Remember life before COVID-19? When we could host in-person events, work closely among our colleagues in the office and go to restaurants without suiting up in full PPE?
Although that was only a few months ago, for most of us in the nonprofit world it feels like a lifetime.
The idea of “normal” may be forever altered. But for nonprofits wondering when the fundraising world will rebound from this economic and health crisis, knowing when the economy will rebound can help you map out your fundraising plans for stability and growth.
In this blog, we’ll use data and analytics to share a look at the current environment, explore three scenarios for the future and show how you can use this information to make strategic decisions for your future.
Evaluating the current environment
The moment we’re in is unprecedented. It seems that something new is being thrown at us every day. Unlike past disasters, COVID-19 is constant and recurring. And depending on what you read, could be with us forever.
But, by using what we know from past recessions, and pairing it with current data, we can determine what the next few years have in store for us.
In March, when COVID-19 began its spread, everyone predicted a hit to the economy.
As we arrive in August, we know this has come true. In Q1, GDP fell at an adjusted rate of 5% – the largest quarterly decline since Q4 2008. Then, in Q2, we saw an even bigger drop, with a 32.9% hit.
Source: USA Today
GDP projections for the rest of 2020 show increases in Q3 and Q4. However, this will be dependent on how we reopen and handle the continued spread of the virus.
Consumer spending is a major driver of GDP, and the spread of the virus has a direct impact on consumer spending. We see this in the consumer confidence index, which began to rebound in June.
However, a decline in July, when the virus was spreading across states like California, Texas and Florida, shows us that consumers are still hesitant to spend at pre-crisis levels.
Source: USA Today
What does this mean for nonprofits?
Humanitarian organizations, especially those serving on the front lines of the disaster response, are seeing an influx of donations and support. Organizations that don’t fall into the humanitarian category might be seeing a decline.
GDP growth and consumer confidence have a direct correlation on the levels of giving experienced by nonhumanitarian organizations.
If consumer confidence is down, the number of nonprofits that donors are willing and able to support will also be down. Until we return to pre-crisis levels, this will continue.
Keeping this in mind, let’s look at three scenarios for the future and what nonprofits can do to prepare.
Scenario A: Virus contained, growth returns
It’s safe to say with current case numbers we’ve already surpassed the containment phase.
However, for this sake of this blog let’s pretend that the virus is contained, and growth begins to return. This would result in a 2.5% drop in 2020 GDP in the U.S.
We would return to pre-crisis levels in Q4 of this year.
Unfortunately, I have a hard time believing this is going to happen. 70% of GDP is driven by consumer spending. Remember the consumer confidence index we discussed earlier? If we’re not confident we can be safe, we won’t go out and spend, ultimately causing this rebound to play out over a longer period of time.
Scenario B: Virus recurrence, with strong rebound
In Scenario B, we see the virus recur but with a strong global rebound. In part, this has to do with the government continuing to provide solutions from an economic perspective.
This scenario results in a 7.9% drop in 2020 GDP, with a return to pre-crisis levels in Q4 of 2021.
This scenario will only happen if we reopen carefully and continue to contain the virus. If we do those things, then consumer spending will come back.
Although this scenario is more realistic, based on the current spread of the virus and consumer spending, I think our return to pre-crisis levels will be even more delayed.
Scenario C: Virus recurrence, with muted recovery
While I’d like to convince myself that this isn’t our reality, data is telling me otherwise. I believe this scenario has the highest probability of occurring.
Due to continued spread and hesitation by consumers, we can expect to see a muted recovery playing out over the next few years. This will require economic interventions like stimulus checks and an effective healthcare response.
In this case, nonprofits will return to pre-crisis levels by Q1 2023.
Knowing this, what actions can you take now?
Investing for the future
If we believe these numbers to be true, then we have the next two years to reimagine our strategies and prepare for the return of pre-crisis level giving.
Once we begin our “new normal,” nonprofits that had previously experienced an influx of donations may begin to see numbers level off.
To prepare, you must use the current boom to invest in alternate sources of revenue. Whether that’s through building a mid-major program, identifying opportunities for planned giving, jumping into virtual events or leveraging sustainers, finding ways to generate alternate sources of revenue now will prepare you for when elevated levels of COVID-giving begins to drop off.
For those who are suffering, you have the opportunity to invest in optimizing your data strategy now. Data is your most important asset and using it properly can lead to strong, sustainable growth.
Take an honest look at how your organization is doing from a global perspective.
What are you doing well? Where can you break down channel silos? Make these data-driven strategy changes now so you can hit the ground running in the future.
By monitoring the current environment and using these predictions to make strategic decisions for your organization, you can set your fundraising program up for sustainable growth in the future. Those who don’t will continue to suffer when pre-crisis levels return.