July 16, 2020

This paid piece is sponsored by Eide Bailly LLP.

Nonprofits are not immune from the effects of COVID-19 and the impact of the economic uncertainty we are experiencing. Now is the time for nonprofits to be innovative and think creatively to identify sustainable revenue sources.

Sustainable nonprofits address challenges with creative, innovative ideas, embracing digital transformation and remembering to always be forward-thinking.

Collaboration and partnerships

Collaboration and partnerships are about coming together on an activity or initiative that benefits all involved. This can be comprised of nonprofits, for-profits or a combination of the two. These relationships help leverage resources and expand missions.

The benefits may be financial, operational, programmatic or all the above. Financially, these relationships may allow organizations to share in costs and reduce expenses tied to joint efforts. Operational efficiencies may be achieved by sharing in program development or implementation, allowing organizations to enhance their programs and grow constituents.

Overall, organizations can grow their value proposition by expanding their mission but not their budgets. The result is both parties are stronger and better positioned to maintain efficiency and withstand changes in funding, which leads to long-term sustainability.

Mining your diamonds

Nonprofits continue to apply this concept of taking a deep look at what they already have — relationships, programs, expertise, physical space, technology — and asking how they can make it go to work for them.

One area to look at is your donor base. Remember, individual donors remain the largest category of support for nonprofit organizations. Cultivating meaningful relationships with individual donors also leads to long-term support, planned-giving opportunities and legacy gifts. Nonprofit organizations also should remember that individuals are also the ones who ultimately request or determine the gifting of funds from donor-advised funds, foundations and corporate grants and sponsorships.

Another area is cash flow and cost containment. The adage “cash is king” has never been truer for nonprofit organizations than it is today. In the wake of the current COVID-19 economic environment, being able to manage your cash flows and cost containment is crucial.

As management and boards plan for the future, there are a few things that can be done to help gain insight:

Know your expenses

The first step in determining how to properly manage your cash outflows is to understand them and where your money goes. For instance, what bills are paid monthly, quarterly, annually, and when are they due? Being able to anticipate annual renewals or expenses that are nonrecurring will help you plan for any bumps in the road.

This also will give you a feel for what your average cash outflow consists of so you can plan for revenues needed or cash depletion that may occur. By assessing this, it also will give you an idea of how long your operating cash will last and if additional funding sources are necessary.

Ask ‘Do I really need this?’

With changes in operations, some services may not be needed or could be reduced in usage. Having a good understanding of where your money is going will allow you to see if opportunities exist to press the pause button. If a subscription service or rental is not being used, check to see if you have the ability to put the cash outflow on hold until your operations stabilize.

Look for extensions

If you find yourself in a position where you are really cash strapped, ask this simple question. Maybe you can delay paying expenses or work out alternative payment arrangements. If this is necessary, start by having a conversation with your vendors to see what options may exist.

Having the proper insight and knowledge into your financials has never been more important to help protect your cash. Following these steps can help you ensure your organization is positioned successfully to navigate these uncertain times.

Social engagement

As the world turns digital, social engagement can be a lifeline for nonprofit organizations. Remember the Ice Bucket Challenge several years ago that generated $115 million? That fundraiser was public, with simple instructions and a clear deadline.

With a lack of nonprofits holding in-person events, how can you connect with your donors and potential donors to keep your mission front and center? Can you use social media to allow donors to be recognized by the community of people they care about the most? Have you made it easier for donors to reach out to their peers?

Digital transformation and a touchless environment

To continue to advance their exempt mission, nonprofit organizations should stay abreast of changing trends and methods for online giving. Specific action should be taken by organizations to connect with individual donors, realizing that place-based and localized giving tends to be the norm with respect to individual giving each year. Social media, online marketing and the ability of an organization to connect with the values and concerns of each generation could give an organization a distinct advantage. Consider the needs and wants of newer generations of donors who are excited to give and participate in the organization’s mission.

Another critical component will be to review how you conduct donations and events going forward. As we move into a touchless or at least minimal contact environment, how can you make giving easy for current and potential donors?

Pay attention to succession planning

COVID-19 has exposed holes in many organization’s succession planning strategies. When an executive director or CEO leaves the organization, whether planned or unexpected, the foundation of the organization can become unstable.

Does your board have a plan in place if something were to happen to the CEO or executive director of your nonprofit? Executive succession planning is a part of the core organizational process — an important part that should not be overlooked.

Loss of strong and effective leadership can slash morale, reduce productivity, result in lost donations and even threaten the organization’s mission. Nonprofit organizations must always be prepared for an unexpected leadership transition. Change can be a good thing when organizations actively plan for it.

If succession plans were not set in place before COVID-19, put this on the agenda as soon as possible. COVID-19 has shown no one is immune to change. Planning will make the process cleaner, smoother and more transparent.

Here are a few tips to consider:

• Identify the leadership qualities that are needed to navigate current and future challenges successfully.
• Consider whether placing an interim leader at the helm is the right path for your nonprofit.
• Draft a time line for leadership successions that are planned.
• Map out an emergency leadership transition plan to address timely delegation of duties and authority whenever there is an unexpected transition or interruption in key leadership.
• Cross-train current staff to minimize the disruption from unexpected staffing shifts.
• Identify potential leaders both on staff and on your board, and give them opportunities to expand their skills. You’ll then have a deeper bench of future leaders.
• Flush out a communication plan for stakeholders before, during and after a transition of leadership. Thoughtful communication will be needed more than ever to support staff and the organization during times of transition.

Importance of creativity and planning

Nonprofits that can be innovative and agile while focusing on key performance indicators will be poised to move forward into the next normal. While not easy, having critical conversations about longevity and what success looks like will be vital.