Closing Nonprofits

I think everyone likes to be right most of the time.  It’s a normal human nature issue/reaction.  But in this case, based on a prediction I had for the 2021 calendar year, I wish I was wrong.

In my podcast in December 2020, predicting some of the possible philanthropic occurrences of 2021, I indicated that I believe that nonprofits in certain segments of the nonprofit world would struggle.  In some ways, I restricted it to small colleges at the time, but it’s turning out that the pandemic is causing greater issues.  So much so, I repeated the prediction for 2022.

In a recent article in the Minneapolis Star Tribune, the authors highlight several nonprofits in the Twin Cities area that are having to close. Part of the reason is a lack of funding, changes from the pandemic.  Part of it is because of workforce issues, an increase in pay, and fewer candidates to take frontline jobs.  Maybe some will say it could be the result of poor planning on the part of the boards and leadership.  No matter the reason, when nonprofits close, people and issues aren’t being served.

I don’t think this will be the first article or announcement of the closing of nonprofits.  I think it’s going to become more difficult for many smaller, service-oriented charities to exist.  If economic conditions, in particular interest rates, continue to cause economic challenges, people will give less.  Philanthropy is based on discretionary income.  When there’s less discretionary income, there’s less philanthropy.

It’s important now to think about creative alternative plans.  Cash reserves.  Reducing expenses while trying to keep services in place.  A backup plan. A backup plan to the backup plan.  It does not mean it needs to be executed right now, but the better nonprofits are prepared for the unexpected, the more likely they are to survive future challenges.