8 Big Lesson to Learn From Bankruptcy

picture of decorative sea grassAs I collected success stories for 7 Nonprofit Income Streams, I met an executive director recovering from near bankruptcy. The entity’s challenges have not become public. To support their recovery, they remain nameless in this paper. However, nameless or not, they have important lessons I’m pleased to share with you that might help protect your organization.

Don’t

  1. Create a profitable annual event and commit 80 percent of its expected revenue before the money arrives. Eventually unforeseen contingencies, such as inclement weather, will happen.
  2. Mix grant income with general funds.
  3. Take on mortgages without income to retire them.

Do

  1. Recognize and embrace industry trends. This nonprofit flew high by joining a growing field in a growing economy. While the Great Recession hurt, the industry had peaked long before the downturn. Stop wishing things were different and respond to what is.
  2. Take advantages of growth niches. The industry now predicts personnel shortages. Reducing personnel challenges is one key recovery focus.
  3. Apprise staff. Let staff know about the situation’s seriousness. When informed, staff can be part of the solution.
  4. Be creative solving grant and donor challenges. When it’s clear that the promises can’t be fulfilled, find a substitute project or return the funds.
  5. Meet often. Boards need to meet regularly to build relationships and to learn so they can make good decisions.

Pick one lesson. Re-read it. Decide how you will apply it to strengthen and protect your organization.

Author
Karen Eber Davis

Before founding her firm, Karen Eber Davis developed the Sarasota County Community Development Block Grant Program. Under her leadership, this infant program received the National Association of Counties National Affordable Housing Award for the Down Payment Assistance Program. To date, the program helped over 1,800 families realize their dreams of homeownership. She also worked with the City of Ft. Lauderdale and the Florida Department of State, Division of Cultural Affairs, where she developed the division’s first audit program. In an earlier position at Good Shepherd Lutheran Church in Tampa, she organized senior, youth, and children groups plus family activities. Her youth staffing work with the Florida Synod of the Lutheran Church in America supported youth ministries in 120 congregations in Florida.