During chaotic times, it makes sense that many nonprofits are only able to focus on their immediate future. A recent survey of nonprofits found that 52% of respondents have the cash on hand to support their organization for only the next three months or less, with 18% having just one month or less.
If your nonprofit is struggling, creating long-term financial plans may seem like a luxury. However, whether your nonprofit is doing well or starting in a poor position, the first steps to sustainability are the same: assessing your strategy, researching solutions, and restructuring as necessary.
In this guide, we will provide tips for ensuring long-term sustainability across leadership teams, donor cultivation processes, and other internal operations.
1. Launch Comprehensive Campaigns
Your nonprofit likely has separate initiatives for major giving, annual campaigns, planned giving, and capital investments. Rather than approaching each of these funding efforts piecemeal, consolidate them into a comprehensive campaign.
Convergent Nonprofit Solutions defines comprehensive campaigns as “a single, structured initiative that consolidates multiple funding efforts and provides long-term financial sustainability and greater impact over time.”
How Does Combining Your Fundraising Campaigns Achieve This?
Typically, these campaigns reduce funder fatigue by streamlining fundraising appeals and leveraging multi-year pledge donations. This approach positions donors as investors in your cause, asking them to commit to long-term support, rather than having to re-request major gifts every few years.
Additionally, comprehensive campaigns also account for planned gifts, which are often larger than regular donations as they deal with assets rather than daily cash flow. Assess your major funders and identify individuals amenable to transitioning from income-based giving to asset-based planned giving. This enables you to build towards your endowment while simultaneously seeking support for immediate needs.
2. Follow a Strong Financial Model
To plan for long-term financial stability, you need to understand your current finances. Then, based on your financial position, create a model that supports growth, plans for long-term sustainability, or allows you to recover from financial setbacks.
Create a strong financial model by:
- Assessing your organization’s financial health. Audit your nonprofit’s finances to determine your liquidity, identify budgeting discrepancies, and ensure you are maintaining legal compliance. Perform routine audits moving forward, so your leadership is always well aware of your financial position.
- Identifying funding sources. Determine your current funding sources and identify possible new ones. For example, you might discover you are overly reliant on a handful of major donors. In that case, you would seek to either expand your major giving program or diversify revenue by exploring grants and corporate partnerships.
- Investing in financial planning tools and resources. If your nonprofit’s finances are particularly tangled or you feel you lack the knowledge to construct a financial plan, consider partnering with an accounting firm. Look for accountants who specialize in nonprofit financial management to work with professionals who understand the unique circumstances of mission-driven organizations.
When you understand where your nonprofit currently stands, you can begin planning for the future. This will impact numerous aspects of financial management, from setting your annual budget to presenting an accurate financial picture to grantors to completing capital campaign feasibility studies. You may also need to adjust aspects of your operations to align with your financial findings, such as by implementing more sustainable revenue streams.
As your nonprofit’s situation changes, modify your financial model along with it. For example, your nonprofit might focus on resolving financial burdens and working towards stability for the next two years. In three years, when you’re no longer in recovery and are ready to start expanding, your financial plan should reflect that.
3. Strengthen Governance and Establish Succession Plans
If you intend for your nonprofit to operate for decades, staff and leadership turnover are inevitable. To ensure your organization survives when key leaders step down, solidify your organizational structure and succession plans now.
A few ways to strengthen your internal operations include:
- Creating a succession plan. Your succession plan should include a timeline for when new leadership will be appointed, processes for recruiting and vetting new leaders, and how new leaders will be onboarded.
- Investing in leadership training. Your board of directors is tasked with ensuring financial oversight and strategic growth. Ensure they have the knowledge of your internal workings to help appoint and guide new leaders, maintaining a consistent direction long-term.
- Documenting internal processes. Prevent knowledge loss by documenting all of your nonprofit’s day-to-day processes. This encompasses everything from software troubleshooting guides to repeatable training sessions for communicating with major donors, mitigating security breaches, maintaining your books, and other vital skills.
Your nonprofit’s HR department will also be involved in any employee relations processes. Astron Solution’s guide to nonprofit HR explains the relationship between HR and your board of directors, discussing how a nonprofit’s board may:
- Establish your initial HR strategy when your nonprofit is first established
- Hire, supervise, and set compensation for major leaders, like your executive director and CEO
- Approve your HR team’s budget
- Provide oversight for various employment-related laws
- Participate in strategic planning
Essentially, HR and your board are partners, working together to chart your nonprofit’s future. Your HR team will handle day-to-day operations, while your board focuses on your long-term direction.
4. Build Infrastructure That Supports Scalability
Sustainability occurs when nonprofits have systems in place that support it. With the right infrastructure, your nonprofit can facilitate its current operations smoothly and establish a solid foundation for future growth.
A few ways you can improve your internal infrastructure include:
- Modernizing your technology. Modern nonprofits use technology to manage nearly every aspect of their operations, and outdated spreadsheets and a reliance on paper documentation limit growth potential. Invest in scalable software, update your website regularly, and ensure your technology stack integrates to facilitate smooth data flow.
- Standardizing internal practices. As your nonprofit grows, you need to make sure your processes are documented and that each person is doing things (generally) the same way.
- Investing in employee retention. Your nonprofit’s staff members are one of your greatest resources, and when you invest in their skills and well-being, you’ll develop a knowledgeable, passionate workforce. Improve employee engagement by providing professional growth opportunities, listening to feedback, and offering fair compensation.
Sustainability helps your nonprofit weather turbulent times while setting it up for long-term success. With the right financial practices, leadership, and internal processes, your nonprofit can prepare for the future.
