February 2025
Preparing for a Likely Recession
No, I’m not an economist (although I do have a B.S. in Economics).
A lot of smart people – including economists — thought there’d be a recession 2 years go and there wasn’t.
And the same thing the year before that. And a few years before that.
You get the gist. In any given year, somebody is predicting a recession.
Of course, this year, between the federal chaos/layoffs, tariffs, and general economic uncertainty created by businesses unwilling to invest under a unpredictable regime, it’s hard not to believe that the long overdue recession will finally come.
It doesn’t mean the end of your nonprofit. Indeed, you may actually thrive during the recession.
I managed the Oregon League of Conservation Voters through the 2001-2002 recession and the first half of the 2008-2010 “great” recession.
Having managed a nonprofit through these, what do I wish I’d done differently in the 6 months prior to them?
Here are six ideas of what to do and one of what not to do. Some of these lessons are directly based on my experience at OLCV and others are based on my knowledge as a consultant.
- Pay attention to your cash reserve. If you haven’t already, have a conversation with your board up-front about what level they are willing to let that reserve drop to during a recession. It’s okay – indeed, it’s appropriate — to have an annual loss during a recession if you began the year with a large enough reserve. Have this conversation openly with your board rather than making decisions on the fly
- Be open with staff about your financial situation. Are you in a really solid position? Or somewhat precarious? At OLCV, I wasn’t always open with my staff about how tight our finances were leading up to the 2001-2002 recession. When a difficult decision was made by the Board Executive Committee (with my support), to freeze all staff salaries (e.g. no pay raises during the year, even COLAs), there was some staff frustration. If I’d done more in the year prior to educate staff about how thin our reserve was, I would’ve saved heartache later on.
- Think about delaying “icing” expenditures. Some of what you do is the cake. It’s what you absolutely need to do to advance your mission. Other things are nice, but if you don’t do them, nobody’s going to look at your nonprofit and say: you’re failing. Take a hard pass through your budget/expenditures and ask: what can easily be deferred 6-12 months until we know more about our financial situation? Ask staff their opinion about what to defer (or just cut).
- Don’t stop fundraising! If anything, step it up. Some people might say: “our donors are probably freaked out, so now’s not the time to ask.” Don’t make that decision for them! You never know their situation. I once had a donor who I knew had been laid off make his largest ever gift to us. (I learned later it was because he’d received an inheritance). Even in bad recessions, plenty of people have jobs/situations that leave them doing well financially. They are sometimes even happier to donate recognizing the need and their relative good fortune.
- In your fundraising, focus more of your energy on cultivating existing donors to deepen your relationships than adding first-time donors. When individuals cut back their giving during a recession, they tend to stick with organizations they already support versus those that are new.
- Also in your fundraising: focus on your relationship with your top donors. In most organization, there are 10-15 donors who make huge difference. Be proactive in the next few months cultivating your relationships with them. Let me know what you’re doing, how your reacting to the new lay of the land, and how their donations are making a difference.
- Lastly, a lesson of what to avoid: don’t choose a recession as the time to launch a business-focused fundraising effort. Corporate fundraising yo-yos much further down during a recession historically, compared to individual giving or foundation philanthropy. If you’ve laid the groundwork or you’re targeting businesses that are somewhat recession-proof, this might not apply to you. But think hard about making a new, business-focused campaign an important part of our 2025-2026 strategy.
Do you have lessons of your own to share? Please leave them as a comment!