Weathering a Financial Storm

Tuesday, September 23, at 12 noon, U.S. Eastern time

Dan Cardinali is the president of Communities in Schools, a Washington charity that works to prevent students nationally from dropping out of school. The organization has faced the loss of some significant regular donors as a result of the recent economic downturn, but it has used some creative fund raising strategies to attract new donors and remain on budget.

Rick Dunham is a fund-raising consultant with Dunham and Company in Addison, Tex. Mr. Dunham specializes in fund raising for Christian charities and he has also worked with organizations such as the University of Southern California in Los Angeles and Children's Medical Center in Dallas.

Clara Miller is president and chief executive officer of the Nonprofit Finance Fund in New York, which provides financial resources for nonprofit groups.

A transcript of the chat follows.

Peter Panepento (Moderator):
    Welcome to today's live discussion, which focuses on an extremely timely and important issue for charities nationally -- the economy. Most of you, I'm sure, are quite concerned about how the headlines coming out of Wall Street during the past week will affect your organizations. To help you weather this storm, we've invited three experts to take your questions during the next hour. They can answer your questions on issues such as management and fund raising -- and I hope you will be able to get some useful tips and strategies that will help you guide your organization through the coming weeks and months.

Peter Panepento (Moderator):
    To ask a question, please click on the "ask a question" link on this page and type in your query.

Peter Panepento (Moderator):
    I also invite you to share your own experiences and tips along the way. If you think you can add to what our experts say in response to a question, please do not be shy about offering your opinion. You can type in a comment using the same "ask a question" tool and I'll make sure it gets added to the discussion.

Peter Panepento (Moderator):
    Ok. Let's get started ...

Question from Cheryl, small arts nonprofit in southern California:
    Our organization has been working hard over the past year to revive, energize, and expand our small group of donors during what has become an operational funding crisis. (We're struggling to pay rent on our small space, utilities, salaries of 1.5 FTEs, etc. Nothing fancy.)

Our situation is already challenging. Now what? How can we be the strong, sure voice of hope for our mission of inspiring creativity, making our case for support (and keeping our doors open) in the face of so much suffering and fear?

Clara Miller:
    The good news is that you're small and have been in close touch with your donors. While being small can feel fragile, it also means having some flexibility. Can you accomplish your mission more "virtually," i.e., without a physical space you rent and pay utilities on? Can you inspire and organize via events, meetups and productions that you develop telephonically and on line, even when a performance or show is in a physical space? The leadership moment is to gather donors, board and other supporters and ask for help in solving this problem and preserving that wonderful creative spirit. Remember, when Winston Churchill was asked during the blitz whether the symphony and ballet should close down, he replied, "isn't that what we're fighting for?"

Question from Kate Lee, small nonprofit:
    Do you see any differentiation by segment-served in how the case for donation should be stated? ie, is there a nuance between how you would ask for monies for nonprofit that provides social services vs. one that supports teachers with arts-education-training?

Rick Dunham:
    This is actually a bit more of a complex question that what appears on the surface. The way in which you ask should be driven by both the cause and the audience. The case should be first be driven by the impact the organization is making, i.e., the outcome in people's lives. I often say, donors don't care about the organization, but how the organization is making a difference in people's lives. So yes, there needs to be a differentiation based on the type of end-game the charity is driving in the life of the community or people. Secondly, if that differentiation is driven by level of donor. Major donors are much more likely to give to vision and potential impact, whereas donors giving at smaller levels are more motivated by the direct and current impact.

Peter Panepento (Moderator):
    We have received a couple of questions about how to listen to today's discussion. For those who are new to this service, this is a text-based discussion. The page will refresh every minute with the latest questions and answers. Thanks.

Question from Nicole, Rural Healthcare Facility:
    How do I convince donors, from a small rural community, to donate to our Hospital in such bad economic times?

Dan Cardinali:
    I would take the approach that a strong hospital is critical to a strong community. Present the idea of a a hierarchy of needs, health is a non negotiable. It must be in place and strong before other kinds of programming can be effective.

