Strategies for
Navigating Tumultuous Times

What if your fundraising income drops by 20%, 25% or more in 2009?

That’s a scary thought but it is becoming a reality for some nonprofits. Instead of taking the “wait and see” approach, many nonprofit executives are beginning to draw up contingency plans on how they will survive in this challenging fundraising environment. Below are strategies to help you navigate during this difficult time.

Prepare different income scenarios for 2009. Review your 2008 spending and develop at least one budget that projects a 25% decrease in income for 2009. What expenses can you reduce? This will help you prioritize your programs for next year so that you can be prepared to make critical decisions if your organization is faced with a cash shortfall. Also remember to monitor actual gifts, expenses, and projections monthly to make adjustments as necessary.

Cut expenses now. Don’t wait until there’s a cash-crunch to trim the fat from your budget.

•  Review personal expenses. Salaries and benefits are usually the largest expenses in a nonprofit organization’s budget. To avoid layoffs down the road, some groups are taking the preemptive tactic of reducing staff salaries now by 10% and putting the money aside to pay out in year-end bonuses, if possible. Or they are offering staff extra vacation days in lieu of salary increases.
• Renegotiate your lease. If you rent office space, your landlord may consider different lease terms to keep tenancy rates up.
• Share administrative expenses. This takes a little more coordination but it may be possible to share administrative duties with another organization.
• Use contractors. Instead of hiring new full-time staff, determine where you can use part-time contractors to help handle the workload.
• Put out a call for volunteers. While volunteerism is on a downward trend overall according to the Corporation for National and Community Service, Americans are still very service-oriented. 60.8 million Americans volunteered 8.1 billion hours in 2007. Review the activities in your organization that may be suited for volunteer help.

Keep your donors close. The Chronicle of Philanthropy recently reported on a study released by Bank of America and the Center on Philanthropy at Indiana University, which showed that the number one reason why wealthy Americans stop giving to nonprofit groups is because they no longer feel connected to the organization. Consider how you keep donors “connected” and focus on nurturing your relationship with donors through print, online, and face-to-face communications. Also, be upfront about how you are addressing the crisis with a sound financial plan. Finally, keep in mind the donor’s needs, not just the immediate financial needs of your organization.

Reaffirm what’s important. In writing about the economic crisis in the January 2009 edition of Moneymagazine, economist Tyler Cowen reported on studies that showed if people “reaffirm their most important values, such as honesty and compassion, they go on to make better and more rational decisions.” Likewise, now is the time to reaffirm the values that we share with our donors so that they can make thoughtful decisions about their support.

Give donors options. Is it possible for your donors to set up annuities instead of making cash gifts? Think of ways you can give supporters flexibility with their donations. Depending on the donor’s age, he or she may also be able to take advantage of a provision in the financial bailout bill that extended the tax-deductibility of charitable contributions through  Individual Retirement Accounts.

Tap into your operating reserve. With any luck, you have put aside some money for a rainy day. With the economic forecast so glum, now may be the time to tap into these resources to maintain key programs. But don’t go this route before you have taken a careful review of expenses.

Approach the bank for a line of credit. If you are on good terms with your bank, consider applying for a line of credit. This will give you one more short-term source of funding to help you get through a difficult time. But use this tool very cautiously, just like you would for your personal finances.

If your organization has employed other ideas for handling the economic crisis, please feel free to share them with us by emailing them to info@acfitzgerald.com.