Part 10: 🦋 Healthy Organizations Plan for Change

I work with a lot of small nonprofits.

And one of their greatest strengths is adaptability.

They figure it out.

A staff member leaves?

Someone absorbs the work.

A grant doesn't come through?

They adjust.

The computer dies?

They find another one.

Demand increases?

They stretch the program.

Something unexpected happens?

They make it work.

That resourcefulness is admirable.

BUT resourcefulness shouldn't be your financial strategy.

There is a difference between being able to respond to change and being financially prepared for it.

Healthy organizations need both.

🔮 We Can't Predict Everything. We Can Prepare for Something.

Planning for change doesn't mean knowing exactly what's going to happen.

There is no way you can, but there are some things we already know.

👍🏽  Your employees will eventually need raises.

👍🏽  Equipment will eventually need replacing.

👍🏽  Insurance and other expenses will increase.

👍🏽  Your technology will become outdated.

👍🏽  Staff will leave.

👍🏽  Programs will need to evolve.

👍🏽  And there will be expenses you didn't anticipate.

Yet many nonprofit budgets are built almost entirely around one question:

What will it cost us to operate next year?

I'd like us to ask a second question:

What do we need to begin preparing for now?

That's a very different conversation.

🗓️ Some “Unexpected” Expenses Aren’t Really Unexpected

Your five-year-old laptops aren’t going to last forever.

The roof won’t last forever.

Neither will your copier.

Your website will eventually need updating.

Your database may no longer meet your needs as you grow.

These expenses may be irregular.

But that doesn’t make them surprises.

We know they’re coming.

Imagine that your organization knows it will need $20,000 to replace aging technology three years from now.

You have two choices.

Wait three years and suddenly try to find $20,000.

Or begin planning for that expense today.

That’s the difference between reacting to a cost and preparing for one.

💵 Give Yourself Some Breathing Room

Then, as we all learned in 2020, there are the things you truly can’t predict.

❌  A major funder changes priorities.

❌  An emergency repair is needed.

❌  A reimbursement is delayed.

❌  A program suddenly experiences increased demand.

❌  An unexpected opportunity arises that requires your organization to act quickly.

This is where operating reserves can become an important part of financial health.

The National Council of Nonprofits describes reserves as resources that can help an organization weather unexpected financial shortfalls and continue fulfilling its mission during difficult periods.

And I think that’s an important distinction – a reserve is not simply money sitting around doing nothing.

It’s breathing room.

It’s time to make a thoughtful decision instead of a desperate one.

It’s the ability to respond to an unexpected expense without immediately cutting a program.

It’s the ability to weather a delayed payment without wondering whether you'll make payroll.

It’s the ability to navigate change without every disruption becoming a crisis.

And there isn’t one magical reserve amount that's right for every nonprofit. The appropriate level depends on your organization’s circumstances – budget, age, future plans, etc.

The important thing is to start having the conversation.

🗓️ Planning Isn't Just About Emergencies

This is where I want us to think even bigger.

Preparing for change isn't only about protecting your organization when something goes wrong.

It's also about being ready when something goes right.

What happens when:

➜ A program suddenly has an opportunity to expand?

➜ A potential funder offers a matching grant?

➜ An excellent candidate becomes available before you planned to hire?

➜ A partner invites you into a new community?

➜ An opportunity arises that requires an upfront investment before revenue arrives?

Financial flexibility doesn’'t only protect you from problems, it gives you choices.

And financially healthy organizations need the ability to make choices based on strategy, not simply based on what’s currently sitting in the checking account.

👥 Your People Are Part of the Plan

We also can’t talk about preparing for the future without talking about staff.

In Part 9, we asked what it means when an organization says its employees are its greatest asset but its budget contains little room for professional development, benefits, or salary increases.

That question becomes even more important when we're thinking beyond one year.

Are you planning for:

👥 Competitive compensation?

📈 Salary increases?

🎓 Professional development?

🌴 Time off and staff well-being?

➕ Additional staff as programs grow?

🔄 Leadership transitions?

If your organization expects to grow but your staffing model assumes the same people will simply keep absorbing more work, that’s not a growth plan.

That’s a capacity problem waiting to happen.

📊 Look Beyond the Annual Budget

One of the practical shifts nonprofit leaders can make is to stop thinking about financial planning exclusively in 12-month increments.

Your annual budget matters.

But so does looking two, three, or even five years ahead.

You don’t need perfect numbers.

You’re forecasting.

Ask:

Where are we trying to go?

What will likely cost more?

What will need to be replaced?

What additional capacity will we need?

What revenue could disappear?

What investments will growth require?

What financial cushion would give us more stability?

The further out you look, the less precise the numbers will be, and that’s okay.

The goal isn't prediction. The goal is preparation.

🤝 Your Board Should Be Part of This Conversation

This is also where boards need to move beyond simply approving an annual budget.

Remember what we said last week: Budgets are leadership documents.

Boards have a responsibility to think about the long-term financial health of the organizations they govern.

That means conversations shouldn't stop at:

"Did we make our budget this year?"

They should also include:

"What financial risks are coming?"

"What investments will we need to make?"

"What should we begin setting aside now?"

"Where are we financially vulnerable?"

"What would make this organization stronger three years from now?"

Those are sustainability conversations.

And they belong in the boardroom.

🌟 Why This Matters to Funders

Planning for change also tells funders something important about your organization – it tells them you're thinking beyond their grant.

You’re considering what it will take to sustain the people, systems, programs, and infrastructure their investment supports.

You’re anticipating future needs instead of waiting for them to become emergencies.

And you’re making decisions with the long-term health of the organization in mind.

That’s a very different story from:

“We need enough money to get through this year.”

One is about survival.

The other is about sustainability.

❤️ Heart Check

If your organization continued operating exactly as it does today for the next three years, what would eventually become a problem?

Your staffing?

Technology?

Facilities?

Cash flow?

Fundraising?

Leadership capacity?

Program demand?

Something else?

And here's the harder question:

What do you already know you'll need tomorrow that you haven’t started planning for today?

✅ One Thing You Can Do This Week

Create a simple Three-Year Look Ahead.

You don’t need a complicated spreadsheet.

Gather (or poll) your leadership team and identify:

Year 1: What do we know needs attention now?

Year 2: What will likely need investment next?

Year 3: What can we reasonably anticipate if we continue growing?

Think about:

👥 People

💻 Technology

🏢 Facilities

📊 Programs

💰 Revenue

🛡️ Reserves

🌳  Growth opportunities

Then choose one future expense or investment you can begin preparing for now.

You don’t have to solve the next three years this week, you just have to stop pretending they’re not coming.

🌱 Join the Journey

Next Week – Part 11: 📈 Why Consistency Builds Funder Confidence

Financial health isn't only about how much money you raise.

It's also about whether the people investing in your organization can see that you’re managing those resources thoughtfully and consistently.

Next week, we’ll talk about why consistency—in your numbers, your story, your strategy, and your relationships—helps build something every nonprofit needs from its funders: 

Confidence.

Join me next week as we continue building financially healthy nonprofits, one conversation at a time.