Question from Nancy C, Self-Employed Consultant:
    We're right in the middle of things here in NYC, and are feeling a bit "can't see the forest for the trees". I've been through 3 economic downturns and 9/11 during my career, but somehow this new scenario, with giant government bailouts, seems completely unknowable. What do I tell those clients who are in the midst of a capital campaign?

Clara Miller:
    You and Henry Paulson, too! The capital campaign question is a knotty one, especially if you're planning (or in the midst of) a major facilities project or endowment drive, both of which decrease liquidity (thus increasing risk). The former also increases fixed cost, making it potentially financially problematic in difficult economic times. Communication is key, getting boards and major donors in touch with how certain projects will increase financial risk. Preserve liquidity, if at all possible, and encourage donors to loosen restrictions on funds given certain guidelines. As Peter Bernstein said, "risk means not having cash when you need it."

Question from Z. LaRocca, CMH Foundation:
    Building our endowment society. With the stress on the economy donors are going to be very careful of what they currently have. What would be the benefits to a donor to consider this now? Would it be best to let the economy turmoil settle before seeking these types of investments?

Rick Dunham:
    This is a tough one right now because endowments are most readily built through estate giving or major gifts of appreciated assets. With the stock market volatility a lot of people have suffered major losses so giving from appreciated assets is a bit tough right now. On the estate side of things, more than ever you can use the tax and sheltering advantages of planned gifts to motivate a legacy gift... charitable remainder trusts or annuity trusts are a lot safer today than a lot of what's in the marketplace!!

Question from Deirdre, small consultancy:
    What impact will the credit crunch have on donations?

Clara Miller:
    In our world, credit makes the economy go round--funding growth and facilitating operations and helping people buy anything from a home to an education. The credit crunch will disable the economy, very probably giving rise to a recession. Individuals affected are likely to cut back on disretionary spending of all kinds, and donations may decline as a result. At the same time, in hard times government aid for social services, health and housing typically increases. And those who can still give may concentrate their aid on basic human needs.

This "perfect storm" is particularly worrisome because there is so much uncertainty. We don't know how bad or long the credit crunch will be yet; and we don't know how much the government (that would be all of us!) will have to spend to fix it. And if the government itself cant borrow (we now borrow internationally to fund our accumulated defecit, and this crisis will affect our credit rating), some major adjustments will take place. Donations will be made in a very tough environment.

One thing to remember: things will eventually get better...finding a way to keep in touch with donors...even when they won't or can't give...will create good will when the clouds part at the end of the recession.

cuts back, but at the same time,

Comment from Interested Reader, NYC:
    Can you please re-post the panelist's bios? I saw them earlier, but now that I am actually reading their responses, the bios are gone and I have no context for who these people are. Thanks!

Peter Panepento (Moderator):
    Here they are: Dan Cardinali is the president of Communities in Schools, a Washington charity that works to prevent students nationally from dropping out of school. The organization has faced the loss of some significant regular donors as a result of the recent economic downturn, but it has used some creative fund raising strategies to attract new donors and remain on budget.

Rick Dunham is a fund-raising consultant with Dunham and Company in Addison, Tex. Mr. Dunham specializes in fund raising for Christian charities and he has also worked with organizations such as the University of Southern California in Los Angeles and Children's Medical Center in Dallas.

Clara Miller is president and chief executive officer of the Nonprofit Finance Fund in New York, which provides financial resources for nonprofit groups.

Question from Peter Panepento:
    Dan, your organization is facing this problem on the ground. Can you offer our audience some background on the situation you face -- and how you are addressing it?

Dan Cardinali:
    Peter, the biggest challenge our network of 200 local affiliates has is that we are primarily funded through a fee for service model with school systems. As property taxes fall, so do school systems' budgets.

Communities In Schools has invested in evaluation to determine if and how we are effective. We now have strong scientific evidence that the CIS' model of integrated student services is effective. This has positioned our local affiliates to make a compelling case to school systems that our work is relavant to student success and merits ongoing financial support.

