Is Your Nonprofit Organization Recession Ready? These 6 Things Will Help You Prepare

I was working in the nonprofit industry when the 2008 recession hit. If your nonprofit organization was like the ones I was working with, you probably didn’t feel the pain of that recession until 2009 or 2010. Nonprofits operate in a very cyclical nature — annual planning, giving cycles, recurring events, membership renewals, etc. — so by the time the economy started to recover, nonprofit organizations were still trying to understand what the true impact was going to be. All of the data indicates nonprofit organizations didn’t fare too terribly during that recession, because it was short by comparison. But at the time, difficult decisions and shifts in focus still had to be made.

When the economy is moving forward robustly, most leaders focus on growth and sales. But inevitably, when the economy slows and times get tough, that focus shifts. With so many people furloughed or laid-off during this time, they struggle to spend money in a way that keeps the economy moving in the right direction. 

Are we already in a recession? It depends on who you ask. Some economists liken it to a ‘medically induced coma’ while others say a global recession is imminent. Regardless of who you rely on for your economic outlook, history has proven that our economy has always expanded and retracted. As of December 2019, the U.S. economy has expanded for a record 126 straight months, the longest time period in the country’s history, according to the National Bureau of Economic Research. Put another way, the U.S. has avoided a recession for an entire calendar decade for the first time ever.

There’s no way to completely recession-proof your nonprofit organization but there are things you can do now to prepare for what’s to come. Whether the COVID-19 crisis drives the economy into the next recession or not, economists agree there will be another one, and it will be soon. Preparing for a recession takes work, but having those difficult conversations during a shrinking economy is much harder. Here are six things you can do today to be recession ready.

1. Get back to the basics

   Return to your mission statement and prepare to focus your efforts on delivering on your core purpose. After all, it is what makes your nonprofit organization unique. In good times, many nonprofit organizations try new things, start new programs and services, and experiment with activities that may be nice to have, but not essential. When the economy contracts, focus on what is tried and true. Your stakeholders will be looking for value directly related to what they need.

   2. Stress test your budget

   Review your budget projections and start running scenarios in case you can’t host that one big event or you lose a major sponsorship or donor. Maybe your membership numbers will drop significantly because a particular industry has been hit hard by the recession. Many nonprofit organizations do not have diversified revenue streams, so one major hit to a program could be devastating. It is better to be prepared in that situation and see where you can cut expenses or increase revenue from other programs.

   3. Review and pivot your strategic plan 

   Nonprofit organizations rely heavily on their strategic plans, as they should. A lot of time and effort have gone into creating plans to help drive the organization forward. When economic downturns strike, leadership must act quickly but thoughtfully. In the face of uncertainty, it is not only okay, but prudent to pause on the activities outlined in the strategic plan. Your efforts can resume when the nonprofit organization is in a viable place, but not at all if you do nothing and lose too much ground by maintaining the status quo.

   4. Eliminate under-utilized programs and services

   Rather than making across-the-board cuts, prioritize core activities and focus on high ROI programs and services, but reduce expenses where possible. Take a look at all activities through a value and revenue lens to determine which should stay and which should go. You can reallocate some money saved to improve those high value core services and make them more profitable. I know it is hard to hear and even harder to do, but it’s okay to suspend and eliminate legacy programs that have outlived their usefulness and value.

   5. Fight the urge to cut marketing

   Typically, one of the first things considered as an easy elimination is marketing, but cutting marketing shouldn’t be the default reaction. Instead, during a time of economic downturn, you actually need more effective marketing to help you target with greater efficiency so that you are squeezing the most out of your marketing budget. It is a time to start marketing smarter and not harder. Smarter marketing efforts can help you drive more value and communicate the message more effectively at a time when it is critical to reach your audience. In times of uncertainty, your audience will be looking to you to provide value and guidance.

   6. Re-imagine your events

   Nonprofit organizations often rely heavily on events, whether for fundraising or trade association conferences and tradeshows. If we have learned anything from COVID-19, it is that things can change in an instant. Nonprofit organizations must begin to digitize their efforts. Maybe your nonprofit organization will return to in-person events as soon as stay-at-home orders are lifted, but you could be leaving money on the table by not incorporating some sort of digital component. Consider looking at how you can offer virtual experiences or hybrid experiences to draw in people that may not be willing to travel or want to stay involved and support your nonprofit organization, but can’t commit to an event.

   We’ve heard a recession is coming. We just don’t know when. The economy is on ice for the time being. Whether we’re just entering the recession or it is on the horizon, I encourage you to take these steps so you can weather the storm. Creating a contingency plan now is a lot easier than making decisions without data and under immense pressure. Once you have evaluated the possibilities, and you find yourself looking for help to recession-ready your nonprofit organization — sign up for a free initial marketing assessment (IMA) to get a no-commitment recommendation on what you can do to position your nonprofit organization for success.