September 26, 2010
With the downturn of the economy and the bankruptcy of prominent Wall Street firms, many people are beginning to feel the pinch, particularly nonprofits. Companies like Lehman Brothers and Merrill Lynch are recognized for large philanthropic donations to various charities, which many organizations depend on for increased revenue.
Whether you’re relying on corporate fundraising or a specific donor, it’s important to diversify your fundraising strategies to insure the strength of your organization during a recession.
Unfortunately, during a recession many nonprofit’s programmatic needs increase. Since people and institutions have less disposable income, nonprofits receive fewer donations and struggle to keep their charity functioning. Each year most charities set new goals to raise more money than the previous year. However, during a recessionary period, the goal should be to maintain at least the previous years’ funding, and at the same time cut expenses.
Some charities make the mistake of relying on a single huge revenue source. Although large projected donations are wonderful, you never know when they could unexpectedly be cut short. It’s best to prepare for the worse case scenario. Making sure that one donor doesn’t represent more than 10 percent of your revenue, provides more independence and financial security for an organization. Diversifying your funds and holding net reserves help to insure that your nonprofit will survive, even during a recession.
Although large corporate sponsorships and donations garner lots of publicity, it’s important to identify all types of receiving financial support. With thousands of foundations in the US, many charities receive grants for programming through trusts. The largest in the country, the Bill and Melinda Gates Foundation, gave away $2,011,675,000 in the fiscal year ending in 2007. Additionally, high net worth individuals, who are passionate about your cause, can provide pertinent funding.
It may surprise you, but according to Giving USA large donations, like the $2 million that Angelina Jolie and Brad Pitt donated to the Global Health Committee, make up just 1.3 percent of overall donations. This means that 98.7 percent of funding comes from donors who give smaller, yet vital gifts. If your organization doesn’t already, you should implement a direct mail campaign to your supporters asking for donations. Another way to gather support is by allowing people to give through your website. The convenience of donating online often makes people more inclined to give.
The current economic crisis serves as a reminder to always hold net asset reserves in the balance sheet of your nonprofit. A six or seven figure reserve can help an institution weather the difficult times. Don’t allow your organization to subsist from week to week, donor check to donor check. Have a plan to continue the success of your charity, no matter what the current economic environment is.
Originally Posted: September 26,2008 on NJ.com