had never invested in public awareness because the funding did not require it. That assumption is now a liability.

The communications problem is not about marketing language. It is about whether the public knows the organization exists, what it does, and what happens if it stops. The National Council of Nonprofits describes the consequences already visible in communities. Food pantries lose funding while families remain hungry. Mental health grants are cut while crisis calls continue.

Those consequences land on staff first. A layoff at a nonprofit is not just an internal cost. The payroll that does not get made belongs to the counselor, the housing coordinator, the researcher. When an organization cuts a program, the service stops, but the need does not.

Leatherberry describes the current moment as a breach of trust, not just a budget problem. Organizations that met every federal benchmark and passed every quality review are now waiting to see whether the next installment arrives. Some are pursuing legal remedies. Most cannot wait for a court timeline without laying off staff.

The organizations that adapt, she argues, will not simply survive the current period. They will enter the next one with a broader base, a clearer public identity, and more flexibility to pursue work that a single funder would never have covered.

The organizations that do not adapt may not get the chance to find out.

What the sector has to answer now is not whether grant funding returns. It is whether the organizations that depend on it will still be standing when it does.