Simmer Down Now! A Study of Revenue Volatility and Dissolution in Nonprofit Organizations

Abstract

Many nonprofit organizations operate under immense financial pressure. Revenue volatility is a common target for managers to minimize under the assumption that maintaining consistent revenue enhances the viability of the organization while high revenue volatility may disrupt planning. However, the relationship between revenue volatility and the viability of nonprofit organizations is poorly understood. This article presents the first empirical test of the link between volatility and dissolution in U.S. public charities from 2010 to 2018 (N = 2,126,894) using discrete time survival models. The results show that a 10% increase in revenue volatility predicts an increase in dissolution risk between 7% and 14%. In addition, the effect of revenue volatility varies by the age of the organization, suggesting volatility may be a greater threat to older organizations than to those newly formed. Implications for managers and future research are discussed.