10 Tips for Adapting Your Nonprofit in Hard Times
It’s likely that you’ll come across problems in the course of managing your nonprofit organization. Everyone does. But sometimes those problems are so severe that you must change the way you do your work to address them. Here are some tips to make it through those hard times.
Recognize the need for change before it’s too late
Recognizing a sudden crisis is easy, but often the most difficult aspect of managing a nonprofit is seeing a gradual decline and the need to change.
Financial problems have clear consequences: When deficits exceed 10 percent of an operating budget, the organization will have trouble paying bills within 30 or 60 days. When the deficit exceeds 20 percent of the budget, the pressure intensifies. The inability to make payroll or timely tax payments signals severe problems.
Communicate when making hard decisions
If you’re facing an unpopular decision, it’s better to communicate clearly and move forward decisively. The longer you delay, the greater harm you may do to your organization and to those employees.
Take a break
Sometimes an appropriate first action when you recognize that your organization faces a crisis is to step back and take a breath. You might want to consider reducing the hours that a program operates or cutting back on the number of programs you offer. You may even consider suspending all your programs to give yourself time to plan your next move.
If you do take a break, keep everyone informed of your progress. Don’t stop publishing your online newsletter or quarterly status reports. It’s critical to your long-term health as a nonprofit that your supporters know you care about them.
Revisit fiscal sponsorship
If you’re facing the need to downsize — even after you’re established as a 501(c)(3) organization, a fiscal sponsor may be helpful to you. How? For a percentage of contributed revenues, some sponsors provide check-writing and payroll services, access to human resources expertise and insurance, regular financial reports, grants management, and other back-office services — freeing you of those key administrative burdens.
Collaborate with others in your field
Collaboration enables you to bring different strengths, resources, and knowledge to a task. It assumes that you can work with greater depth and understanding through a partnership. You also may save some money.
Try a temporary, modest project with your partner before launching a large-scale combination of services. Shared goals and values and shared fields of interest matter, but personal compatibility is important, as well.
Share a back office
Maybe program collaboration won’t work for your organization, but other types of collaboration may be successful. For example, why not approach another nonprofit about sharing a staff member? By hiring together, you may be able to offer a stable, full-time job with a competitive salary rather than a part-time gig. In turn, your organizations can engage more experienced and qualified employees.
Sharing things instead of people also can reduce your operating costs. Consider whether you can save money by purchasing equipment, securing office space, or combining supply orders with others.
Place a program within another agency
One question you should continually ask is how to best meet the needs of the people you serve. If your nonprofit is stretched too thin to achieve everything it’s trying to do, why not spin off a program, placing it within another reputable organization that shares your values? You may find that another organization is positioned to do a better job of managing that program.
Placing a program with another agency may enable you to focus on the services that best address your nonprofit’s mission and will likely reduce your costs.
Merge with another nonprofit
One challenging but responsible choice for your nonprofit may be to merge with another organization. Generally, in a merger, one organization dominates the other.
Mergers require thoughtful planning that involves teams of people from both nonprofits. Plan in two phases: First, thoroughly discuss your missions, goals, and program philosophies. The second phase involves choosing a name, selecting staff, consolidating boards, and arranging a new structure.
Use a facilitator to lead you through the plans and decisions, and work with an attorney to draw up your final agreements.
Close with dignity if necessary
Nonprofit organizations generally resist closure, maybe because they’re usually founded by people with a vision and a desire to serve the public. Yet, sometimes closing is the right choice.
Shutting down a nonprofit involves several stages — some of them formally defined and some of them merely good practices. Consider the following:
Take care of your employees.
Take care of your clients.
Tell your donors and professional partners.
Pay your debts or negotiate settlements of your obligations before closing.
Document your work.
Celebrate and recognize your staff, board, and volunteers.
Complete the closing paperwork
If you decide to close your nonprofit, you need to take a few formal steps. One of the first is to have a board meeting at which the board votes to dissolve the organization and records that decision in the board minutes.
Another is to take an inventory of all your assets and pass them on, sell them, or return them appropriately, honoring your donors’ intentions if some things were contributed for specific purposes. If you have assets to distribute, you must pass them on to a nonprofit with a similar mission.
You’ll likely want some technical assistance from a consultant or attorney to complete the paperwork, because you have certain state and federal requirements to meet:
State requirements: You need to file a formal intent to close with your secretary of state or state licensing department.
Federal requirements: Just as you turned to the Internal Revenue Service (IRS) to create your nonprofit, you return to the IRS to shut it down. You must file a final Form 990 tax return within four months and 15 days of your organization’s termination.