The volatility of the financial markets this past week are a crude reminder of its wicked unpredictability. Only the strong survive when it comes to investing in stocks and only those who understand that even when the markets are heading south, it could still mean opportunities for investors. I will leave the lessons in market volatility or investment strategies to the economists.
Because I help small businesses and nonprofits seek revenue support in various ways, it always comes back to where is the money is coming from to support their objectives. As I read this morning's edition of USA TODAY MONEY, the first article that grabbed my attention was "What You Should Learn From the Stock Market's Sell-off." A really good question, since most people are so consumed with the panic of losing their money, learning lessons rarely come to mind.
The real question is, "how does the sell-off impact businesses that rely on financial support to operate," like service organizations or nonprofits? The answer: Maybe not as seriously as you may think... but, it is worth considering.
Most corporate entities have a socially responsible arm to their business. This is where they influence community change through grants and other gift-in-kind donations to service organizations/businesses. However, the structure of their giving is largely dependent upon their investment strategy for the year. Medium to large businesses have the luxury of making their annual giving discretionary and have less governing regulations, so they give as much or as little as they want and their giving is often on a cycle.
On the other hand, foundations are governed when it comes to their annual giving. Albeit, a hot topic, the federal requirement is that foundations distribute 5 percent of their investment assets annually for charitable purposes. Even in this down-turn, foundations are far less affected because most base their 5 percent on a three-year rolling average of their assets. This means they have a built-in safety-net for times such as these, but it could mean they will curb their giving in the months or even years ahead.
Here are a few steps you can take to help keep your funding plan on track:
1. Review your funding requests strategy and determine the number of requests going out in the next 180 days. Either hold the requests, or postpone until the next funding cycle for the grantor. You will increase your chances of being funded, even if the funder has decided to cut back on giving because of the market conditions.
2. Diversify your requests to include more government grants, and individual donations or support, with fewer requests to corporate entities. This will help you to ride the tide and keep your funding expectations in check.
3. Monitor the financial or money segments of larger publications such as USA TODAY, The New York Times, The Wall Street Journal. Even if you don't have a full understanding of financial matters, it helps to see what the trends in money news are so that you can consider hiring a professional to help you sift through the information and give you advice on how to adjust your funding strategy.
It's impossible to predict the future, and as long as there is capitalism our economy will be in a state of constant fluctuation. Taking steps to use the information given to create a funding plan to work for your service organization or business will help soften the blow of any downturn in market conditions.