Question from Z. LaRocca, CMH Foundation:
    Considering the economy, is a year end mailing the best time of year to purchase a community mailing list? When do most other small shop, small donor base do this?

Rick Dunham:
    Depends. If you are a social service organization like The Salvation Army, year end is a great time because of the holidays and the fact that people are inclined to want to support these kinds of organizations at that time of year. However, for the vast majority of charities this is a time to avoid acquiring donors via direct mail. September-October and January are often the best months.

Question from Kathy Weidner, college alum class fund chair:
    Would you recommend acknowledgement of the uncertain and difficult economic times in the context of a letter , typically one page long, to fellow alummi asking them to give to their alma mater? If so, how might you interject this in the "ask"? I am concerned about walking the fine line of not being insensitive, yet not feeding the worry that giving now may not be the best idea.

Rick Dunham:
    Actually, I would turn this around and help the alumni understand, "Just like you we have felt the sting of a uncertain economy." I would then give examples of the important funds (like scholarship funds) that must be maintained even in difficult financial times. Affirm them and let them know just how grateful you are that you know you can count on their support.

Comment from Hsien Hong Lin (Joe), Taiwanese Kent State doctoral candidate:
    In my opinion, the bad times still have rich chances for philanthropy. Several main corporate philanthropists may stop their charity supports due to their financial crisis. How about marketing the international or oversea corporate philanthropists to substitute domestic money givers? I am an international student and I can sense American government still keeps an optimistic policy toward welcoming international students to study here. Why not American charity organizations plan to market internationally instead of domestic marketing, if necessary? Second, American charity groups should lobby federal and/or local legislations in order to pass some acts or regulations for charity developments. I think this is another possible way for charity.

Question from Graziella Macchetta at Villa I Tatti/Harvard University:
    In the current financial climate what advice do you have for fundraisers in the field of arts and humanites? Thank you,

Graziella Macchetta

Rick Dunham:
    That's a pretty broad question because it depends quite a bit on the particular strength of that program in the community. Having said that, I would want to stress the ongoing importance of the what the organization does to strengthen the community and to enrich the lives of those within the community. I would also focus on special programs such as those that impact the lives of children and the difference those programs make in the lives of the participants.

Question from Terri, PJCC:
    We are about to launch an annual campaign, a capital campaign and a benefit to celebrate our 60th anniversary. No one is waving any red flags as yet--what should we be listening for?

Dan Cardinali:
    Oh boy, this is a tough time to be launching such an effort. We too have launched a $150 growth capital initiative, but designed it as a prospectus. This has enabled Communities In Schools to lay out a clear business case for investing in the CIS Network that can address a pressing social issues, the dropout crisis, while also delivering a social return on investment (ROI). So far it has been an effective strategy. So I would be listening for donors' desires for long-term impact and their desires for transparency on how you plan to spend the money.

Question from Jamie Terranera, Girl Scouts of the Appalachian Council:
    What suggestions do you have to those of us in rural commuinties which may not ouutwardly appear to have been affected by the fall of these power house companies, but are really struggling due to recent economic events?

Clara Miller:
    While I realize it's cold comfort in the face of multiple and difficult economic challenges, rural communities have remarkable resilience because of a long history of volunteerism, resourcefulness, pragmatism and interdependence. People have historically stepped up and taken on leadership roles because they had to--there just wasn't anyone else. Organizing, resourcefulness and cooperation, long a staple of rural success, will work again. The key is to get together, communicate and brainstorm in anticipation of problems--even when things seem very confusing or grey--so you're prepared for the worst while hoping for the best.

Question from Kathy Harget, Co-op America:
    Do you have any advice for approaching foundations during these difficult times? Should we change the way we approach them?

Rick Dunham:
    Not if it's successful! As long as you are focusing on building a relationship with key decision makers and treating them like people and not an institution, you should gain the intelligence needed to know whether you should shift your strategy with any particular foundation.

