The convergence of intense health, economic, and social justice issues has materially affected our communities and most vulnerable populations. Nonprofit organizations are on the frontlines responding to this crisis by providing communities with programming, services, and support even as they as businesses navigate changing business models and priorities. To gain a broader picture of how nonprofit organizations are surviving and thriving during this crisis, we surveyed our nonprofit clientele. Questions were asked about revenues, expenses, programming, grantmaking, partnerships, and innovation. The survey respondents[1] included a diverse set of nonprofit organizations that Syntrinsic is fortunate to serve. These organizations provide grants, programming, and services across many sectors — from economic development to media, human services to education, early childhood to senior care and much in between.
The survey revealed that even in the face of declining revenues, altered fundraising, and increased need, the nonprofit organizations in communities across the country are transforming business models, fostering collaborative partnerships and cultures, and creating innovative financing structures to effectively support those in need.
Business Model Shifts
Many public charities derive a large portion of their revenues from special events, which can include fundraisers, conferences, and mission related programming. The inability to host large scale events has weighed heavily on the nonprofit sector. We have seen some pivot to create smaller, virtual events with varying levels of success. For most, it is too early to tell how they will replace the revenue (i.e. smaller events, new business lines, etc.).
On the plus side, many organizations have been able to obtain monies through the Paycheck Protection Program (PPP), which provided the income needed to retain personnel at current salary levels as they evaluate transitioning business models. In addition, about 50% of the organizations that responded have seen a decline in expenses (i.e. event costs, travel, supplies, etc.), which has helped to offset some of the declining revenue.
Over 40% of the respondents that make grants have chosen to increase their grantmaking even as investment returns and fundraising has declined. Organizations have also made it easier for their grantees by lifting restrictions, reducing reporting requirements, providing more operating support, and shortening decision-making timelines. Many also have shifted priorities to focus on the extreme needs that have been amplified because of the crisis; the most extreme of these needs are funding and childcare challenges (see chart below) as well as food insecurity. Most anticipate that these changes to their grantmaking will last several years, with some exploring more permanent innovative models of participatory grantmaking to help shift the power to the grantees and the communities.
Opportunities and Challenges
In addition to pivoting business models to be more responsive, the respondents highlighted “economic uncertainty,” “meeting client’s needs,” “keeping up connections to community,” and “donor compassion fatigue” as significant challenges that will require some continued navigation.
However, amidst, all these challenges, the perseverance, resilience, and innovation we have seen has been outstanding. Over 38% of the respondents have formed partnerships with other funders to provide funding and services, and 15% are working on innovative financing structures to provide alternative sources of liquidity to those in need. In Colorado, granting organizations and the City of Denver and the State of Colorado have teamed up to create a rapid relief grant funding program for nonprofit organizations focused on basic needs as well as loan funds for small businesses. Across the country, community foundations, private foundations, and other philanthropic individuals have joined forces to create grant funding for specific issue areas such as racial and gender equity, arts, faith, and health. As one respondent stated, “the biggest opportunities are for renewed commitments to partnerships with other organizations through the crisis that will be beneficial to us in the future.”
Our respondents also mentioned using program related investments or programmatic investments (i.e., where social and/or environmental needs may outweigh the consideration for financial return) as another tool to support the community. These investments took the form of pooled loan funds for nonprofit organizations and small businesses, loan guarantees for nonprofits, and loan extensions. Most of these investments were collaborative efforts with other grantmaking organizations to scale the impact. These investments provided nonprofit organizations and businesses with the financial resources to keep personnel, expand capacity, and/or restructure services to meet the needs of their communities and customers.
For several organizations the most meaningful opportunities emerging from the crisis have been the “opportunity for more meaningful connections” and the “technology efficiency” gains that have emerged.
Several weeks ago, Syntrinsic’s CEO published a piece on “How Nonprofit Organizations Can Survive and Thrive in Times of Crisis”, reflecting on his 20 years guiding institutions through the investment markets. Ben reflected on the need to demand competent leadership, use capital wisely, and create a people-centric culture in order to thrive. This survey has shown that our respondents are doing just that to not only survive but thrive. We applaud our clients’ perseverance, willingness to innovate, and ability to reimagine their businesses in order to empower our communities.
[1]The survey respondents consisted of 30 nonprofit organizations which include public charities and private foundations.