Nonprofit sustainability – the ability to deliver relevant social impact over the long term – has always been important to leaders in the nonprofit sector. A recent national survey found that 93 percent of nonprofit respondents have had to adapt or curtail services since February 2020. And, a year’s worth of dealing with the spread of COVID-19 and economic upheaval has elevated the sustainability conversation, for sure!
Financial health is crucial to ensuring that your nonprofit can continue your work in the months and years ahead. And, before you can really discuss financial health and organizational preservation, you need to pause and consider your social purpose. Getting clear on the impact you want to have will help guide decisions about how to financially sustain your work, and how to build capacities needed to deliver that impact. Here are three areas you and your team should be looking at now.
Make time to revisit your vision for social impact as context and needs continue to change. In addition to informing decisions on finances and capacity, this helps ensure that your work remains relevant. Questions to consider:
- Is it time to shift the way you deliver programs and services?
- Is it time to explore new partnerships to extend your reach and impact?
- Is it time to advocate for systemic change within your organization?
Another important consideration is how you frame the value of your work in the current context: “why your mission matters now” – to rally donors, engage partners, and motivate staff.
It goes without saying that nonprofits need to be financially viable to deliver impact. Sustainable nonprofits have the following items in common:
- Predictable and reliable revenue
- Expenses that line up with expected revenue
- Sufficient cash on hand to cover routine and emergency needs
- Processes in place to monitor finances and plan for contingencies
Are you facing an increase in demand for services? Have you experienced significant disruptions to your funding stream(s)? Conversations that occurred last spring, and again this fall, indicated that most nonprofits are experiencing destabilizing conditions that are threatening their long-term financial stability. Even more nonprofits expect to experience continued threats in the months ahead.
Despite this destabilization and uncertainty, there are some things you and your team can do right now:
- Assess your current situation. Cash management is critical. What are your monthly operating costs? How much cash do you have on hand? Look at the diversification of your donors. It’s important to understand your reliance on various revenue streams and individual donors so that you know how to respond if a major funding source goes away.
- Create financial scenario plans. No one knows what the future holds for our economy or how it will affect your organization. Create a best, a worst, and an expected case scenario with clear plans for how you’ll respond to each one if it happens. Use external data and prior experience to try to make a reasonable set of assumptions and focus on the things you can control to put your nonprofit in the best possible position. In some scenarios, sustaining impact over the long term may mean scaling back in the short term or merging with another nonprofit with a similar mission.
- Have honest conversations with your donors, partners and stakeholders. Make sure your donors understand your needs. Ask them direct questions about their plans and intentions so that you can get some sense of the reliability of your revenue streams. Talk to your donors and members to better understand whether and how they plan to engage with your nonprofit in the months ahead. Many nonprofits are finding success in asking clients or members to donate pre-paid fees for canceled services and events to help programs and services they care about continue in the future.
Capacity to Deliver On Your Mission
Delivering social impact requires talent, systems, and processes. Nonprofits have had to shift to virtual operations, make up for lost volunteers and deal with other challenges to capacity.
While different nonprofits have different capacity needs, these four are critical to sustainability:
- Leadership capacity. Nonprofits that remain resilient during challenging times tend to have strong and diffuse leadership that can make quick decisions in response to evolving challenges. Prioritizing a well-functioning executive team, frequent and transparent communications with staff and good governance practices all help build and maintain the kind of trust a productive culture requires. Great leaders also model authenticity and vulnerability.
- Adaptive capacity. The importance of adaptability right now is paramount. Consider possible changes in client needs, behaviors, and the operating environment over the next six-12 months, and how your nonprofit can respond. Set short-term financial and impact goals, along with plans for what you’ll do if you don’t meet them
- Collaborative capacity. Many nonprofits are coming together in creative ways to boost social impact during this time. Collaboration shows up in three ways: a culture that explicitly calls out the importance of collaboration, a team with collaborative skillsets, and leadership that models and incentivizes collaborative behaviors.
- Technology capacity. A recent survey showed that 85 percent of nonprofits know that technology is important to their long-term success, yet only 23 percent have a long-term strategy or vision for how they will use technology. As nonprofits scrambled to shift to virtual operations, the need for strong systems and staff who can use them has become even clearer. Technology capacity is critical to business continuity now and will remain critical during recovery—both for data-informed decision-making, and as a method of delivering services at lower cost and greater scale.
Last Words- Stay True to Your Purpose
The volatility and uncertainty of the past year has left many of you feeling like you’re in a tailspin. My advice is to apply the same mindset to your nonprofit that you are (hopefully) applying to your personal life. The global pandemic and continued economic uncertainty have caused me to refocus on the things that matter most to me personally. I encourage you to use first part of 2021 as an opportunity to bring that same focus to your nonprofit. Reground yourself in why you “do what you do”, and use that as your compass. This will help you determine what you need to support your vision on a financial basis and organizational capacity.