Mar 1, 2008 12:00 PM
Out of Reach
Management at nonprofit fitness facilities may have to reach for funds in new places as the economy slows, utility costs rise and competition over limited fundraising dollars increases.
David Kisselback, CEO of the Family YMCA of the Glens Falls Area in Glens Falls, NY, is also seeing a higher need for scholarships than a year ago. Each year, the Glens Falls Family Y uses more than $400,000 to provide more than 2,500 scholarships for the facility's programming, including fitness, to children, families, adults and seniors. To help fund the rising need for scholarships, Kisselback is looking at the Y's general operations to see where money can be saved. He's also waiting to hire new staff members.
“We're watching everything from cutting utility expenses to waiting on supplies,” Kisselback says. “Waiting on computer systems is OK, but we'll never turn anyone away for their inability to pay.”
Focused Approach
Many nonprofits are cutting costs by being more cost-effective in their fundraising, especially when it comes to special events. In the past, the Racine Family Y sponsored a golf shootout, in which 25 people shot for a hole-in-one. Although the event was creative and fun, it didn't bring in nearly enough money to cover the staff time that went into planning it, Collen says.
Instead of holding big events, many nonprofits could be more effective by simply doing a better job of supporting their annual campaigns, he says.
“Because of the competition in fundraising and the reduction of people and corporations available to help, we have to make sure that the events that we do are cost effective,” he says. “So many times these events look like they've made a lot of money, but they're so time and staff intensive that there really isn't a good payoff.”
However, not all events are strictly about bringing in funds, he says. With more than 3,000 runners, the Racine Family Y's annual Lighthouse Run brought in close to $60,000 last year, but it cost the Y nearly $55,000 in expenses to run. Despite that, Collen says it's an important event that they'll continue to do.
“It's a nice event that gets us publicity and partnerships with corporations,” he says. “It's one of those good-feeling events that are so crucial because when we go back to corporations and individuals and ask them for money during our annual support campaign, they remember that event.”
During times of economic uncertainty and increased competition, it's important for nonprofits to create their unique voice and create a connection with donors instead of just an event, Nilsen says. All nonprofits should also have a Web site with the capability for online donations and a summary of their mission, he says.
Perhaps the most prudent advice for fundraising is for nonprofits to treat their donors like their fitness facility members and keep their rate of retention high. Like members, it's easy to attract new donors, he says, but it's more cost effective to keep the ones you already have.
Through cost-effective and smart fundraising, most nonprofit fitness facilities are confident in their ability to withstand whatever challenges the economy throws at them, even if that means increasing membership prices and reorganizing staff.
“As a society, [nonprofits are] facing challenges in being able to afford to provide services that are needed to the community,” Giroir says about the future. “Whether you're a nonprofit, government or for-profit business, I believe in the American spirit and that we'll all make it through. It's going to be a challenge, though.”
Five Tips to Help Nonprofits Prepare For an Economic Downturn
- Avoid strong, silent behavior and sustained spending
“We are entering a period of financial crisis, and we can't afford to fake it until we make it,” says Clara Miller, president and CEO of the Nonprofit Finance Fund. “This heroic type of behavior does no one any good in the long run. Nonprofits need to share worries with boards and funders, and enlist their support in getting ready for a possible recession. Organizations need to try to get by on decreased revenue and programmatic spending for a year or two in light of new financial indicators before moving forward with challenging expenses.”
- Engage with board members and funders in contingency planning
“The end clients are especially important and face the greatest risk,” Miller says. “Many of the populations served by nonprofits are fragile, needy people, whose need increases in times of financial stress. The goal of surviving a recession or economic recession is not to stay afloat for the sake of staying in business but rather to make sure you're around to keep serving the public, particularly in times of increased demand for services. It's important to get board members and funders to go public with that message — that the organization's survival is important because of the clients it serves.”
- Avoid large investments in fixed assets and infrastructure
If nonprofits are already in the process of growing, they should work with funders and their board to build a cushion to allow flexibility and course corrections, Miller says. “As economist Peter Bernstein put it, ‘Risk means not having cash when you need it.’ And that is particularly true for nonprofits, which often have liquidity problems in the best of times. Liquidity becomes even more of an issue during a downturn, when there is a temptation to maintain or increase services, and hence expenses, even if revenue is declining.”
- Get a firm handle now on revenue patterns
“Organizations can examine revenue cycles to see if they're contra-economy or not,” Miller says. “In some cases, the revenues of nonprofits actually rise during a recession. If that's true, nonprofits can build growth funding to allow rapid expansion to meet needs. If the opposite is true, nonprofits can take actions in step with cushion-developing approaches.”
- Don't be afraid to approach the government
If nonprofits offer services (e.g., job retraining, food kitchens and housing services) that will lessen the negative impact of an economic downturn, nonprofits should approach government funders more aggressively, Miller says. “Nonprofits should propose revenue-neutral changes if the government can assist it with expansion during a recession or improving its practice within the context of its mission,” she says. “Nonprofits can also band together around quality-adequate pricing and consider shared-platform investigations, using already-scaled ones available.”
Source: Nonprofit Finance Fund
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