There’s more speculation about recession out there.
According to the Bureau of Economic activity, US Gross Domestic Product (GDP), a measure of economic output, the US grew at a rate of 1.1% the first three months of 2023. This is a decrease from the last quarter of 2022. Which was a decrease from the quarter before.
Seeing a trend?
Nonprofits are bracing for the double threat of increased demand from their communities struggling to make ends meet as well as donors holding back until the economy shows some strength. Yet this is THE time for nonprofits to show their own strength, particularly for organizations focused on communities in financial straits.
While rare, recessions are a fact of life, with the US experiencing 11 recessions since the end of World War II. To make things more difficult, recessions are defined after they’ve ended. So what is the defense against a possible recession? Robust nonprofit financial planning and continual review of the nonprofit’s biggest risks.
Achieving this demands a few conditions to work. First, the organization needs to adopt and accept a culture of transparency, in which staff are encouraged to voice challenges and leadership to demonstrate the willingness to act on those challenges. Every nonprofit is unique in how it achieves financial resilience driven by the organization’s mission, procedures and, to some extent, culture. Yet there are also many resilience factors nonprofits have in common, as we’ve found by conducting in-depth workshops with a wide array of nonprofits, large and small, from education to healthcare to faith-based. This work identified the following Five Nonprofit Resilience Factors.
Those Five Nonprofit Resilience Factors are:
- Nonprofit Staff
- Nonprofit Facilities
- Technology Dependence
- Nonprofit Revenue Stability
- Nonprofit Program Operations
For example, how does one pay for critical staff to keep the mission alive, particularly when wages continue to rise? How does a nonprofit upgrade technology to deliver on the mission in a new virtual environment? Nonprofits don’t often have the luxury to reallocate funds to relieve immediate crises, yet keeping an eye on these five factors that challenge nonprofit resilience helps to focus leadership attention. Problems, errors, miscalculations, or inaccuracies in these factors are consistently cited by nonprofit leaders as having a direct impact on the organization’s ability to fulfill the mission. Nonprofit leaders that can effectively communicate to major donors, grantors and other stakeholders exactly how the Five Nonprofit Resilience Factors directly affect community impact can achieve the following:
- Show skeptical prospective donors they would not be throwing good money after bad
- Convince the board to release funds to support operational needs
- Persuade donors to give unrestricted funds beyond specific program gifts.
Here are some examples of connecting infrastructure risks to community impact:
- Incompatible technology could limit how effectively a grassroots nonprofit reaches the community while in the field, working directly with those in need.
- Antiquated systems could expose an organization to security breaches leading to loss of donor or client personal information ultimately bringing about community distrust.
- Understaffing leads to human error and poor service further reducing mission impact.
When nonprofit leaders can communicate how the organizational internal challenges tie directly to the mission and the community served, they create an opportunity to secure better donor engagement, stronger support, and a deeper understanding of the organization’s financial challenges. This could ultimately encourage bigger grants and gifts to allow the organization to be more financially resilient in the face of adversity.
Talk to the financial experts at Fairlight Advisors to learn more about managing your nonprofit’s investments. Schedule a free consultation today!