Comment from Deborah Stewart, Steppenwolf Theatre:
    Will you be posting a transcript following this session?

Peter Panepento (Moderator):
    Hi Deborah. We will post a full transcript of this discussion once it is over at http://philanthropy.com/live For those who are new to this feature, we have a full library of transcripts of all of our previous discussions available at that address. I invite you to check them out.

Dan Cardinali:
    I just want to clarify that Communities In Schools has launched a $150 million cap campaign, not a $150 cap campaign.

Question from Jill, higher education Foundation in midwest:
    What strategies should we avoid during this financial storm?

Rick Dunham:
    It's not so much what you should avoid but what you should do! Make sure you focus on consistent communication with your supporters and KEEP THEM ENGAGED. It's crucial to keep the cause and the importance of the cause and its impact in front of your donors as there are a lot of messages that can drown you out if you don't.

Peter Panepento (Moderator):
    As we reach the halfway point in today's discussion, I'd like to issue a reminder that you can ask a question by clicking on the "ask a question" link on this page. If you've already posted a question and have yet to receive a response, please stick around. Our experts are working feverishly to answer all of your queries.

Question from Frederick Lane, Baruch College Center for Nonprofit Strategy & Management:
    When it has resisted this in the past, how does a nonprofit experiencing fiscal stress go about diversifying it revenues?

Dan Cardinali:
    Changes in income streams either come from internal decisions or external market forces. So, if there is resistence from within, the external forces will push you to change. Each npo sector tends to have a unique funding balance that makes for healthy diversification. For example, Communities In Schools is 70% public/30% private; but within these two main categories, there is diversification.

Question from Steve Griffiths, The Link:
    What are some of the business sectors that you would recommend cultivating as they haven't been hit as hard as the financial industry?

Rick Dunham:
    I think this has to be driven as much by a match between your charity and a business as I do anything else. In other words, you need to start with what businesses make most sense in that they would want to support your cause (ie, supermarkets for a food pantry) and then do some research as to the viability of those businesses right now to support your cause.

Question from Tricia Rubacky - Advocates for Children and Youth :
    We have several donors who make gifts of stock at the end of the year. I anticipate many of those gifts will be lower than in prior years. These are donors who are giving from assets rather than from income. I am planning to speak to these donors directly before they make their gifts, and would like any suggestions I can give to donors how they can keep the annual gifts up when stock values are down.

Dan Cardinali:
    Depending on how you use the stock (i.e., immediately convert it to cash or hold it for investment purposes) will determine the conversation in my mind. The straight forward conversation is asking for an amount in either cash or stock. I susepct that if donors will hold on to stock this year and convert donations to cash before donating--it's a better tax deduction deal for them.

Question from Hsien Hong Lin (Joe), Taiwanese Kent State doctoral candidate:
    In my opinion, the bad times still have rich chances for philanthropy. Several main corporate philanthropists may stop their charity supports due to their financial crisis. How about marketing the international or oversea corporate philanthropists to substitute domestic money givers? I am an international student and I can sense American government still keeps an optimistic policy toward welcoming international students to study here. Why not American charity organizations plan to market internationally instead of domestic marketing, if necessary? Second, American charity groups should lobby federal and/or local legislations in order to pass some acts or regulations for charity developments. I think this is another possible way for charity.

Clara Miller:
    You're so right--people rise to the occasion in bad times, and philanthropy is more important than ever! And in this particular period, we are reminded again and again that America depends on international friends as well as having an international leadership role to fill. I don't believe, however, that the U.S. should be in line for international charitable resources. There are other needier and more desperate causes outside our borders.

Question from Gary Rick, Jeffrey Byrne and Associates, Inc:
    What do you say to those board members who are working on campaigns. I am not talking about the ones that have the resources to make large donations, but those who wield influence over others who give. What do we say to them to give them a positive outlook on their role as fundraiser?

