Alert – Alert…The new tax bill will fundamentally shift the revenue model in the nonprofit sector – particularly community-based organizations. And, it could mark the demise of many critical organizations at a time they are needed more than ever.
Why? The tax bill increased the standard deduction, and so fewer regular Americans will itemize their deductions, meaning for them, there is no tax benefit associated with charitable donations. The traditional revenue cycle is the majority of donors write checks in Nov/Dec to take advantage of the deduction – with that gone, will they still write a check?
The ball is in your organization's court. Don’t wait until Dec 2018, and fain “surprise” that your end of year appeal was a flop. Or that many of your middle-income donors stood down from giving this year. You have 12 months to make fundamental shifts in your business to ensure a sustainable revenue stream. Like what you say? Here's some ideas:
· Reach out to every donor and ensure they are connected to the mission. Make their motivation to support your cause more meaningful than a tax write-off. We all know it’s all about the relationship (stupid), so put this into action immediately. Engage your entire board in this mindset shift.
· Jump into social enterprise to reduce your dependence on traditional charitable giving. Surely there is an initiative you can start that supports your mission AND brings in revenue. Consider a special committee made up of entrepreneurs who can offer insights – and launch the committee this month.
· Revisit your fundraising strategy: new assumptions and a fresh approach may be needed. If your development department and/or your fundraising consultants don’t have ideas, it’s time to reevaluate their guidance.
· Cut back expenditures until you have realigned your business. I predict a challenging fundraising year in 2018/19 and you can hedge this starting today. Consider a very conservative revenue budget. If your 2018 budget is already approved, reevaluate it quickly with an eye to conservative revenue assumptions.
OK, many of you may be thinking:
· “Let’s wait and see -- maybe people won’t know.” Wake up…. it’s here and hiding from reality is not a plan.
· “My donors will still give.” Have you asked them?
· “My development effort is lean – we don’t have time to reevaluate our revenue model.” Well, maybe you’ll have time after you have to downsize your business.
So -- Act now. Get advice. Be open to change. And DO SOMETHING to ensure your mission thrives. We can all do better!