Special Funds & Reserves

Have Enough?

April 13, 2017 | Laurence A. Pagnoni

When the economic outlook is hard to get a handle on, fundraisers get nervous. “Do we have enough?, is often the question.  However, in fundraising there are things that change in the nonprofit sector as a result of cyclical changes in the society at large and things that do not change. Donor’s intent on achieving tax-efficiency will still look to planned gifts, for example, both in times of economic up- and downturn. Similarly, the giving patterns of individuals of high net worth are usually not affected. These individuals give not only to be charitable, but also to receive something of value in return—i.e., tax efficiency. They still need tax efficiency whether the market is up or down.

The fact is that fundraising fundamentals do not change with the rise and fall of the economy, but apply irrespective of the prevailing phase of the business cycle. This point tends to be overlooked during booms and recessions alike. That is why I am keeping a sharp lookout on my mailbox. Within a few weeks, I expect to see a leading journal of the nonprofit sector run yet another article asking, “When Money is Tight, Should We Cut Fundraising Because We Can’t Afford It?” The underlying assumption of these perennial “think pieces” is that the nonprofit’s executive office can handle the fundraising function at a tough time.

The sad irony is that fundraising fundamentals—and the specialized knowledge to put them into effect—are more pertinent when the market is in the doldrums. Invariably, those organizations that effectively ask for more money, stay in touch with donors, and produce real change for those they serve (as documented by program outcomes) attract more money.

The fundraising function of a nonprofit allows your entrepreneurial ideas to come to fruition. Without money, those ideas are just ramblings. So cutting back that function at a time when you need more stability is just not smart.

On the contrary, a better business decision would be to respond to lagging economic indicators by establishing more cash reserves. Why? Cash reserves, like a home or building, are collateral that can be borrowed against, and with interest rates so low this is a good time for nonprofits to take on “good debt” (mortgages), should a new brick-and-mortar project be required. Also, cash reserves can be used to make-up unexpected shortfalls, as long as a plan is in place for replenishing the reserves.

What are some effective fundraising strategies your nonprofit uses during uncertain economic times?  Please share in the comments below.

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