In 2019, the economy is growing fast but two-thirds of economists in the U.S. are predicting the start of another recession by the end of 2020. Many nonprofits were taken off guard by the last economic recession when it began in 2007. Being unprepared for a downturn can be detrimental to any type of organization but is particularly disastrous for the nonprofit sector. Organizations are forced to cut programs, services and staffing when they’re likely to be needed most: during times of financial crisis.
Be Prepared for the Next Economic Downturn
Anticipating future economic turmoil can save nonprofits from unnecessary struggle when times get tough. Continued support relies on setting a concrete plan.
What Can You Do?
Tell a motivating and inspiring story. People need to be inspired in order to act, and your story will have to change when you’re facing hard times. You’ll need to be prepared to show your donors there’s still reason to be excited. Above all, make sure your story changes with the times so no one is hit with any surprising bad news.
Run scenarios. Take a close look at your budget and run through a few worst case scenarios. Know that fundraising will definitely take a hit and plan on appealing to your most loyal supporters. Figure out who you can really depend on by contacting people directly and discussing the possibilities. In fact, preparing your donors for the reality of a downturn can sometimes lead to larger contributions.
Focus on your core mission. What is your mission? When you have a clear focus you can decide what activities to scale back on. For example, more experimental things are a good place to start scaling back. In some cases, staff cuts will be required and you may want to weigh the benefits of outsourcing (Room40).
When Fundraising Becomes a Higher Priority
One of the first studies to examine how fundraising efforts changed before, during and after the 2007 recession was published online by Voluntas: International Journal of Voluntary and Nonprofit Organizations. The study states:
Fundraising is a crucial activity for many nonprofit organizations. However, scant research has examined how the strategic priority of fundraising activities may vary across organizations and over time. This study addresses this gap in knowledge by examining how economic and organization-specific financial conditions predict the priority of fundraising in a nonprofit organization. In particular, this study examines the changes in the ratio of art, culture and humanities organizations’ fundraising expenses to their total expenditure during the period of 2005–2012, which includes the great recession of 2007–2009. The findings reveal that, when facing an economic crisis, the ratio of fundraising expense to total expenditure increases, suggesting that fundraising becomes a higher priority under a hostile economic condition. The analysis also reveals differences in nonprofits’ reaction to recession depending on their revenue mix, with donative nonprofits reacting more sensitively than commercial nonprofits.
It’s possible that you will have to do spend more money on fundraising for your nonprofit before an economic downturn or recession strikes. If you already rely on fundraising as a major source of income, you’ll have to do more of the same (UT Dallas).
Strengthen your case for support. First, communicate the importance of your work to supporters. All board members and key staff should be able to effectively share your story and give examples of what makes your organization different than the rest.
Make connections with donors. Bring donors closer by focusing on gratitude. Be upfront and engage your donors to use their expertise on your behalf. This makes them want to stay connected.
Reevaluate relationships with corporate donors. Finding new and improved ways to add benefit to corporate donation is essential. Ask donors what they value most and incorporate these into your plan.
Review revenue stream and calculate return. Calculate the true return on your investments. Evaluate where you’re spending money and consider more efficient techniques. For example, it may be a good time to redirect your attention to donor development rather than planning events.
Avoid crisis messaging. Donors don’t want to support organizations that are on their way out. Begging for help at the last minute is a last resort and something you should make a serious effort to avoid. The earlier you have conversations with your supporters the better.
Use personal fundraising. DIY events lower expenses and increase interest. These efforts are of no cost to your nonprofit because all expenses are paid by the supporter. Furthermore, DIY events raise more money on average than signature events.
Encourage loyalty. Your supporters want to help and sometimes nonprofits forget to ask for what they really need. In addition to donations, ask your supporters to fundraise and advocate.
Have a balanced plan. Know your strengths and weaknesses and plan accordingly. If you’re overly dependent on any one avenue of revenue, consider what you would do if you lost that support. Prepare for the worst while continuing to strengthen existing relationships
Is Your Nonprofit Ready for the Next Recession?
No one wants to think about the next economic downturn or recession but it’s important to have a plan. At Computer Resources of America, we’re prepared to help. Contact us today for a free evaluation of your nonprofit.