Economic uncertainty can feel like uncharted territory, especially for small nonprofits that operate on tight budgets and unwavering dedication to their missions.
When issues like high prices, Federal deficits and spending, politics, and tariffs plague our daily lives, it’s hard to know what tomorrow will bring.
The good news is that challenging times bring opportunities to plan smarter, strengthen strategies, and deepen your impact.
So if you find yourself concerned or worried, or if you have a Board member that’s concerned or worried, know there are some proactive steps you can take to safeguard your organization’s future.
With the right tools and mindset, your nonprofit can not only endure economic challenges but emerge even stronger.
Let’s dive into the 10 things your nonprofit can start doing now to build resilience.
10 Steps Your Nonprofit Can Take to Prepare for Economic Uncertainty
1. Diversify Funding Streams: Relying heavily on one or two funding sources can be risky ANY day and especially during an economic downturn.
Imagine if one of those suddenly disappeared – where would that leave you?
I’ve seen it happen numerous times, and I don’t want it to happen to you.
Be proactive! Actively explore and cultivate new funding avenues, such as individual donors, grants from different foundations, corporate sponsorships, and earned income opportunities (if appropriate for your mission).
2. Build a Cash Reserve: Aim to build an emergency fund that can cover at least 3-6 months of operating expenses. This cushion can provide vital breathing room if donations or grants decrease unexpectedly.
Building a cash reserve takes intentional effort and consistent discipline for a small nonprofit.
Setting clear, achievable savings goals and allocating a portion of unrestricted donations towards the reserve each month or quarter is crucial.
Over time, these consistent contributions, combined with prudent spending habits, will allow the nonprofit to accumulate a vital financial cushion.
3. Review and Refine Your Budget: Scrutinize your current budget for non-essential expenses that could be reduced or eliminated.
Prioritize core program activities and identify areas where you can operate more efficiently without compromising your mission.
And I can’t stress this enough – use real numbers and not ballpark estimates.
This helps you ensure spending aligns with anticipated income rather than relying on guesswork.
Bottom line: Basing the budget on historical data and realistic projections allows for better decision-making, enabling you to anticipate potential shortfalls and allocate resources effectively.
4. Strengthen Donor Relationships: Focus on nurturing your existing donor base.
Regular communication, personalized updates on your impact, and sincere appreciation can foster loyalty and encourage continued support, even during challenging times.
If you don’t love on your donors, you run the risk of losing them.
That means you HAVE to focus on donor cultivation activities.
So take the time to plan and execute these special warm touches to keep your donors engaged.
5. Communicate Your Value Proposition Clearly: In a recession, donors and funders may be more selective about where they give.
Clearly articulate the critical need your organization addresses and the tangible impact of your work.
Highlight how your services are particularly important during economic hardship.
If you need help getting started on this, ponder the points below about your nonprofit:
- Who are we?
- What do we do?
- How are we doing it?
- Why are we doing it?
- Why does what we’re doing matter?
- Why do we need to do the thing we’re trying to do?
- What sets us apart from other organizations doing the same thing?
- What are some of our past successes?
- What’s been the positive impact of donors and their support?
6. Explore Collaboration and Partnerships: Consider opportunities to strategically collaborate with other nonprofits or organizations to share resources, reduce costs, and expand your reach.
For example, by joining forces with other organizations, small nonprofits can pool resources like office space, technology, or even staff, leading to reduced overhead costs for everyone involved.
In turn, these collaborations can create opportunities to find new donors and amplify the collective impact of your mission, potentially attracting more support – even when individual giving might be constrained.
7. Invest in Fundraising Capacity: While it might seem counterintuitive to spend more when anticipating a downturn, investing in your fundraising infrastructure (staff training, CRM systems, donor management) can pay off in the long run by making your fundraising efforts more effective.
For instance, during times of economic uncertainty, hiring a fundraising coach can be incredibly beneficial for small nonprofits by providing expert guidance and a fresh perspective to navigate challenging financial landscapes.
A coach can help nonprofits develop more resilient and adaptable fundraising strategies, identify new opportunities for funding, and optimize their existing efforts for maximum impact.
Furthermore, they can offer accountability and motivation to keep fundraising on track when resources might feel scarce and anxieties are high, ultimately strengthening the nonprofit’s ability to sustain its mission through tough times.
8. Develop Contingency Plans: Brainstorm potential scenarios that could arise during a recession (e.g., decreased donations, increased demand for services) and develop proactive plans to address them. This might include identifying potential program adjustments or temporary cost-saving measures.
When playing with these scenarios, it’s helpful to create a contingency budget that reflects your plans too.
Basically, you’re creating an organizational budget that reflects your scenario.
Let’s say you suddenly had to cut 25% of your expenses – where and what would you cut?
I know of many nonprofits who had to take actions like this overnight when the effects of the Great Recession started happening, back in late 2007.
9. Engage Your Board: Keep your Board of Directors informed about the potential economic challenges and involve them in discussions about financial stability and strategic planning.
Their expertise and connections can be invaluable.
Although you might think it’s the Board’s job to be the leader with all of this – after all, they’re ultimately responsible for the nonprofit – take a proactive stance.
If you’re the Executive Director, team up with the Board Chair to do things together like review the nonprofit’s current financial reserves, discuss risk tolerance, and brainstorm potential strategies to mitigate economic headwinds.
Then, share this information with the rest of the Board and get their input, feedback, and ideas.
10. Stay Informed and Adapt: Monitor economic indicators and stay connected with other nonprofits to learn about their experiences and strategies.
Be prepared to adapt your plans as the situation evolves.
Flexibility and responsiveness will be key to navigating a recession successfully.
This means reviewing your budget and actuals every month.
And asking yourself what you can do to strengthen your financial situation, like moving reserves from CDs to more liquid assets like a money marketing account.
Or talking to your bank about a line of credit.
Do everything you can to stay positive, but be prepared for worst case scenario.
The Bottom Line
Economic uncertainty doesn’t have to derail your nonprofit’s mission.
By taking proactive steps, your organization can weather the storm with confidence and purpose.
Remember, preparation is the foundation of resilience, and investing in your nonprofit’s adaptability today will pay dividends tomorrow.
Now is the time to evaluate your strategies, engage your team, and take bold action.
Need help for your nonprofit?
If your usual fundraising strategies are all of a sudden not working, or if you’ve tried everything you know and you’re still short of your funding goals, let us help.
We understand how overwhelming it can bring in enough revenue for your nonprofit when there’s so much uncertainty going on.
That’s why we tap into our 17 years of experience to create a customized plan for you to help you reach your funding goals.
Want to talk to someone to find out if fundraising coaching is right for you? Click here to fill out our strategy session request form so we can learn more about your nonprofit.
