COVID-19 has made a significant impact on individuals and organizations around the world. Everyone is working hard to keep their distance from others and amping up healthy practices to slow the spread of the virus.
On top of the humanitarian crisis brought about by the pandemic, we’re also experiencing significant economic disruptions. Businesses have shut their doors, millions are out of work, and the economy is threatening a long-term recession.
Nonprofits, who generally operate on limited budgets in normal circumstances, are especially vulnerable during these tough times. These organizations need a sustainability plan to carry them through the crisis and into better circumstances.
This guide explains how nonprofits are impacted by the economic changes and provides actionable solutions for all.
Due to economic disruptions, nonprofits tend to be facing these challenges:
- Keeping up with compensation.
- Raising funds from struggling supporters.
- Limited streams of revenue.
- Changes in philanthropic programming.
Ready to dive a little deeper? Let’s get started.
1. Keeping Up With Compensation
You’ve heard about the businesses and organizations struggling to keep up with their payroll during economic disruptions. People are taking pay cuts and many individuals wonder if they’ll even receive their next paycheck. No one wants to be in this situation.
Before the pandemic, your nonprofit may have struggled internally with your stance on overhead expenses. They’re necessary for growth and development at any organization. However, donors typically want to see their donations directly used for programming and mission-based activities.
This mindset often causes nonprofits to carefully examine and evaluate their overhead expenses, including compensation of employees.
During a pandemic, this evaluation is considered with even more weight to it. The last thing you want is to cut or limit the compensation of your valuable employees. However, you recognize that something needs to be done to make your budget work.
We recommend considering the following strategies when it comes to keeping up with payroll and compensation:
- Look into government programs. Jitasa’s guide to the CARES Act for nonprofits explains that organizations with fewer than 500 employees can apply for completely forgivable loans to help cover 2.5 months of overhead expenses as a part of the Paycheck Protection Program. Plus, Economic Injury Disaster Loans (EIDL) can also be used to pay your overhead expenses, although these aren’t forgivable.
- Cut discretionary spending. Take a look at your expenditures over the last year. What was truly necessary to keep the organization running? You may consider cutting costs like organization-wide lunches, hiring costs (put a pause on those), and other unnecessary costs. This isn’t fun, but in troubled times, it can be necessary.
- Don’t stop fundraising. While we’ll dive a little deeper into this in the next section, don’t stop your organization’s fundraising efforts. Many organizations don’t want to bother their supporters during tough times, but many of your supporters may be itching to give back. You never know until you ask!
As you’re considering your organization’s options for budgeting through these difficult times, we recommend that you discuss your options with nonprofit accounting professionals. You can ask them about the different programs you can work with and what to expect. In fact, Jitasa is offering free 15 or 30 minute consultations about the Paycheck Protection Program or the EIDL program.
2. Raising Funds From Struggling Supporters
As we mentioned earlier, many nonprofits hesitate to ask their supporters for donations during difficult economic circumstances. Many times, this comes from good intentions, as you don’t want to burden your supporters. However, you should continue raising money even throughout the pandemic.
You will likely see two primary changes to your fundraising strategy during the pandemic: First, you’ll need to rely entirely on your virtual resources. Second, you’ll need to change the way you approach your supporters for contributions.
Reliance on Virtual Platforms
Events everywhere have been canceled. If your nonprofit usually relies on events as a large component of your fundraising strategy, you’ll need to take a new approach to raise money. This can be done through the use of virtual fundraising platforms.
This is less limiting than you’d think! Many fundraising campaigns can be completed completely using online approaches. Consider, for instance, the following fundraising campaigns:
- Peer-to-peer fundraising
- Virtual events
- Text-to-give fundraising
- Online donation pages
- Matching gift campaigns
- Online auctions
There are so many possibilities that your organization can choose from so get creative! Plus, virtual fundraising guides like this one from re:Charity can help you make sure you’re investing in the best software to make your campaigns possible.