Dan Cardinali:
    These folks are critical. First, I spend time with them to dtermine if they're on board with the org's strategy. If so, I work with them to ensure they understand how the org's resource development strategy supports the strategic plan. From there, I ask them to use their influence to present the "state of affairs" at board meeting and encourage all to do their part.

Question from Carol Leone, small Tribal museum:
    Did I understand correctly that annual giving is not successful in Nov. and Dec.?

Rick Dunham:
    Not from me...quite the opposite. We have our biggest months in November and December for individual donations. In fact, we have a strategy of out reach that starts in late Oct to remind folks to start staging their donations.

Question from Emily Capelle, Goodwill Industries of Southeastern Wisconsin:
    We have been struggling with the performance of our direct mail program - the revenue has not been what we would like to see given expenses. We've done the usual tweaking of copy, added stories, tried to keep it simple, directed donors to our website for donating, etc... We feel that the economy here in the greater Milwaukee area is having a substantial impact on giving and donations have gotten smaller. Any suggestions on how long to keep hanging in with direct mail (we've been working on an ambitious program for 3-4 years now - 6 mailings per year for cultivation and 1 acquisition) What do you think the future of direct mail is and what do other organizations do to generate more revenue with direct mail? Thanks!

Rick Dunham:
    Long question... long answer. Sorry!

First, welcome to the club! Most charities have experienced a softening in direct mail response and in average gift. HOWEVER, don't pull back now. If you do, your downturn in revenue will become a self-fulfilling prophecy! One of the questions I would have is how well have you communicated the impact of the donors support? Is there a regular flow of information that overtly connects the support of your donors to the impact of your organization? Donors are always more prone to give when they know that the organization is making a difference and that impact is validated on an ongoing basis. How you are segmenting your file will also determine the overall effectiveness and ROI you direct mail is generating. Make sure you are really giving special care to donors with multiple years of support. Finally, I think the future of direct mail is strong--if it is done properly. When direct mail is seen as much as a cultivation tool as a fundraising tool and drives a deeper connection between you and your donor then it wins big. Case in point, with two charities this year we have had two record direct mail campaigns, one just two months ago.

Peter Panepento (Moderator):
    If you would like more information on direct-mail strategies, I invite you to read the transcript of a fantastic discussion we had earlier this year on the topic. You can find it here: http://philanthropy.com/live/2008/03/direct_mail/

Question from Susanna, Catholic high school:
    Is it possible to tell how much of this is media hype vs. actual impact on our donors? I'm not planning to do anything differently this year, although my goals are somewhat more modest. On the whole, this is just making me more disciplined and deliberate. Thoughts?

Clara Miller:
     You're making a great point...and if you knew what the actual impact of this melt down might be (on donors or anyone else) our own Treasury Secretary would want you to give him a call immediately!

The depth of impact will depend on the kind of nonprofit you run. If you're at a private parochial high school, you know that there will still be demand for your services, it's worth focusing on how many parents are likely to have trouble paying tuition, whether donors may be able to dig deeper to make up that difference, and how you think about adding cost (expansions of facilities, etc) and managing the expense side of the business I love your general rule: "disciplined and deliberate."

Question from Nancy C, Self-Employed Consultant:
    At what point should nonprofits begin "Plan B" financial projections? I have clients that have June 30 FY end dates, and it's too soon to say what may happen. Should they consider doing Plan B projections with 10-20% drop off from certain donor categories?

Dan Cardinali:
    Great question. Depending on cash reserves, monthly unrestricted burn rate and how much fundraising success an npo has do have during its current fiscal year, all determine Plan B projects.

The closer to real time fundraising that you have do, the sooner you need to implement plan B. Painful as it is, if your not targeting a surplus scenario at the end of your fiscal year, you're cuttling too close to the bone.

Question from Kate Barr, Nonprofits Assistance Fund (Minnesota):
    I wonder if we have finally arrived at a moment when the game has really changed. The past few years have seen a series of up and down cycles when nonprofits go from "hunkering down" to a little bit of growth. The message is always to do more with less. In a way it may be the charity and volunteer version of living on borrowed time and money. Will the impact of this economy on state, local and federal budgets and on all source of contributed funds finally force some big questions about the nature of nonprofit work and capacity?

