Monday, December 28, 2009

Happy Holidays and New Year's Challenge

First, Happy Holidays to all of you hard working people in the third sector. 2009 saw some interesting challenges to the sector and I am forseeing the following in 2010.

Based on some recent economic data I saw from the Chief Economist from the NEA (see above, although blurry), the upward climb out of this economy is going to be more difficult than imagined. What you see above is that as an economy we will not reach zero (October 2008) until 2016.

What this has done to state budgets is astronomical. States are now each month waiting for tax revenue to come in in order to pay bills and when there is a gap are doing a variety of things to meet zero, including I.O.U.'s. In looking at the blow NFF chart, you see that the larger nonprofits are the most reliant on government sources, essentially becoming a more flexible (ok, maybe not) wing of government. If the blood is cut off, these large organizations are really going to suffer, as we are just starting to see.

As we look at the smaller organizations, we are also seeing some real challenges on the horizon, mostly in terms of liquidity. The below NFF chart shows that organizations that are smaller have very little in terms of receivables coming in to help them make cash flow. The days of cash on hand is just over one month.

What does this mean? It means that this year's challenge is to actually partner and collaborate. Now, before 2010 this idea has been done to real perfection about once or twice, but no where near the level that is suggested in literature and conferences. Having looked at the financials of nearly 20 organizations this year, the proof to good partnership should be seen there.

How many mergers have we seen in NYC in the last year? How many organizations, from a percentage standpoint, are actually sharing administrative, operations and fund development staff? I suggest the number is low single digits.

If we are to see the best sector make it, we will need the current song and dance of partnership and collaboration become very real, quickly. I suggest we get a donated auditorium and bring index cards with all of our assets listed on each card. We take those assets, tape them to the walls and we start mixing and matching resources. Am I crazy? Crazy is not trying something resembling this......

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