The grim forecast of Michael Clark, executive director of the Nonprofit Coordinating Committee of New York, echoes the alarm of many a news headline over the last few weeks, predicting lean times in the wake of the financial meltdown. But to some experienced hands, the rickety condition of the financial services system – and slimmer municipal budgets – don't have to mean a death sentence for nonprofit organizations.
That's a good thing, because even as both public and private funding for nonprofits is drying up, leaders in the sector recognize that a weaker economy leads to increased demand for social services. The problem is magnified in New York, where nonprofits have received much support from the charitable arms of now-failing Wall Street institutions. Recent cuts to city and state budgets further threaten the future of the many organizations serving the city's neediest. The New York Nonprofit Press counts at least 3,200 human services nonprofits in the five boroughs, part of a $12 billion industry in the metro region.
“There is a grave concern ... that people won’t be able to get the aid that they need,” said Allison Sesso, deputy director of the Human Services Council, a local umbrella organization for nonprofit human services providers. “Many nonprofits may be forced to close their doors, and people knocking on them will be turned away.”
Despite the possibility that a strained economy could disrupt or even end the operations of groups that provide vital services, the situation is not hopeless. And nonprofits don't have to let the outside climate solely determine their fates – at least not according to several nonprofit business consultants familiar with the New York City scene. In fact, they say, nonprofits can take steps to weather the economic storm. Following are several of the most commonly mentioned tactics:
• Think – and act – like a competitive business
According to Clark, who served as president of the Citizens Committee for New York City for 19 years prior to joining NPCC, “the ones that survive” will be the ones that pay attention to business operations in addition to providing services. Business smarts can mean the difference between carrying on and closing up shop. In better times, service organization leaders may have dismissed such a perspective, but less so in today’s more competitive nonprofit world. A drought of outside funding due to a plummeting market will only energize this approach.
“Revenues should exceed the cost of operations,” Clark says. “A lot of nonprofits don’t plan on making a surplus, yet in these times, if they want to survive, they need to have reserve funds."
According to Randall Quan, managing director at Community Resource Exchange, a nonprofit consulting firm, nonprofits are going to feel the brunt of the economic downturn, but they have a number of ways to insulate themselves. “The most resilient nonprofits will have a range of strategies in their toolbox that includes business tactics,” Quan said.
• Brainstorm new ways of generating income
Most nonprofits rely on outside funding in order to meet their mission goals, but increasing numbers are pursuing capital ventures as a means of sustainability. They are updating the way they think of finances and the methods they use to get support.
As an AIDS advocacy organization that operates popular thrift stores, a bookstore and a catering business in order to support its core mission, Housing Works is a model of social enterprise. Bookstore executive director Susie Lupert is likely to point out the quality of her shop's products before even mentioning that it provides housing assistance to AIDS patients.
