Nonprofits Should Stress Test Funding on a Regular Basis [SUBSCRIBERS-ONLY]

Stress testing a nonprofit organization’s funding seems like a frightening proposition, conjuring images of doom and gloom. This is not the case at all. Regular stress testing of funding will enhance strategic planning, raise awareness of changing conditions, and stimulate an earlier call to action. All funding sources, both strong and weak, will benefit from these regular efforts.

The key to stress testing of funding (STF) is to consider all funding sources, not just funding sources that are weak, exposed and/or experiencing declining performance. Even a small change in a minor funding source could have a potentially big impact on operations and the bottom line. Consequently, it is important that your stress test include all sources of funding, such as earned revenue, contributions, sponsorships, grants, as well as other sources of business and miscellaneous revenue (for example, rents, royalties, administrative fees, and advertising).

The following two basic tactics will make STF more effective and efficient. First, schedule your STFs to occur on a regular semi-annual basis. Second, use STF surveys to gather information, check the temperature, and monitor changing conditions.