Q: What’s the longest economic expansion on record?
A: You may be living through it right now — and it might be on its last legs.
Are you ready?
The Great Recession may feel like it ended just yesterday. Instead, the economy has expanded every month since June 2009. If the US expansion reaches into July of 2019, that will mark the longest economic expansion since World War II.
Good times never last forever, and this economic expansion may be tottering. In fact, most economists see the US falling into a recession by 2020.
So what should your nonprofit be doing today to prepare for the risk of a possible recession? Here are some suggestions.
Perform a Risk Inventory
If you haven’t evaluated the threats and opportunities facing your organization, you put your organization in peril. The time to learn about challenges is now, before the economy falters. We can help perform a risk inventory for your team. This allows you get the most benefit, while your organization learns about sound risk management practices and gets set on a course for a sustainable program (at a discount if you mention that you are responding to this newsletter). You can also perform a risk inventory on your own using our free guide. We can help you with next steps.
You may not have anyone on your current team who was on staff during the Great Recession. Now is the time to look back on old planning and performance documents. What was your nonprofit budgeting in late 2007, just before the recession struck? Did demand for services increase or decrease within your target population? How did your nonprofit respond to fluctuations in demand and financial strains?
Consider reaching out to major donors now to ask for additional funds “just in case.” Citing materials from this email, ask donors to help you build a rainy day fund. This approach would show funders that you are an effective, forward-thinking steward of your mission.
Consider delaying plans for expansion of programs. Scale back new initiatives. Don’t stagnate, but exercise prudence. Instead of rolling out all of a major new program, use a pilot project instead, moving forward on a narrower basis.
Consider Your Credit Situation
Credit is a tricky thing. On one hand, if your nonprofit is highly leveraged, you may want to reduce that leverage when heading into challenging economic times. On the other hand, however, many nonprofits have not evaluated whether they have sufficient, effective backstop lines of credit. While a line of credit should not be used for long-term financing needs, LOCs can help an organization address short-term cash shortfalls. So have a heart to heart conversation with your banker about your nonprofit’s credit status — before the economy slips into recession.
Recommit to Financial Leadership
While the sun is still shining, take a hard look at your financial leadership, as Kate Barr and Jeanne Bell explained in this classic article in Nonprofit Quarterly. A CEO or executive director shows her mettle during crisis. You may soon get your chance.
Interested in more? Here are some other thoughts from people we trust.
Is your nonprofit recession ready? (2018) – Smart ideas for crafting your narrative and reducing fixed costs.
Outrun the Recession (2010) – Let’s learn from what smart people said during the last recession.
How to Prepare Your Nonprofit for an Economic Recession (2008) – Another checklist from the Great Recession.
10 Strategies for Recession Fundraising (2009) – If we slide into recession, how should you build additional resources during the downturn?
Because we care about nonprofit risks, we provide blog posts like this one to help nonprofits thrive.