The Double-Edged Sword: Reduced Giving in Today's Economy

The squeeze upon the non-profit world placed by a tight economy is a double-edged sword; charitable support becomes more critical than ever, while at the same time, much more competitive to obtain.  While non-profit income is on the decline, demand is on the rise.  Non-profits are forced to work with fewer volunteers and navigate through budgets cuts in order to sustain.

Complicating things are pivotal changes we have witnessed affecting non-profits that, combined with the challenging economic environment, present obstacles to growth:

  • The economy has heightened concern for donors as to the viability of their charitable giving.  This invariably translates into greater scrutiny surrounding where and how their dollars are spent.
  • What the average donor wants from the charitable causes they support has changed; fundraising appeals that once garnered substantial support are no longer working with the same effectiveness.
  • Donors that at one time were keenly interested in supporting a cause are now looking much closer at the reported results instead.  New measures being used to compare mission-related effectiveness between non-profits only add to the competitive nature of attracting donors.
  • Donors have become more selective as well as exclusive with where their support is given.  Donors that may have once supported multiple causes have switched to more focused giving strategies, often narrowing their giving to one organization – typically, one that demonstrate strong results.
  • Donors that were once motivated by a good story, are now demanding to see data to support those stories.

Given the increasing challenge in today’s charitable community, how do non-profits create fiscal fortitude, empowering their donors to keep coming back?  Here are a few ways in which charitable organizations can strengthen their financial fortresses to help sustain them during these challenging times:

Expand Giving Opportunities

It is easy to accept donor dollars, but … what about donated stock?  Donors that hold valuable stock positions may be unwilling to liquidate those themselves due to capital gains consequences, but would be more than happy to transfer the stock directly to their chosen charitable causes.

Another way to broaden the scope of opportunity for donors to support you is to open avenues of alternative giving, such as real estate, artwork, collectibles, and even automobiles.  Real estate offers donors a way to give with benefits that a cash donation does not have – such as deferring capital gains tax and eliminating any carrying expenses.  Just be sure to have a plan on how to handle and dispense these types of non-cash donations to ensure profitability for your organization versus a liability instead.

Understand The Numbers

Non-profit organizations benefit understanding their own revenue patterns and factors that influence them.  Surprising as it may seem, some niches of the non-profit world experience rising revenues during recessionary periods.  If your non-profit is in one of those niches, this is the time to focus on growing your charitable income sources.  If the opposite is true, however, all is not lost – there is simply a greater need to put into place the necessary contingencies that will lessen the negative effects of a weakening revenue stream.

Control Spending

Non-profit organizations across the spectrum are faced with having to trim programmatic spending.  Having a good strategy in place identifying critical – as well as not-so-critical – areas of spending is a useful tool during these times.  Contingency plans can be formulated and kept on the back burner, should tough times become even tougher.  Proactive approaches will not only create added cushion, they will afford peace of mind as well in the process.

As economist Peter Bernstein put it, ‘Risk means not having cash when you need it.’  This is particularly true for non-profits, who often have liquidity problems even during the best of times.

Engage Your Board

One of the strongest criticisms of board members for non-profits is the frustration of feeling underutilized.  Sharing financial concerns with members of your Board is not a weakness – it is much more courageous to ask for help, and what better resource than the members sitting around the table who share the passion for your cause.  People want to help – so, let them!

Need more board members?  Consider adding hierarchies to your board’s organizational structure.  Funding organizations are often inclined to support a non-profit where one of their own executives serves as an emeritus board member.  These honorary members need not have voting rights – they do not necessarily even need to attend meetings!  What this opportunity affords your organization is the ability to attract support from new sources – and best of all, support that is sustainable for the longer term.

Spread The Word

The “clients” of most non-profits represent the segment of our society that need help the most – and equally so, those who have the greatest struggle to sustain when the going gets tough.  During any economic recession, while there is temptation to stretch the means to serve those clients, the importance of staying in business is paramount to continuing to serve those populations for years to come, in good times and in bad.  This is a time when increasing awareness and adding to your constituency can be an invaluable life raft to your organization.  This is prime time to brush up on your elevator speech; people are much more apt to get involved when they clearly understand the need, and it is up to every organization’s board members to sound the trumpets to all who will listen.

Beacon Pointe Advisors values the important work that non-profit organizations do, and the lifeblood they represent to their communities.  We work with each of our non-profit clients to establish their strategies, formulate spending plans and contingencies, and provide specialized reporting, imparting valuable information to your donors to imbue their continued confidence and philanthropic support.  Our mission is to support your mission; if you are interested in learning more about the ways in which we work with our non-profit clients to ensure their ongoing success, contact one of our advisors today.

Important Disclosure: This content is for informational purposes only. Opinions expressed herein are subject to change without notice. Beacon Pointe has exercised all reasonable professional care in preparing this information. Some information may have been obtained from third-party sources we believe to be reliable; however, Beacon Pointe has not independently verified, or attested to, the accuracy or authenticity of the information. Nothing contained herein should be construed or relied upon as investment, legal or tax advice. Only private legal counsel may recommend the application of this general information to any particular situation or prepare an instrument chosen to implement the design discussed herein. An investor should consult with their financial professional before making any investment decisions.

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