Nonprofits, both nationally and locally, are continuously asked to do more with less. However, in 2025, we can expect a sharp rise in that expectation. Here’s why and what you can do about it now to avert a crisis at your nonprofit and a reduction in support for people you serve who are already vulnerable.
I initially referred to this situation as the Nonprofit Fiscal Challenge; however, two respected community leaders, in separate conversations on the same day, pointed out that it is not merely a challenge but a crisis—a fiscal cliff. So, what does this crisis entail? Essentially, demands for nonprofits’ programs and services — especially those providing food and shelter — are increasing without a corresponding rise in financial resources, including the final end of COVID-related stimulus.
What does the future hold? Corporate philanthropy is expected to remain flat or decrease; even as interest rates may decline, the relatively high cost of capital, combined with a slowing economy, suggests that corporate direct giving will likely diminish through 2025. However, we may see an increase in employee volunteerism and cash contributions, which typically account for around 5 percent of annual budgets.
Most fundraising experts predict a slight uptick in overall individual giving, primarily through a few large donations, while support from many foundations is expected to remain flat or slightly increase, according to a 2023 report from Giving USA. A federal bailout seems unlikely given the $35 trillion federal debt (129 percent of the GDP), high interest rates, political divisiveness and DOGE — the Department of Government Efficiency. Consequently, this crisis is likely to worsen by 2025, coinciding with the depletion of stimulus funds and potential federal budget cuts.
Alongside decreasing funding, nonprofits are experiencing a rising demand for services, particularly those the stimulus funds intended to support. Food banks and homeless prevention service providers are among the hardest hit, with organizations like Atlanta Community Food Bank (ACFB) and St. Vincent de Paul Georgia (SVDP) reporting a 50 percent increase in demand over the past 18 months.
According to Kyle Waide, CEO of the ACFB, the number of individuals visiting food pantries has surged by 66 percent in the last two years, escalating from an average of just under 150,000 households per month to nearly 250,000.
Mike Mies, CEO of SVDP, stated: “We served more than 150,000 people state-wide in 2002, but this year we will serve more than 220,000. Those are neighbors supported with food, housing assistance, direct financial aid, and free prescription medications. The need is so great we are only able to provide direct financial assistance to 50 to 60 percent of those calling our helpline.”
For those working in nonprofits or government entities, how can you navigate this approaching cliff? The answer is straightforward. Change your direction and avoid driving over the cliff. Initially, focus on short-term strategies that can help mitigate the impact. Even if the ending of stimulus funds does not financially challenge your nonprofit, your impact can be enhanced by implementing these strategies.
Activate your board
Start with a board-giving campaign with 100 percent participation. Better engage the Board in fundraising, initially starting with them being engaged in relationship building before asking them to seek support from their network — get them first used to advocating for the great works of your nonprofit. Remember that everyone can contribute, even those who are uncomfortable or unwilling to solicit gifts. Board involvement in fundraising begins at board recruitment, ensuring fundraising is in the board job description and working with each board member to establish an appropriate revenue goal.
Remember that board members need support, including fundraising training and tools like print materials, short videos, and talking points about the organization and its impact. With these tools, leverage board member’s networks by having them educate their network on the impact of your organization and then have staff make ‘the ask’ for funding. Remember that fundraising is all about building relationships and compellingly telling your agency’s story and its impact on those it serves; it is not high-pressure sales.
Invest more in fundraising
It seems strange to advise a nonprofit with funding challenges to invest more in fundraising, growth, and long-term sustainability — view it as an investment and not just an expense. Seek funding from a current donor, a community foundation or another source to invest in this fundraising. Allocate a percentage or more of the Executive Director’s time to fundraising. Put it in the ED job description and performance goals and track outcomes. Hire a part-time fundraiser or a fundraising consultant. We have found that this fiscal cliff has led to increased costs and salaries for experienced development staff, as so many small and mid-sized nonprofits cannot afford an experienced and proven development director. Keep in mind, 70 percent of nonprofit funding is from individuals, so ensure you implement individual giving campaigns.
Partner or compete — stick to your niche
In our observation, many nonprofits, driven by stimulus funding and a desire to meet all the needs of those they serve, have expanded beyond their core mission, programs, and services—often straying from their primary strengths and competencies. Spend time evaluating your competitive advantage or niche — what you uniquely do or what you do more effectively than other similar agencies. This is what funders and the community would perceive as “competitors.” This deep self-assessment might require strategically paring back your programs and services to what you do uniquely best. With this clarity and focus on your competitive advantage — be bold and promote and own these strengths.
While we all want to help others succeed and thrive, one nonprofit agency cannot effectively address every issue, barrier and challenge faced by those you serve, so partner with others to meet these needs and stay focused on your core programs and services.
Prove your outcomes
Spend time to clarify your logic model that links your resources to outcomes, not just outputs, then focus on an effective way to track those outcomes. An imperfect evaluation is better than none at all, especially if you are small and/or not used to tracking outcomes. It can be costly, but consider using a third-party consultant or explore working with a local university business or public policy school. Thinking long-term, use the evaluation to not just track and report outcomes but also to improve your nonprofit and the program and services you provide.
These are the short-term strategies, and we understand the need to focus on the short-term during these challenging times; however, nonprofits, funders, government officials and community leaders must consider long-term strategies: strategic partnerships — including mergers, scaling innovation for better impact, engage the business community and enhance government productivity.
This will not be easy, but it is doable. First, change direction now and avoid going over the cliff.
