In April 2025, Federal Reserve Chairman Jerome Powell told the Economic Club of Chicago:
“The…administration’s tariffs are significantly larger than anticipated. The same is likely to be true of the economic effects, which will include higher inflation and slower growth.”
That small and between higher inflation and slower growth roiled already-battered global markets and made immediate headlines. And for good reason. It’s a sign that we may be heading toward a rare combination of economic conditions that hasn’t happened in decades: both rising inflation and rising unemployment.
As nonprofit leaders, we don’t always have time to wade through economic policy and market signals. But in this case, it’s worth taking a few minutes to understand what’s happening, and steps you can take now to make sure your organization is prepared.
A Quick Fresher: The Federal Reserve’s Role and Why It Matters
The Federal Reserve has two main goals:
The first is keeping inflation in check, ideally around 2% per year. The second is promoting “full employment,” which acts as a proxy for overall economic growth.
Here’s the catch: The Federal Reserve’s tools for addressing high inflation and high unemployment are often at odds with each other. To treat high inflation, the Fed increases interest rates. In contrast, to address high unemployment and stimulate economic growth, it typically lowers interest rates.
Fortunately, for the past 40 years, the Fed has only ever had to correct one of these challenges at a time. But Chairman Powell’s recent comments suggest that, soon, we may face both at the same time. That hasn’t happened in a generation.
There is precedent for this, but it was so long ago that few people in the workforce today were in the workforce then. The last time we saw this was in the late 1970’s and early 1980’s. Already high for most of the 1970’s, inflation peaked at over 13%. To cripple inflation, the Federal Reserve raised interest rates to the highest in the history of centralized banking. Interest rates for home mortgages, if you could get one, were as high as 25%. And while the rate increase worked, in trying to fix inflation, unemployment spiked, and recovery took more than a decade.
We’re not saying history will repeat itself, but it’s important to recognize the signals and take proactive steps. Nonprofits, especially, face unique challenges that make these conditions more difficult to navigate.
Why This Matters for Nonprofits
Unlike for-profit companies, most nonprofits can’t simply raise their prices to offset cost increases. Many nonprofits, especially those in the human and social services sectors, will likely see demand for their services increase.
At the same time, you might also face tighter government funding, slower individual donations, and more competition for foundation grants.
What can you do to help your nonprofit survive, and even thrive, in a turbulent economy and continue to serve those who rely on you? In short: Identify, quantify, and have a contingency plan for your organization’s risks. Here are some practical ideas.
Strategies to Strengthen Your Nonprofit in an Unpredictable Economy
These aren’t abstract theories—these are strategies we use with our CFO clients across the nonprofit sector.
Financial Strategies
- Stress-test your organization’s financials: Perform scenario analyses. What if wages went up 10%? What if you lost a significant donor? What would your financials look like then?
- Review your debt and assets: Examine every line on your balance sheet and all fixed costs and ask how they will affect your organization if they’re subject to recession and/or inflation. For example, retire/refinance variable rate debt; monetize underutilized long-term assets.
- Revisit your reserves: Move short-term savings, like your operating reserves, into ultra-safe, inflation-protected, short-duration bonds and notes.
- Improve cash flow forecasting: Tighten month-to-month (or even week-to-week) visibility on cash needs to minimize expensive borrowing.
Operational Strategies
- Re-evaluate all vendor contracts: Renegotiate prices, seek multi-year deals with locked-in rates. (They’re going through this too; they’ll likely appreciate the certainty of a long-term contract.)
- Explore shared services models: Partnering with other, allied nonprofits in your area might allow you to defray costs by combining non-program overhead and back-office services.
- Embrace flexible staffing models: Outsourcing certain functions (like finance) can give you access to expertise without long-term overhead. It also gives you room to scale up or down as needed.
Revenue Strategies
- Personalize your fundraising: Communicate cost pressures to donors; convey to them the need for unrestricted funds; and if you rely on individual donations, remind them of how important your mission is to them and their gifts are to you. This is the time for sincere, personal connection with your donors
- Explore fee-for-service or earned income: Earned income can provide sustainability and connect beneficiaries with your organization. These strategies involve charging a modest fee for certain services or products your organization already offers, particularly those that provide direct value to beneficiaries or the broader community.
One example Chazin is seeing among its clients in the human services, arts and culture, and environmental sectors is the growing popularity of group service experiences. In exchange for a participation fee (accounted for as unrestricted donation revenue), the nonprofit offers a coordinated day of volunteer service tailored to individual corporate, faith-based, civic, or community groups.
These income streams don’t need to replace your core fundraising efforts, but they can diversify your revenue portfolio and provide a level of stability that pure donations can’t always guarantee, especially during economic shifts.
Governance Strategies
- Engage your board in contingency planning: Remind them of your organization’s reliance on their financial support. For example, if you have a reserve fund for operations, get your board to approve, in advance, the circumstances where you’ll access those funds and how much. Leave nothing for the last minute.
- Review your Investment Policy Statement (IPS) and your Endowment Spend Rate: Ensure it reflects current risk tolerance, includes inflation-aware benchmarks, and is durable enough to withstand a shaky economy.
Most important, avoid the impulse to hunker down! When the future’s uncertain, there’s an understandable instinct to want to pause, conserve, or wait things out. But the nonprofits that thrive long-term are the ones that prepare, identify risks, take precautions for the worst, and then plan for the future.
This is the time to be bold in your planning, humble in your assumptions, and strategic in your execution. Find the charismatic visionaries in your organization and give them a responsible level of freedom to find opportunities in the chaos and grow your organization into the future.
At Chazin, we help nonprofit leaders not only navigate what’s happening right now, but think three steps ahead. As head of our CFO Services practice, I’ve worked with organizations large and small to develop financial strategies that are resilient and mission-driven. If you’re thinking about your next move, or wondering how even to start, we’re here to help.
Let’s make sure your financial foundation is ready for whatever comes next.
Share This Post:
Chazin
With over 20 years working exclusively with nonprofits, we pride ourselves in having a unique understanding of nonprofit accounting needs. We believe that nonprofits deserve personalized, quality service and should not settle for a one-size-fits-all approach. We collaborate with you to provide a fully virtual and customized solution that is not only cost-effective but also strengthens your accounting function. We offer a team of industry experts at your disposal to provide advice, leading technology, and to supplement existing staff to improve efficiency and compliance.