Is it time to cut back? Some collected wisdom
The end of the calendar year is here, and for some, it is also the end of the fiscal year. The annual appeal letters have been out for several weeks (I sure hope so!), and each day the arrival of the mail brings checks—some large, some smaller than you expected, and some checks, sadly, don’t show up at all.
It is tough out there. Main Street organizations are facing unanticipated cutbacks from some of their most reliable funding sources—local governments, sponsors, utilities, even some long time donors. Many Main Street organizations are only starting to get hit now in the pocketbook, while other sectors of the economy have suffered for more than two years.
I believe the commercial revitalization sector is hurting now because local government property tax collections lag a year behind. This year’s tax receipts are probably lower due to foreclosures, diminishing value of real estate in general and homeowners who have challenged any increase in their property tax assessments. Some state governments have been hurting for years; others seem to have weathered the storm. Again, most states are dependent on sales tax and business tax receipts as their main revenue sources. Even as key industries begin to recover, it will take another year before the bottom falls out at the state level.
If government is more than a third of your revenue, begin working now to come up with alternate revenue sources to plug that gap. If you have not felt it already, it is probably on its way in the coming fiscal year.
What to do
I went looking these past few days for some advice to nonprofits struggling with financial reverses, with the hope that there might be pieces of wisdom for revitalization organizations as they face down the end of a difficult year.
Most of these advice sheets are geared for general non profits or arts groups. Read them all or read one or two to get the general gist of the advice. While all focus on the tried and true methods of “cut expenses and raise revenue,” some provide measured advice that fits a community based organization that is not saddled with real estate or collections that must be maintained for the public trust.
Some of the cuts mentioned here would be extremely painful, or would ultimately lead the organization to fold and liquidate its assets. Other cuts such as looking for cheaper insurance, cutting travel costs, or exploring shared services with other nonprofits might be easy to embrace.
Regardless whether your organization has staff or not, look at these suggestions with your board and select a handful to explore further. Perhaps pick three ideas from these lists for each of the following categories: Easy/no brainer; Minimal external impact; and finally Painful, but worth doing.
Here are my three favorites in each of these three categories for small to medium downtown revitalization organizations with small staffs and owning no real estate assets.
INCOME –Follow up on all receivables and call each vendor to seek speedy payment. Consider changing your invoices to Net 10 and offer a 1% discount if vendors pay within ten days.
INCOME—Add a 50/50 raffle to any upcoming event (get the appropriate license if necessary).
INCOME–Review your membership/annual appeal levels, and increase some giving levels ASAP if you have not already sent out your annual appeal letters.
EXPENSE—Review all of your insurance payments (general liability, officers and directors, health insurance), and shop around for insurance around or bid your policies out.
EXPENSE—Review all office equipment; sell surplus office equipment–anything that still works– on EBay and Craig’s List; look through the rest of the office and clean up, toss, or offer any surplus supplies to another nonprofit, perhaps in the form of barter.
EXPENSE—Buy no more office supplies for the next three months; switch to on line bill pay, consider if you can get along without your land line phone, and just use a cell phone number; cut your paper newsletter to four pages, and mail only twice a year and use email newsletter instead.
Minimal external impact
INCOME—Hand write thank you letters to every donor over $100 for no reason, just to say thank you. Make phone calls to anyone who has donated over $50 to the organization in the last year; leave a message on their answering machine to thank them. Send an email to every member with lots of photos of a recent event and tell them how their membership makes these events possible. Focus on memories that your organization creates for anyone who visits downtown, especially during the holidays. While these suggestions won’t add revenue, they do position the organization to ask these donors within the next six weeks for additional support.
INCOME—Clean up and rearrange your office, and rent out a portion of your office to a similarly minded sub tenant (if your lease permits such).
INCOME—Determine if your organization is eligible to participate in your area’s United Way, and if so, widely distribute your agency’s number to members and volunteers, via newsletter and social media tools.
EXPENSE—Undertake a Board review of current work plan and budget, and develop scenarios with 5%, 10% and 20% cuts in expenses. Implement the 5% cut in expenses immediately, and monitor monthly if additional cuts are necessary.
EXPENSE—If you are audited, bid out your audit or shop around for a better rate.
EXPENSE—Cancel all but necessary memberships/subscriptions and travel. No more board packets– send everything electronically.
Painful, but worth considering
INCOME—Make a phone call or visit every donor who gives $100.00 or above, to ask for an additional emergency gift right now to support programming NOT staff or keep the doors open. Donors will be more likely to respond positively if you sell them the benefits of their donation.
INCOME– Review your work plan, and insist that every work plan item break even or make money. Cut every event that does not generate a profit for the organization. Reallocate your volunteers to those events that make money and revisit each work plan item to maximize revenue.
INCOME—Cut your lowest membership rate by half, and undertake a sustained effort for at least six weeks to increase the number of new member/partners/friends/donors. Offer to prorate any higher level donor who seeks to renew early.
EXPENSE—Negotiate with your landlord to find a subtenant for your space. Ask a board member to provide free office space, have the board and volunteers help you pack and move to the new space.
EXPENSE—Cut back everyone’s hours to four days a week for three months, and reassess whether this should continue at that point.
EXPENSE—Review various fees such as web hosting, bank fees, payroll and credit card charges for savings.
The moral of the story
Every downtown organization will have to make tough choices if their continued existence is at stake because of a fall off in donations. Let me know what you think of these articles and if you are using any of these ideas.
Coping with financial downturns, an annotated bibliography
Friedman, Alan J. “Tactics for Leading through a Financial Crisis.” http://www.noycefdn.org/documents/AlanFriedman–LeadingthroughaFinancialCrisis.pdf- From a nonprofit manager, offers positive and negative comments about each of his picks.
Fieldstone Alliance. “185 Cutback Strategies.” http://www.fieldstonealliance.org/client/articles/cutback_stragtegies.cfm This is an excerpt from their book Coping with Cutbacks: the Nonprofit Guide to Success When Times Are Tight. This is a great place to start. It gives the biggest number strategies, but not much detail about what each strategy might be able to accomplish. The broad range of choices are compelling.
Fieldstone Alliance. “20 Cost Cutting tools for nonprofits.” http://www.fieldstonealliance.org/client/tools_you_can_use/01-22-09_cost_cutting_ideas.cfm. A great article if you are facing serious threats NOW, and must take action, rather than sit around and only think about making cuts NOW.
Fieldstone Alliance. “20 Emergency Funding Sources for Nonprofits. http://www.fieldstonealliance.org/client/tools_you_can_use/12-16-08_emergency_funding.cfm. A great chart, short and to the point.
Network for Good. “The 2008 Online Fundraising Survival Guide: 12 Winning Strategies to Survive & Thrive in a Down Economy.” www.fundraising123.org/article/online-fundraising-handbook. This is just about on line fundraising and your web site, but is a good overall primer for those interested in maximizing your on line presence.
The Pennsylvania Council on the Arts (PCA) “Strategies for Survival Checklist” from The www.pacouncilonthearts.org/docs_upload/SFSchecklist.pdf A good overview.
Hope you found this round up useful. Please add your comments and ideas.