5 Steps to Prepare for a Recession

The economy’s warning lights are flashing.  Nonprofits need to plan for this now.  Here are five steps to get you started.

Nonprofit funding waxes and wanes with the economy.  Over the last few years, the US economy has grown, unemployment plunged, and stock portfolios soared.  Foundation endowments have flourished and there has been more wealth to distribute to not-for-profits.  According to Giving USA (2018) the total charitable giving rose for the fourth consecutive year in 2017, making 2017 the largest single year for private charitable giving, even after adjusting for inflation.

Nothing lasts forever, though, and the economy’s warning lights are flashing. Tax cuts have caused the deficit to bloom.  Trade wars have provoked uncertainty and volatility in the markets.  America is divided and facing the prospect of impeaching its president.  It is likely that philanthropic endowments will shrink, individual wealth will shrink, and taxes will increase.  During an economic downturn, funding dries up and demand for non-profit services surges.  What would your non-profit do with 10% less funding?  20% less? 35% less?  What is kept and what is cut?

You don’t fix a roof when it starts to rain.  The time to plan for this is now – here are five steps to get you started.

1.   Mission First

Preserve And Protect The People And Programs That Are Critical To The Mission

Assess your core mission, program model, and your organization’s strategic goals and activities.  You must distill and clarify the programs and people that are essential to your impact. If the mission and model priorities aren’t clear –convenethe board and staff to provide clarity.

• What is imperative to your mission versus elements that are nice to have?
• What programs, people, and contracts are imperative to realizing your mission? Which realize the greatest return for the investment?

Rank by priority the programs, people, and contracts that have the greatest impact on the mission.

2.   Use Your Guiding Values Or Principles

Use Your Values To Make Decisions And Focus On What Is Important

Values are the deeply held principles, ideals, or beliefs that should guide one’s work. Values stand at the very core of human decision‐making.  We know that every individual and every organization is involved in making hundreds of decisions every day.  In times of crisis or change our cumulative decisions should align with our values.  During the tough times, reassert your values internally and externally to maintain organizational cohesiveness.  Make an explicit effort to maintain your values in the face of adversity.[2]  For example, do you value transparency? Inclusiveness?  Hospitality? Equity?  How will you realize these values when cutting 10%, 20%, or 35% of the budget?

Remember, when you use your values to make decisions, you make a deliberate choice to focus on what is important. When values are shared, they build internal cohesion –especially in tough times.

Then, you must address your expenses from largest to smallest:

Re: People, ask yourself: