No, we’re not in a recession. At least not yet.
Consumer spending has stayed about where it was last year, so has Gross Domestic Product, and the Federal Reserve continues to project growth. The S&P 500 is 10% higher than it was at the same time last year, the DJIA is 7% higher, and the Nasdaq is 7% higher.
What we’re actually in is turbulence created by massive changes coming from Washington, D.C. These changes are creating fast-moving highs and lows, making for a very bumpy ride.
Example: On Friday, news broke that the National Endowment for the Arts withdrew all its grants after a presidential decree that the agency was going to be shuttered. This has affected nonprofit arts groups across the country. In Houston alone, those grants totaled $482,500. If your arts organization was counting on these grants, which were awarded in January, you need to make some changes quickly.
Moreover, the perception of recession may lead to the reality of having one. If we all think a storm is coming, we will all hunker down.
What’s the best thing you can do for your organization right now?
It’s this: Prepare a plan that will guide you through whatever weather you might encounter — a plan that helps you do these six things:
1. Stabilize your finances
- Review and prioritize your spending, focusing on mission-critical activities.
- Maintain a reserve or cash buffer. Think in terms of months: How can we do what we need to do for X months if revenue drops?
- Diversify your funding. If you’re over-reliant on one form or another (a specific income source, donor, or grant), find something else that could supplement it or take its place.
- Check in on any income stream above 8%. Whatever it is, if it provides more than 8% of your revenue, check to see just how secure it is for the next 6-12 months and plan accordingly.
2. Preserve what’s essential
- Keep what you truly need. That means protecting the products and services that provide your core offering. It’s why people care about you.
- It also means focusing your marketing, putting out the word about who you are and what you do. That’s how people find out about you (including the people who could bring more revenue).
- And that means keeping your core talent and providing support for them. Because without them, you can’t do any of this.
3. Plan for trouble
- Write a contingency plan with two scenarios: What you would do if income dropped 10%. What about 25% or 50%? What are the things you would cut? How would you shift resources — money, time, focus, personnel — around?
- Implement it if or when one of those situations arises.
4. Plan for success
- Track and evaluate the impact of your scenarios and the changes you make, so you can know what worked and keep doing it.
- Be ready to demonstrate value to funders now and at any time, no matter what the economy’s doing.
- Reassess your marketing, your messaging, your communications, and every aspect of how you tell the world, “Hey, we’re here, and here’s what we do and why it’s important and how you can support it.”
- As the saying goes, “you can’t cut to grow.” Growth requires investment of time, money, and other resources. Plan for it now.
5. Stay driven
- Frequently, downturns create urgency around issues, which in turn can increase nonprofit support. Here are just three examples from the heart-stopping 2008-2009 economic crisis:
- Feeding America: With food insecurity rising, its core mission became even more urgent and visible to the public. Feeding America leveraged corporate partnerships (with, for example, Walmart, Kraft, and General Mills) to secure food donations and funding. The organization communicated clearly how donations would help people struggling in the recession, which drove individual and institutional giving. Feeding America not only survived but grew stronger.
- Habitat for Humanity: Foreclosures made affordable housing more urgent and visible. Habitat formed strong partnerships with banks offloading foreclosed properties, then expanded through volunteer sweat equity and local affiliate models, keeping costs low.
- The Fresh Air Fund: Many families were facing economic hardship, and the Fresh Air Fund’s focus on providing free summer vacations for children from low-income families was well-received. By emphasizing the life-changing impact of these experiences on children, the organization expanded its donor base and its donations.
6. Bet on the future
- Explore and write down your BHAG, your Big Hairy Audacious Goal, your visionary leap or jaw-dropping accomplishment — the game-changer you could pursue when the time is right.
Economic trends come and go, and every economy has people and organizations who succeed despite the surrounding atmosphere. Your BHAG is the idea that would truly illuminate your mission and make a difference in the world. No matter what, you should steer toward that.
And tell people about it.
After all, hope for the future starts with each of us.
Lee Wochner
CEO & Creative Strategist