New Way to Approach Supporters
While we do recommend your organization continues fundraising, it’s important to note that you won’t be “fundraising as usual.” You’ll need to approach your supporters in a new way in order to show them that you value their relationship first and foremost.
These conversations and outreach strategies should be used to not only raise funds, but also to keep your supporters engaged with the organization. Be sure to provide ways for them to get involved that may not include giving considering the difficult economic conditions.
When you open up fundraising conversations with your supporters, they should look something like this:
- First, ask the supporters how they’re handling the additional stresses of the “new normal.”
- Explain what your organization is doing in response to the pandemic to continue programming while adhering to the new guidelines.
- Tell supporters why you need their support now more than ever and that any contribution they can make would be greatly appreciated.
- Follow up after gifts to express your appreciation for their contributions. Even if they can’t give now, follow up and thank them for their time. Consider inviting them to other engagement activities like video calls, advocacy campaigns, or free information resources.
When you request funding from supporters, be sure to provide them with information about the immediate impact the gift will have. For example, you might put together a wish list and ask supporters to order items you need for your programs. This adds a tangible value to the campaign that seems more worthwhile to supporters rather than simply donating funds.
3. Limited Streams of Revenue
One of the biggest challenges that nonprofits may be facing right now is the limited number of revenue streams built into their current strategies. By putting all of your eggs into one basket, you take a big risk that that revenue stream will stay profitable during an economic downturn.
Now more than ever, your nonprofit should be considering ways that you can diversify your revenue streams in order to mitigate this risk as much as possible.
Some sources of revenue that you should consider adding to your financial strategy include:
- Major gifts. This is probably already included in your fundraising strategy (and it may be the primary source of revenue for your organization. Unfortunately, many organizations are finding that their major gifts are decreasing in size, which supports the idea that you need to further diversify revenue.
- Grants. Many grant funders are actually expanding their programs right now. Make sure to take this into account and think about increasing the amount of time and resources you put into writing grant proposals. It could help balance any decreases in your fundraising revenue.
- Matching gifts. Ask your supporters to check their eligibility for matching gifts. Similarly to grants, many larger companies are increasing their philanthropic programming as the need for support has increased.
Diversification in your organization’s revenue helps spread the income sources a little wider. This way, if one of your revenue streams takes a major hit, you won’t lose everything. Diversification is an important strategy in your regular fundraising, but it’s especially important now.
If you’re looking for advice about how to craft these strategies and other diversification methods, consider reaching out to a professional accountant specializing in the nonprofit sector for guidance.
4. Changes in Philanthropic Programming
Your philanthropic programming has likely changed dramatically as a result of social distancing regulations. You may have less contact with your constituents or have put precautions in place to help keep everyone safe.
Either way, you’re implementing a new strategy when it comes to your regular programs. You may have even increased your programming if you work on the frontlines of coronavirus relief.
However, many of these changes may also affect the cost of your programming. For example, you may need to invest in new software to get in touch with those in need. Or, you may need to purchase masks for your staff and constituents.
Here are some ways you can draw on more support for your new programming structure:
- Ask for in-kind donations. Supporters will love getting directly involved with philanthropic activities by providing the tools and goods you need to make them possible.
- Tell more stories. Explain how your programming initiatives are still making a difference in the lives of your constituents. This will motivate donors by showing them that you still need their support.
- Explain the changes you’ve made. Both your supporters and your constituents will want to see that your organization is making smart, healthy choices. Explain how you’re keeping team members, volunteers, and constituents safe.
Many of these elements will help maintain and grow support for your philanthropic programming, even throughout the changes.
Coronavirus has not only caused a humanitarian crisis, but also an economic one. Knowing the impact this economic crisis has on nonprofit organizations will help you to better understand how to approach these difficulties and keep your organization afloat. If you’re feeling these negative impacts on your organization, try some of the suggestions in this article to get back on track. Good luck!
About the Author
Jon Osterburg has spent the last nine years helping more than 100 nonprofits around the world with their finances as a leader at Jitasa.