Ten Best Practices to Recession Proof Your Nonprofit
It’s Not Enough to Hope for the Best without Planning for the Worst
Ups and downs in the economy are to be expected. We thrive when things are good and go into survival mode when they’re not. And while no one is particularly fond of recessions, they are a normal part of the economy. In fact, according to the National Bureau of Economic Research (NBER), the U.S. has experienced 12 recessions since World War II (roughly every 6 years). And all we have to do is turn on the news to see that many believe we are heading for another one right now.
“The U.S. economy shrank in the last three months by 0.9%. This is the second consecutive quarter where the economy has contracted. In the first quarter, GDP, or gross domestic product, decreased at an annual rate of 1.6%.” As the NPR article also points out, “While two consecutive quarters of negative growth is often considered a recession, it’s not an official definition.” Still, there are many indications that it is on its way.
While a recession impacts nearly every organization and individual (just as all market fluctuations do), it takes on a whole new meaning for nonprofits. A nonprofit’s survival is, of course, based on donor funds. And when those donors are also feeling the recessional crunch squeezing their wallets and have to start prioritizing what to pay, they often cut back on funding.
It’s a bit of a conundrum, really. While, from a social standpoint, a nonprofit’s role has arguably never been as important, with tragedies ranging from a global pandemic to natural disasters to war to social unrest (all demanding their assistance), they are left in a particularly vulnerable position to face the consequences of a recession. While they are needed more, they’re also susceptible to lose more.
As leaders, there’s nothing we can do to stop a recession. But that doesn’t mean we should sit idly by and wait. Now is the time to recession-proof our nonprofits … not after the stock market plummets. Recession proofing is about proactively preparing for the next economic downturn, rather than waiting for it to hit and then figuring out what to do. Simply, by then, it may be too late.
The following ten best practices can help:
Logistical Best Practices
- Include Recession Planning in Every Meeting
Because a recession can, and likely will, impact every part of the organization, it’s important to keep it at the forefront of each stakeholder’s mind. Meetings provide an opportune time to hear various perspectives on what steps should be taken to ensure the nonprofit’s foundation is strong and that the programs being run are in a position to sustain any economic turbulence that may come.
- Assess Risk Tolerance
Consider how much risk the nonprofit can withstand. This should be an honest assessment across all levels—from leaders to staff and volunteers to technology and systems. The questions are—Are they adaptable enough to handle the stress of a recession? Can they withstand the pressure? And, if so, how much before they start to crack? Then, the biggest consideration—What can we do to strengthen them?
- Develop Plan
It’s crucial to develop a recession plan now. This plan should be committed in writing with the understanding that it is fluid and will likely change over time. Considerations regarding lines of credit, shifting of resources, prioritization of programming elimination (if the need arises), the strategic use of volunteers, diversification of resources, reduction of spending, and amplifying emergency funds should be included in this plan.
Donor Best Practices
- Increase Stewardship
While this is a best practice regardless of the economic climate, it is essential before a recession. Waiting until the recession is here is too late to further develop relationships. Develop ways to increase communications and engage with them personally before times get bad. Then, when it’s time to make tough decisions regarding where to spend their dollars when they have less of them to spend, they are more likely to choose to support the nonprofits with whom they have the best relationships.
- Increase Fundraising Now
When times are good, donors generally have more to give. As always, focusing on the problem the nonprofit addresses, the solution it provides, and directly linking the use of the funds in furtherance of that solution goes a long way. Fundamentally, it’s about showing the value proposition of the work being done for the long-term. By bolstering fundraising now, there will be more unrestricted dollars accessible to help the nonprofit remain agile through any upcoming disruptions.
- Provide Downgrade Options
The last thing any nonprofit wants is for donors to think that they have to stop 100% of their funding because they can’t provide what they had in the past. Providing options and various levels for donors to choose from will help them discover that it is not all or nothing. Consider what will work for them in trying times and also what will work for the organization. After all, something will likely be better than nothing.
- Diversify Funding Sources
Like stewardship, this is always a best practice. Nonprofits should consider how to tap into a new funding source within its current parameters. This may be extending geographical boundaries or offering more virtual options and events. Simply, the more funding sources available, the less likely the nonprofit will be overwhelmed by the recession’s impacts.
Team Best Practices
- Train for Resiliency
Especially in the face of so much uncertainty and potential disruption, leaders must ensure the organization can withstand different future scenarios by training their teams on resiliency. Consider various future scenarios and confirm that the team understands what steps will be taken, if and when each situation arises. This means examining unanticipated future threats, stress testing current capacity, and developing longer planning cycles with foresight planning and resiliency training.
- Reskill and Cross-train Employees and Volunteers
There’s no doubt that resources may be lost during a recession. As such, flexibility and resiliency among the team is crucial, providing the ability to pivot when needed. However, too many individuals only know one department or area or one set of tasks or activities because that’s what they’ve been trained for. Cross-training and reskilling so that they can work in various areas if needed are essential to preparing a nonprofit for the next recession.
- Technological Advancement
Technology continuously reshapes industries, but never more so than through troubled times. As we saw with the pandemic, technology does not slow down, but rather rapidly increases during times of disruption. The more technologically advanced the nonprofit is, the better prepared it will be.
With recession proofing, the goal is to have the ability to escape survival mode and move into thriving mode as quickly as possible by stabilizing finances and operational preparedness. While none of us have a crystal ball to predict when it’s coming, we can be prepared for it. Recession proofing is not about having a pessimistic attitude. Instead, it’s about being proactive by planning for the worst, as we hope for the best.
At The Win Woman, we focus on funding opportunities for nonprofits and Corporate Social Responsibly for organizations of all sizes. We work with boards and C-Suite executives to help develop the right solutions for their specific situation in their specific industry. For more information about trust-based philanthropy, please contact hello@thewinwoman.com.
