The COVID-19 era is here, and we’re starting to get used to it. The initial scramble of March and April, including workplace disruption, canceled events and commotion around short-term government funding, was exhausting. Now it has settled in, and many nonprofits have a little stability. For many, this is temporary.
What is coming? Predictions are just educated guesses. But most economists see a deep recession underway. Will it be a yearlong slump? Two years? Ten, some have suggested? This survey, if you trust experts as a group, suggests it won’t be brief. So, a reasonable educated guess might be 2-3 years, which implies that 2021, 2022 and 2023 may be lean. The last recession (which may need to be renamed after this one) had lingering effects for roughly five years.
Photo: Michael Rogers
What will the effects be? They may likely include depressed individual and corporate giving. Major donors may be impacted by the stock market as much as the state of the economy, and the two can go in different directions. Volatility in investment markets can be as bad as an outright crash, which hasn’t happened yet. The reason is that people who can’t predict their account balances tend to be more conservative with their spending. Foundation giving will be impacted by the markets if any given year ends badly. Grants will also be affected by needs—priorities can shift, which may benefit some organizations and hurt others. Fees for service may stagnate or decline for nonprofits. Finally, while government funding has actually gone up this year for many organizations, that is likely to change. Recessions hit the tax base hard, and government funding was ravaged after 2008, and it took the longest to recover of any of these streams.
In short, funding will likely be scarce, though not for every organization nor necessarily in consistent ways. But, for most the real storm is coming and the time to plan is now, before it hits.
How best to prepare?
First, develop a robust financial plan, with contingencies. This article discusses key considerations.
Second, double-down on relationships with supporters, get creative and be assertive with funding. Consider investing more in fundraising, even while pondering deep expense cuts.
Third, think outside the box about your organization’s future. Rather than put off ideas like rebuilding from the ground up or merging with another nonprofit, nurture and build out those ideas as concepts. If you need them you won’t necessarily have a lot of warning, so don’t wait to consider what-ifs. Get professional support if you need it, while you have time to plan.
Some initial reports suggest that as many as 20-30% of nonprofits in the U.S. and Canada could dissolve as a direct result of this pandemic. That’s speculative at this point, but I’ll predict that most of those that do expire will have waited too long to consider alternatives.
The common thread here is be proactive. Proactive can be strategic. Reactive is always tactical. Use this time to calmly consider the possibilities.