What do you do when facing sudden and significant funding loss? What happens when a major grant that you were counting on was either denied or significantly reduced? What happens when a major donor who has given five or six figure gifts annually suddenly shifts his or her area of interest? What happens when 10 to 20% or more of your revenue plan is gone?
Well, there are five things that I advise my clients to do in this situation.
1. First, you remain calm. I am not saying that you should not be disappointed. That’s natural. I am not saying that you should not be afraid or uncertain about the future. I am saying that you should not panic and become so anxious that you can’t been analytical or strategic. Leaders are needed most in crisis situations. Our decisions and actions can make or break an organization. These are the moments that we were made for. These are the times when God will call upon our unique gifts, strengths, and perspectives to lead transform obstacles into opportunities. But, you can’t hear Him speak or see Him working , if you are distracted by fear or pre-occupied by how this affects you. Be calm and be confident that all things will work together for good.
2. Next, you should redraft the budget. It is important to confidentially work with your accounting team to update your budget and cashflow projections to see the exact impact that the loss of funding will have on the remainder of your fiscal year both without the use of reserves. You need to know exactly what you are facing. After that, you create various budget options making the following three adjustments.
3. Next, restrict hiring. If you have any vacancies or planned hires for the remainder of the year, remove those salaries from the budget, unless adding them is absolutely necessary. Chances are, if you are making do without them now, you can do so until such time as replacement funds are secured. If you were planning to add staff, cancel those plans and remove those planned salaries from the budget for the remainder of the fiscal year. Restricting hiring will lessen the need to down-size later. After instituting a hiring freeze, recalibrate the budget to determine how much more you need to reduce or eliminate to balance the budget.
4. Then, reduce expenses. Next, send each leader their budget for the remainder of the year and ask them to send you a list of any line items that they predict can be reduced or eliminated. Also, ask them to complete a quick Return-on-Investment Alyssa on each program, project, or service under their purview. Basically, you want to know X things for each program, project, or class: (1) How many clients participate annually, (2) what outcomes do they achieve, (3) how much does the project/program cost annually, and (4) what % of the program/project/class is covered by a designated grant or fees for service? The ROI will give you a quick view of what programs are worthy of continued investment and which programs could be ended or suspended. Finally, request a list of staff with documented performance issues. If you have to reduce staff, you want to do so by eliminating low performing positions. From there, you should have what you need to make your second wave of reductions until you have a balanced budget or a minimum use of reserves.
5. Finally, recalibrate goals. Now, it is time to recalibrate your annual goals and your revenue strategy. First, you need to recalibrate your program goals based on the reductions you have made. It is time to create a marketing message to explain clearly and succinctly what program changes will occur and why. This message should also include revised program goals and targets and be sent to all funders requesting a modification in grant outcomes if applicable. After this is done, I recommend an adjustment in your revenue strategy which should include an increase in all remaining grant requests, securing a matching donor to create enthusiasm for any future campaigns, and meetings with major donors to both re-assure them of the organization’s future and request gap funding to ensure that critical services can continue.
These five steps can help you to overcome sudden and significant funding loss while minimizing the financial impact and the use of reserves.
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