Depending on what news you consume, the economy is either (a) headed for a mild recession by the end of 2019, (b) headed for a major recession in 2020, or (c) just fine and you should stop worrying about recessions. With these conflicting reports, what’s a nonprofit leader to do? Here’s an idea: hope for the best, but plan for the worst. We’re currently in one of the longest economic expansions in U.S. history. Eventually, this will come to an end as all economies are cyclical.
Here’s what you can do today to plan for a possible recession:
- Devise an emergency plan that assumes your organization will experience a 20% drop in revenues. Which programs would be cut? Which employees are most essential? How would you change what you do with a significant drop in revenue? Write it out and take this plan to your Board. Have them bless it or change it, and then put it somewhere safe so you can dust it off if you ever need it.
- Make sure that you are focusing your current development efforts on building strong, personal relationships with your current donors. Don’t wait for tough times to start the conversation with donors. Start it now. No one likes to feel like they’re only important when times get tough. Build the relationships today so the donors hang with you in the difficult times.
- If you have an endowment, make sure that your endowment policy has a provision for tapping the corpus in “emergency situations.” This too will require Board discussion and approval and the nuclear option of tapping your endowment for emergencies should only occur in true emergencies. If you have to ask if you’re experiencing a “true emergency,” the answer is “no.” Trust me, you’ll know the true emergencies without a doubt.
- Stay calm. Don’t lose your head in downturns. They’re typically short-lived. The average recession in the United States lasts 10-18 months (data since 1919). Project confidence, assure your community that you have planned for the recession and that you’ll weather the storm. Everyone wants to be associated with a winner.