3 Immediate Steps for Financially Failing Nonprofits

Last month I designed an interactive assessment for nonprofit finances, designed to provide an immediate nonprofit_fundraising snapshot to help evaluate and monitor nonprofit health.

Taking stock of this sort is more important now than ever before. According to Forbes in 2016, half of nonprofits are set up to fail – and that was in the midst of economic boom predating current year predictions of a $20 Billion charitable giving decrease.

Although budgeting with a downward and declining revenue projection is a dominant reality for nonprofits entering 2019,

some are far more vulnerable to market forces. You might be working for an organization where the ‘writing is on the wall’, perhaps through several years of budget deficits and hemorrhaging of cash. Or, it might hit you out of the blue, like corporate giant Bear Stearns in 2008 – dissolving overnight after posting its first quarter of revenue loss in a more than 80-year history.

Whatever path has led you here, if you’re among the 10% or so that scored under 20 on my assessment, your organization has a terminal diagnosis. Just as with any diagnosis this severe, the alternatives are to accept the fate and focus on getting affairs in order for the inevitable end, or to fight to the end with optimism and embracing all experimental remedies. 

If you find yourself in this condition and are bolstered by a strong leadership core, take these 3 steps to buy yourself some time:

  • 1
    Raise $10,000 per every $500K of annual operating expense from your Board in 30 days. The $10K figure is the floor, and this ratio is non-negotiable. If it can’t be embraced then move immediately to potential merger, sunset planning and asset liquidation. Smaller agencies will require and have access to less resources, and conversely larger agencies need more and need to be able to more readily generate it. This means organizations in the $1M range will need to raise $20K, and those at $5M require $100K – get or give from board members in any combination. In all scenarios, there is profound symbolism of the ability to mobilize and to generate some quick cash that you will need to re-invest in emergency measures. 
  • 2
    Secure an emergency revenue plan. This is not something you can do in-house; your inability to strategize and forecast has put you in this predicament. Take the funds you’ve generated from the Board campaign and bring on an expert to develop a customized and tangible revenue plan with benchmarks at 3, 6, 12, 18, and 24 months. Plan to spend $5,000 for every $400K in operating expenses, as plans are necessarily more intricate for large budgets at the emergency stage. Prognosis is highly contingent on the state of your condition, chances are you might not make it, but fundraising crisis experts can often extend your life another 6-12 months, providing options for future operating decisions.
  • 3
    Cut costs 25%. You have to tighten the belt, cut the fat without taking muscle and bone. No one wants to be in this spot, but it’s your reality now and that means all unessential costs must go. This pain will be felt in a variety of ways, from taking away the daily cookies for volunteers to employee furloughs, but you must find a way to operate at 25% less for 6-12 months to have a chance to make it. Rest assured, your work need not suffer. With multiple organizations, I’ve been able to produce unprecedented revenue and all-time highs in clients served while cutting total budget costs coming off prior year deficits. It takes strategy and dedication, but it is attainable.

Remember, your organization is terminal, and this doesn’t happen accidently or from a simple mistake. You have a limited network with no coordinated plan to engage or mobilize, low organizational bandwidth to address deficiencies and no cohesive infrastructure. This condition is emblematic of your operating philosophy and it will require a miracle cure when the market bears down. If you score in this range, take drastic action immediately.

When most of your organization’s funds come from private donors, you need strategic processes in place to identify potential donors and communicate with them effectively.

This is where marketing comes in.

To learn more about attracting donors using story telling with inbound marketing, download our eGuide entitled How to Use Inbound Marketing to Attract New Donors.

You can download it here.

About Perry Jowsey

Perry Jowsey, CFRE is a professional fundraiser and featured speaker who has been leading financial turnarounds for more than a decade, 

where he has generated more than $20 million in Jowsey_Headshot-1-1.jpgrevenue specializing in small and financially distressed budgets. Perry has worked with local and international media, foreign government delegations, and philanthropists on the Forbes 400. In unparalleled acts of fundraising success, he has cut costs while producing ROI’s as large as 4000%, leading to features in national trade publications and special invitations to present to groups around the United States. Here is the link to Perry's LinkedIn profile