Where do for-profit and nonprofit business planning intersect? Philanthropy.
Lately, business crises and collapses are grabbing headlines. From Peleton to Theranos, innovative companies are rising and falling faster and faster. And their stories are not only covered in the press, but are being dramatized in real time.
Watching from afar, the stories are often shocking. In the aftermath of each saga, we hear from investors, customers, and creditors. But one area that is often overlooked is the impact of these business crises on nonprofits.
What about all the nonprofit organizations that had been poised to benefit from corporate and individual philanthropy?
The very swift collapse of FTX cryptocurrency exchange is illuminating some of the answers to this question.
For example, The New York Times reported on a Chicago nonprofit that has had to suddenly scrap a “guaranteed income program for recently incarcerated people and their families.” Science reported on several scientific research grants that will no longer be paid. While Vox reported that one of its own projects, which was funded by FTX’s founder, had now been put on hold.
The Impact of Business Crises on Nonprofits
The stakes of business crises are high—and not just for company leaders. Investors, employees, and contractors are all affected. So are the nonprofit organizations these individuals and institutions contribute to.
While we often think of business as profit-driven and philanthropy as mission-driven, the reality is the two are deeply intertwined. Individual giving, corporate giving, and most major foundation giving at some point originated in successful business ventures.
Just check out the $2 billion MacKenzie Scott donated to nonprofit organizations over the last seven months.
For nonprofit leaders the most pressing question then becomes:
How can I prepare my organization to weather the potential fallout of business crises?
Nonprofit Business Planning: How to Prepare for Uncertainty
There are four concrete steps you can take today to start preparing your nonprofit:
- Create a nonprofit business plan: Also called a strategic plan, a nonprofit business planning process will clarify organizational goals, strategies, opportunities and potential challenges over a 3–5-year period. Your nonprofit business plan will detail budgetary needs over this same time frame, preparing your organization to create a sustainable long-term fundraising plan.
- Update your gift acceptance policy: A gift acceptance policy outlines what types of gifts an organization accepts and how those gifts will be treated. For example, will the organization accept gifts to create endowed projects? If so, what is the minimum gift amount? Are there any types of gifts an organization will not accept, such as gifts from companies that conflict with the organization’s mission? Having a gift acceptance policy positions your organization to better evaluate new donors and minimize risk.
- Cultivate diverse income streams: Diverse income streams are a nonprofit organization’s best friend. Ideally, you should aim for a mix of major individual giving, foundation giving, events, and small dollar donors, alongside federal and/or corporate funding, depending on your organization. The ratio will often vary based on your organization’s sector and programs. But the key is ensuring that you are not overly reliant on any one donor, or handful of donors, such that a pullback in giving would threaten your daily operations. For more information on diversifying your income, check out our webinar: Optimizing Income Streams.
- Regularly assess risk: Matching your organization’s priorities against your budget and income should be an ongoing priority. Alongside financial tools like monthly spending and cash flow projections, we recommend reviewing your annual income projections at least quarterly to identify any at-risk contributions. This could include foundations that are shifting priorities, pledges that are overdue, or long-time individual donors who have been hit hard by market downturns. The more time you have to prepare for potential funding gaps, the better positioned you will be to weather them.
Business Planning is for Nonprofits Too
Yes, headlines about programs that suddenly lost funding will haunt many nonprofit leaders’ nightmares. But your nonprofit is far from powerless.
With proactive nonprofit business planning, you can chart your organization’s immediate and long-term needs. That way you can be prepared to pursue the right gifts at the right times—and avoid potential heartache.
For more resources on fundraising strategy and sustainability, check Funding for Good’s Fundraising Fundamentals Webinar Series.
