Note: this guest post is from Traci Shirachi of The Mark USA. Thanks, Traci!

Are we entering a recession? If so, are you ready? 

Throughout the pandemic, nonprofits excelled at adaptation: embracing remote work, changing their service delivery models, engaging donors differently. These pivots were largely successful but required a lot of thought, energy, and diligence. 

Many nonprofit leaders – maybe you? – are feeling exhausted. Reinvention requires work … a LOT of work.

Emerging challenges

As COVID concerns ease somewhat, most organizations were hoping for a period of normalcy and stability. However, we’re now facing a different suite of challenges. 

Inflation. It costs more to both manage your organization and deliver goods and services to those who need them most. Additionally, the cost of fundraising events has also increased, which makes it more difficult to build donor relationships.

Changes in donor behavior. Faced with inflation, individuals are watching their pocketbooks to assess how much they will give. Many remain wary of gathering in large groups, which creates another barrier to events.

Workforce disruptions. While demand for social goods and services continues to grow, it’s harder than ever to hire and retain workers. We’re in the middle of a global workforce shortage and nonprofits – many of which pay lower-than-average wages – are not immune. 

As we approach the end of the fourth quarter and plan for the new year, nonprofit leaders will need to be even more astute and adaptable. Here’s how.

Preparing for a recession: Five tips

The word “recession” describes a prolonged period without economic growth. Historically, this has resulted in lower nonprofit revenue accompanied by (for some organizations, depending on their mission) an increase in demand. 

While a recession may be on the horizon, the following suggestions will position you well in case it does.

1. Improve your technology. Invest in technology that reduces bottlenecks and inefficiencies. If layoffs are required (and I hope not!), this allows you to continue – or maybe increase – your output with fewer staff. For example, integrate your donor database with your financial management software so you don’t need to input the same data twice.

2. Measure your impact. Focus on impact reporting. Demonstrate the results and changes – outcomes – you’ve achieved in your community. This will distinguish your efforts from other nonprofit organizations that focus solely on outputs (number of individuals helped, dollars spent, etc.) Note: Per item 1 above, you may want to invest in tools or evaluation to better measure your outcomes.

3. Strengthen donor relations. Prioritize donor relations and connections. Regardless of financial changes, donors need to know that they matter beyond the money they give to your organization.

It’s worth noting that philanthropy has grown substantially during the pandemic. During tough times, donors tend to give more to the groups they love and have a connection with. So deepen those relationships!

4. Retain staff through greater impact. Help your employees understand the difference they make in the community. Yes, they need to be committed to the mission, vision, and values of your organization – but even more committed to increasing your impact.

Impact reporting will help your team understand both the “why” behind their jobs and “how” they help create community change.

5. Build cash reserves. Prepare for a rainy day – start building reserves. Prioritize discretionary funds that can be spent as needed, compared to non-discretionary funds that are earmarked for specific purposes by donors or funders.

Manage the present, prepare for the future

Successful organizations can walk and chew gum: managing immediate needs while preparing for the future. Many tools and strategies, including the five tips above, support both. 

You can never go wrong by investing in capacity and agility, supporting the growth of your people, living your values, and measuring the results and changes you achieve. Through creativity and hard work, you can also raise enough money for present needs while building a reserve for the future.

If the threat of a recession provides an opportunity to sharpen your focus and strengthen your systems, maybe that’s a good thing.