Clara Miller:
    Kate--you make an excellent point. The social "safety net" is already in tatters because we have been letting ourselved continue to do more with less. It means we either have to dig even deeper now, and there may not be anything in the reserve tank.

An economist (Norielle Roubini sp ?) was on the news the other night saying "we have privatized profits and socialized losses..." In our sector, we tend to "fake it 'til we make it," and I think that habit may have caught up with us. We have internalized sub-marginal cost pricing so much in our social sector that many of our front-line helpers are not well-equipped to respond in this economic emergency.

Question from Kat Rice, GiveCheerfully:
    Are there any good tactics to get people to donate online, or is it better, with this kind of economy, to get money in person (through events, campaigns, etc)

Rick Dunham:
    If you are talking about people who are current donors who have opted into an online relationship with you then you need an ongoing strategy to engage them via the web and to give them reasons to want to give to you online. With our clients we always create an online version (highly edited) that goes out in concert with any direct mail appeal to our email list. It is a consistent and reliable source of revenue. In this day of options, you need to make sure this is one of the options through which people can in fact give.

Question from Caren, small LA nonprofit in education reform:
    We are moving offices next year, and have drafted a letter to donors asking for a $200 donation to help pay for moving expenses. We also send a year-end letter asking for donations, but do not specify an amount. Would sending the moving letter in September/October, and then the year-end letter in December be too much? Should we just send one letter this year? If so, which one, or how can we incorporate both ideas into one, and when would be the best time to send this letter?

Rick Dunham:
    Great question. There's an underlying assumption among a lot of charities that they shouldn't mail their donors very frequently. But that's a huge misunderstanding. Here's the principle: Donor's don't mind frequency, they mind irrelevancy! In other words, if all your communication is organizationally centric that's irrelevant. But if it is mission centric, showing how the donor's support is making a difference that's relevant. I would mail both letters but I would make sure that you tie the move into how it will enhance the mission of the organization and allow you to make a greater impact... and impact like (insert story here). At year-end, let your donors know its crucial you achieve a certain goal by Dec. 31 in order to move into 2009 in the strongest possible position to accomplish your mission--and put that into terms of impact.

Question from Sarah, NYC ED nonprofit:
    When sending an appeal letter, do you think it's appropriate to acknowledge the state of the economy and our understanding that times are tough?

Dan Cardinali:
    Depends on the potential donor. Personally, I much prefer to lead with results and impact than an appreal based on hard times. I just find in a letter, potential donors want to be left motivated to do something positive, not play a defensive position.

When I've had to make the "things are tough" appeal, it's always better in person if at all possible.

Finally, when such an appeal is made, demonstrating how this gift will get the npo to the other side of a bad situation and not require another "time are tough" approach is key.

Question from Victoria, GI-NET:
    I work for an NGO that focuses on advocacy and education around U.S. foreign policy. Is there information from past economic downtowns about how advocacy and education orgs fare compared to organizations providing direct human and domestic service?

Clara Miller:
    I'd check out publications and studies from Giving USA and the Foundation Center for historic information on giving trends. Also, the Urban Institute and the National Center for Charitable Statistics have excellent data on this.

Peter Panepento (Moderator):
    I'd like to offer a couple of resources from our archives on this topic.

First, is a story on how different types of fund raising typically fare during a downturn: http://philanthropy.com/free/articles/v20/i08/08000801.htm The other is a series of graphs that provide some historical data on giving during recessions: http://philanthropy.com/free/articles/v20/i08/08001001.htm

Question from Milwaukee Jewish Federation:
    What can our organization do to state our needs to donors during challenging economic times without sounding like it's 1929?

