How Non-Profits Can Prepare for Economic Challenges

In 2023, nearly 50% of surveyed nonprofits identified rising expenses as their most significant operating challenge, followed closely by insufficient staffing.¹ While these are two significant issues for charities in almost any economic environment, they are exacerbated by changes in the economy such as inflation or recession, highlighting the importance of proactively developing a robust long-term financial plan.

Being prepared with a solid financial strategy can help mitigate the impacts of rising costs, workforce reductions, and fluctuations in donor support. Effective steps may include diversifying income sources, cultivating and educating donors, leveraging technology, and forming partnerships with other nonprofits. 

To help identify the right steps for your organization when facing challenging times, here’s a look at five ways the economy may affect operations. 

Understanding the effects  

1. Increased prices. If you’re running a foundation or endowment, you understand that nonprofits can’t react to rising prices during inflation like businesses can, like raising prices or getting a bank loan. One result may be having to decide which services the organization can and can’t afford to provide, which is difficult to navigate when more people may be turning to your organization for help with basic needs. 
2. Staffing issues. When the economy affects the labor market or you need to cut costs by letting staff go, creative solutions can help. You might partner with other nonprofits to share staff or use technology to automate tasks and boost digital marketing. Encourage volunteers to give more time and resources or recruit new ones. Keep them engaged with regular communication and requests. 
3. Decreased income. State and local governments could cut back on grants and contracts you rely on for operational expenses. In addition, donors — including store customers — may be contributing less. It might not be necessary to discontinue previously successful fundraising events and campaigns; rather, it may make sense to scale them down. Also, consider diversifying and broadening fundraising capabilities, such as through legacy gifting and other charitable giving vehicles. 
4. Inflation misunderstandings. Donors have historically decreased the size of their individual and institutional gifts when there is a substantial rise in inflation, without realizing that their donation also has less value and purchasing power. In mid-2022 when inflation was at 9.1%, $100,000² had about $90,900 buying power. It may be necessary to educate donors about why raising their donation amounts is crucial for your organization.  
5. Reputational risk. It could take only one aggrieved donor or charity recipient to cause reputational damage to your foundation or endowment. It’s important to communicate with the community and be transparent about program or service cuts to help avoid misunderstandings. 

Making a plan 

Taking steps to create a comprehensive plan can help with developing more opportunities for your nonprofit to sustain economic impacts. However, the time and knowledge required to employ strategies may be overwhelming, especially if yours is a smaller nonprofit. That’s when it can be beneficial to collaborate with an experienced wealth manager. 

These are some of the ways a financial partner focused on nonprofit planning can help: 

• Creating a long-term financial strategy 
• Setting up advanced giving vehicles 
• Protecting and nurturing relationships with donors, volunteers, and other nonprofits 
• Educating supporters on giving and fundraising opportunities 
• Counseling board members and executives 

Getting help 

At Mercer Advisors, we have a team of advisors and specialists who have spent decades working with foundations and endowments as well as serving on nonprofit boards in their own communities. 

We can: 

• Partner with you to create a long-term financial planning strategy that encompasses your organization’s cash flow, staffing costs, grantmaking cycle, mission, investing, and other core factors. 
• Provide estate strategists and family wealth advisors who can work directly with your nonprofit and its wealthiest donors to set up advanced giving vehicles such as a charitable remainder unitrust.  
• Serve as a resource to help educate your supporters about charitable giving opportunities through webinars, in-person events, social media, and other channels. 
• Work directly with your board members and executives to develop best practices in governance and fulfill their fiduciary responsibilities, such as complying with the Uniform Management of Institutional Funds Act (UMIFA). 

Learn more about our Endowment and Foundation Group here. When you’re ready to receive guidance on how to improve your ability to face the economy’s impact on your organization, let’s talk. 

1.  “Biggest challenges for nonprofit organizations in the United States in 2023,” Statista, Aug. 20, 2024. 
2. “Historical Inflation Rates: 1914-2024,” CoinNews Media Group, 2024.