At lunch the other day a friend asked how I thought the present downturn would affect the nonprofit sector. After I replied, she noted that my view was very different from how she'd been thinking about the fates of local nonprofits.

Her analogy was that the economic downturn was like the windstorms that roll through the Northwest once or twice a year. In the aftermath of those windstorms she looks at the patch of woods near her home and sees that the wind has toppled the older, sicker trees.

A similar analogy, mine, from the medical arena would be the effects we usually see when there is a bad cold snap or an extended heat wave. The vast majority of deaths in such circumstances are people who already have significant health problems.

But neither analogy really applies; if anything, plain old Darwinian (in its true form) evolutionary forces are at work. I inserted the qualifiers because too often in the 150 years since the publication of Origin of the Species the idea has been misused and misapplied to justify very non-scientific ideas.

In its purest form, evolutionary theory says that those species that are best equipped to survive in their environment will be favored.

And surviving in one's environment can be a very transitory and arbitrary.

Evolution does not ensure that the "best" species in the long run will survive; it only means that the species that can best survive today and tomorrow will survive.

The nonprofit sector needs to keep this in mind, both funder and fund seekers. Everyone needs to be thinking about what we want the sector, at least in our area, to look like and to act in ways that ensure that future. Because without thinking that through and acting on those ideas, we may find that the composition of our local nonprofit sector is a hodge-podge of groups that happened to survive because they were lucky.

For example, nonprofits are very sensitive to cash flow. Organizations can disappear almost overnight because of major cash flow problems. And this economic environment, with the downturn in so many categories of support essential to nonprofits, is one where cash flow problems can pop up at any time. An example is a recent post on a nonprofit networking exchange where a staff person was asking advice about getting a last check from an organization. This person had worked for two organizations that had gone out of business, both of which had so far failed to make good on the last payroll check.

In a purely Darwinian environment it doesn't matter how good your organization is or how important its mission. The organizations that can meet their cash flow needs will survive and those that cannot will founder.  

This concern doesn't mean that you should focus on finding a funder who'll give you the money to get through the next few months. It's not about getting through the next few months; it's about how you're going to get through the next couple of years.

What are some tools that will help you should a funder that you've got your act together?

First, have an up-to-date cash flow budget. There are several models around to use. Basically, you need to show how your expenses flow, month by month over the next few years, and how you estimate resources will come in.

As I talk with people in the community I'm surprised at how few nonprofits regularly share a cash flow budget with their board. Few organizations receive their funding in regular increments, i.e., close to the same amount each month all year around. It's critical to show how the normal flow (for your organization) of donations, ticket sales, tuition payments, etc. creates a revenue bulge in one part of the year that has to carry the organization's expenses throughout the rest of the year.

Second, how does this budget, both resources and expenditures, relate to your focus on the key activities that promote your mission? As funders and fund seekers do the funding dance sometimes the core activities that support mission get lost. 

Now is the time to look at all those activities and to focus on those that are most critical. And in doing so, I urge both funders and fund seekers to keep mission in mind. The services you started ten years ago to meet the needs of your clients may not be the best way to serve that same need today.

It's easy to see your organization as the organization that does X because X was your largest program that you've been doing for the longest time. You get known in the community as the organization that does X.

But what if there is another way to support your mission? What if the change you want to see in the community now requires different tactic? And finally, given the resources you think you can attract, including volunteers and other in-kind resources, what is the best way to deploy those resources? Do you do everything you can for a limited number of clients or provide a few services for a lot of clients?

There are right or wrong answers to those questions. But I do know that funders are eager to see that organizations have asked themselves those questions and thought through their answers, both for the impact on surviving today and for the long-term needs of the community and the nonprofit sector.