Rick Dunham:
    I think it's to connect with your donors at the level of their pain and concern. Help them understand that just like them, your organization has experienced the financial difficulty of unsure economic times and that it is in these times that you must look to good friends and supporters like them to help keep the Jewish Federation strong. They will both appreciate your transparency and empathize with the struggle.

Question from Kat Rice, GiveCheerfully:
    Do you have any suggestions for charities that are just starting out, in other words, they have no set base to draw from?

Dan Cardinali:
    Yes. First, the who behind npo is key. Leadership matters always, but particularly when starting out. Second, a good plan matters. Donors are savvy these days and the maket place is crowded. Good plans make a fundamental difference and demonstrate a seriousness that validate leadership's charismatic qualities. Finally, the rare balance of charismatic leadership with a clear plan for how such a leader will respond to a need, opportunity, or provide a solution to a social challenge is winning combo.

Question from Sarah, small nonprofit:
    What will happen to the corporate foundations -- for both the companies that have gone under and the ones that are on the brink?

Clara Miller:
    If they are endowed foundations they may continue to operate, but probably at a much reduced level (they will not receive additions to their endowments or pass-throughs from corporate contributions).

If they are corporate giving programs, they will probably be vastly reduced or become dormant until the crisis has passed. Bankrupt companies will not make any contributions at all. Companies acquired by another will be subsumed by the parent, and their giving program will be folded into the parent's. If you receive contributions from the financial, banking or insurance sectors you are likely to have contributions reduced or discontinued, at least temporarily.

Question from Susanna, Catholic high school:
    How will this economy affect foundation and corporate giving generally?

Rick Dunham:
    I don't have a crystal ball, but in talking to some it's feels a bit like a wait and see attitude as to how things shake out. I think we need to assume a downturn in that giving if the market continues to get hammered.

Question from Megan, mid-sized NY based nonprofit:
    Under the current financial situation, could you please advise the best place for an organization to keep cash beyond what is needed for cash flow purposes - most importantly low risk and insured options. Thank you.

Clara Miller:
    Keep it simple. A triple-A rated, federally-insured bank deposit is probably best until the dust settles. Check with the bank on the maximum insurable deposit, and whether they can help you avoid concentration of risk beyond the limit, if applicable.

Question from D. Barrett, mid-size arts institution:
    We're just starting our budgeting process for next year. How do we know what to anticipate? I'm assuming foundation assets will shrink, as well as individual assets, but I will be under pressure to raise more money (rather than less) to keep pace with escalating costs. Any advice?

Clara Miller:
    Management and board should be doing some contingency planning around possible reductions in all revenue sources: donations (foundation and individual), ticket sales and membership. This is not to say that you should not work hard to bring in revenue. It is only to make sure that the budget numbers are not forced beyond what is realistic simply because making cuts (much less thinking about cuts) is unpleasant. Start talking with major donors now and working internally across revenue sources to get a realistic picture of revenue as a whole. Once you have a picture of revenue, develop the expense budget and manage accordingly.

Question from Lea Montalto-Rook, The Wilma Theater:
    We're hesitant to send out our annual fund mailing before the election due to the current political and economic situation. If we wait, we're then heading into the holiday season. We like to try to drop our annual fund mailing at least 8 weeks prior to our telefunding campaign (which typically begins the first week in January). Any suggestions?

Rick Dunham:
    It feels like a pretty big gap between the mail piece and the telemarketing campaign. Normally we try and make those a bit closer. I would either mail right after the elections or right after Thanksgiving. I would suggest you at least test mailing a segment of donors right after Thanksgiving and compare how they respond overall to those who get the mail piece in November.

Question from Sarah, small nonprofit:
    In this economic downturn, how can each organization convince donors to give to them, as opposed to other equally worthy causes (i.e. how do you win the competition of sorrows?)? or how can organizations work together now?

Rick Dunham:
    First, you need to stay consistent in your communication to your donors. You can bet your donors are giving to other causes, and that's not only ok but good. However, your most loyal donors, those you have given in multiple years or have given your organization 3 or more gifts love you. You don't have to convince them about the worthiness of your cause. What you need to do is consistently demonstrate the import and impact of what your organization is accomplishing through their support and show them why that ongoing support is so important.

