How Record Inflation Is Hurting Nonprofits and How They Can Fight Back

Inflation is running at a 40-year high, making everything from gas to food to housing more expensive.

When prices increase in an inflationary environment like this, the nonprofit sector is particularly impacted. Unlike for-profit businesses, nonprofits can’t easily raise the cost of their goods and services, if at all. At the same time, the needs of their constituents will likely grow because household budgets are getting tighter as prices rise nearly across the board.

Since we have not seen inflation at this level in decades, many nonprofit organizations simply don’t have much experience dealing with it. Here are some of the biggest ways that inflation may be affecting your charity and our best advice for navigating through this fiscal storm:

Prepare for a Drop in Donations

Inflation is really a gauge of purchasing power. High inflation means your money doesn’t go as far. And when people are feeling pinched in their pocketbooks, it’s logical that they will look to cut out discretionary expenses, including charitable donations. While Americans gave in record amounts in 2020, don’t be surprised to see a dip in donations, if you haven’t already.

To overcome this, make sure your donors understand how inflation is affecting your organization. Many may not realize that with inflation running above 9%, that means you need to raise at least 9% more this year just to maintain your fundraising levels. It also means that costs for your operations and programming are rising accordingly. All of these are good reasons to ask donors to give a little more than they normally would.

This is also a time to ramp up your fundraising and marketing initiatives — not cut them back. Think about how you can diversify your income streams, adding an e-commerce store or peer-to-peer fundraising, for example. Experiment with new marketing channels such as TikTok, Facebook messaging and text-based marketing. Plan earlier and more seriously for your Giving Tuesday campaign this year. Be more aggressive about applying for public grants, seeking foundation support or partnering with for-profit companies.

Anticipate Anxiety Among Your Staff 

High inflation essentially shrinks your paycheck. While your salary doesn’t change, your ability to buy goods and services decreases. This forces workers to start looking at their wages differently and demand more raises, or leave their current jobs for higher paying ones. Nonprofits will have a really hard time retaining and hiring talent in this environment, especially in an already tight labor market.

If your organization is in a position to do so, consider offering bonuses or wage increases that will soften the impact of inflation on your employees’ household budgets. Annual cost-of-living raises may need to be recalculated.

If you’re unable to increase salaries, consider adding more non-monetary perks, like these: 

• Loosen restrictions on remote work, flexible hours and PTO. 
• Do more to help employees achieve better work-life balance — perhaps even moving to a four-day work week). 
• Increase opportunities for professional development. 
• Offer more wellness and mental health benefits.

Expect Your Operations to Cost More

Of course, if inflation is making everything more expensive, the cost to maintain the same level of service or programming that your organization provides will increase accordingly. 

This may not matter too much if you’re dealing with, say, office supplies, but it could have a huge effect on more significant expenses such as rent, wages, transportation and fuel costs, and making capital improvements. For example, inflation is forcing the Housing Assistance Council to scale back on the number of affordable-housing units it can provide this year — smack in the middle of a housing crisis.

“It’s stalled countless projects for us, right in the middle of a period of time when housing and shelter are the most important things needed to weather the storm of a pandemic,” said the nonprofit’s CEO David Lipsetz in an AP interview. “For us, a modest increase in costs can shut down a project in an area of the country where it’s needed the most.”

Make sure that you’re accounting for the corrosive effect of inflation in all of your budgets. Consider increasing your recurring donation levels, while being more realistic in terms of the revenue you can expect to generate this year. Take a hard look at your programming, prioritize essential services, and sunset or downsize initiatives that are nice to have but don’t seem to be making a sizable impact.

No charity is immune to inflation, especially at these historic levels. By taking steps to counter it, you’re protecting your programming and the health of your community.