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Thinking Through the Next 12-18 Months

Once a non-profit’s leadership has a vision for the future, the Board and ED can develop plans for getting through the next year or so.  One technique several EDs use for serious discussions about the short-term is financial scenario planning.  This approach is good for several reasons:

  • It enables leadership to consider several real, possible 12-18 month financial  futures simultaneously without having to lock in on one budget (important given the uncertain times)
  • By discussing several detailed possibilities before having to make decisions, leaders can create a framework within which the staff can act quickly once the financial picture clears, facilitating a nimble response to the financial environment
  • By talking about more than one possible future, leadership can discuss what to do if the bottom falls out of their funding streams.  That scenario is psychologically very difficult to talk about if it is the only option on the table

Here’s my suggested approach to financial scenario planning, using  a few basic steps:

  1. Select a revenue projection for each revenue stream for the 12-18 month future that you believe is likely (make it real, not overly optimistic) – this is the basis for your first scenario
  2. Next, reduce your revenue projection by 20-25% (the reduction need not occur evenly across all revenue sources) – this is your second scenario
  3. Finally, try to imagine complete disaster and reduce your revenue projection by at least 40% – this becomes your third scenario
  4. Next, for each scenario make program and staffing plans for what you will do in each case – and make sure you consider the impact of any restrictions on funding streams)
  5. After making your implementation plans for each scenario, consider the impact on your projected long-term vision and your future core programs – and make adjustments if you need to position yourself differently

Even though you will probably not be directly on target with each of your projections, by using this approach you will have prepared yourself for a range of real possibilities before anything happens.

The Nonprofits Assistance Fund also has an excellent scenario planning worksheet for nonprofits.

What planning techniques or tools are you using to prepare for the next 12-18 months?

Posted in Finance, Planning. Tagged with .

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