Peter Panepento (Moderator):
    We'll keep the chat open for a few extra minutes to attempt to get to as many remaining questions as possible.

Rick Dunham:
    FYI -- we are fielding a national study this week to try and ascertain the impact of the economy and elections on fourth-quarter giving. We should have top lines next week.

Peter Panepento (Moderator):
    Thank you, Rick. I hope you will share the results with us.

Question from Christie, small international nonprofit:
    We are primarily foundation funded. What thoughts do you have about how grants might be impacted by the turmoil? I'm guessing that it might be too early to tell, given the daily rise & fall of the stock markets. But I'm wondering what folks have heard as "the word on the street."

Clara Miller:
    Most foundations manage to their IRS payout requirements on a two-year running average, so there may be a little "wiggle room" with respect to available funding for this year. Nonetheless, large declines in foundation endowments will reduce giving from same. Foundations have different approaches to situations like the one we're facing. Those heavily oriented toward human services, health, poverty alleviation and similar will see increases in demand for their grantees' services. Sometimes that prompts them to increase payout beyond what is required. Some cut entire program areas in order to preserve other programs without cuts. I think you're right in saying it is too early to tell (assuming a foundation's endowment wasn't deeply concentrated in one of the bankrupt or dissolved companies), but communication with your foundation funders is key. Getting information early will allow planning and will allow you to manage through the financial shoals.

Comment from Cheryl, small arts nonprofit (again):
    Thanks so much for the earlier response! We are a visual arts group, needing space for art exhibitions, classes for children and adults, presentations, etc. Virtual, while valuable, just doesn't substitute for face-to-face program delivery--we need a dedicated space. Comments?

Question from Robert, direct service nonprofit:
    It's understandable that many will want to focus today's conversation on the micro level, and how this ongoing meltdown will impact their causes. I understand that, as this is a HUGE issue for every nonprofit in America.

But is there any macro advice you all can offer "us" about how nonprofits might use this current dilemma to get an entirley new dialogue going. Wouldn't this be an ideal time to reframe the debate, so that the economic role of nonprofits becomes a part of the dialogue?

Clara Miller:
    Great idea! In an early answer, I quoted Noriel Roubini, an NYU economist, who said something to the effect of, "in this country, we have privatized profits and socialized losses." In doing so, we have defunded a variety of services that were central to civil society, ranging from maintaining bridges to educating children, to recovering from disasters to running fair elections to taking good care of wounded soldiers when they return from war. We in the nonprofit sector have been obediently trying to pick up the pieces, but I think it's time for us to push back: the tank is getting perilously close to empty, and the needs not provided for mount daily. We can only be the "gasket" for the for-profit economy if we're maintained!

Question from Allison, small non-profit:
    During these uncertain times, how cautious do smaller non-profits need to be in hiring and recruiting for additional staff? Also do smaller organizations need to consider work alternatives such as telecommutting or reduced work week as a cost saving measure?

Clara Miller:
    Very cautious. Be very careful about increasing fixed cost, especially ahead of reliable revenue. This runs counter to every fiber of most nonprofit folks' being--we are called to do what we do, and we throw ourselves into a cause passionately, whatever the cost or prognosis.

Your ideas about work alternatives are excellent for smaller and larger organizations. Just be careful about the way it's communicated to the troops. Avoid panic and lead with the "we're all in this together," voice. Remember that the biggest risk, especially in health and human services, is to the people served. Make sure you're there for them.

Comment from Jill, higher education Foundation in midwest:
    Thank you for a valuable and timely conversation!!!

Peter Panepento (Moderator):
    Our time is up. Thank you to everyone who joined us today and a special thanks to our three guests who took the time to join us on short notice. We'll be back again next Tuesday at noon Eastern time to talk about compensation trends in the nonprofit world. I hope to see you then.