If your inbox looks anything like mine, there’s lots of talk about contingency planning. You can attend webinars, sit through Zoom presentations, download an app. Maybe you have time for all that, but if you just want some quick 411 to help you figure out how to steer your boat in the storm, we offer some quick guidance:

Definition: A contingency plan organizes a set of critical decisions that are contingent on a combination of known and unknown variables.

That’s a nice wonky definition. How would you actually make a contingency plan? Let’s break it down into five steps:

1. Identify the decisions you have to make that are critical.

What’s critical is in the eye of the beholder, but in my experience, critical decisions at a nonprofit have a material impact on the people you serve, the people you employ, or the people who have a stake in what you do. If you have to add/close a site or expand/reduce the site’s hours, hire/lay off staff or raise/reduce their pay, these are examples of critical decisions that would have a material impact.

2. Identify what you already know.

What are the expenses that are locked in for the coming year? Examples may include non-negotiable obligations like rent and debt service. Some staff positions you may need to cut may result in offsetting revenue losses if all or part of their salary is coming from a grant you’d have to give back if you stopped paying for that position. If you cut staff, you’ll need to take separation costs like unemployment into account. You may lose sunk costs like leasehold improvements and security deposits if you walk away from a lease. This doesn’t mean you shouldn’t make these decisions (you may have little choice in the matter), but you should understand the full costs.

3. Identify what you don’t know.

How much grant money can you raise this year? That’s a variable, and you probably don’t know the answer yet. Variables can be financial or programmatic. What they have in common is that whether they come in higher or lower than anticipated will have an impact on a critical decision. For example, if you applied for one of the Payroll Protection Program loans, whether you get the full amount you requested or some percentage of that will affect how long you can keep your current staffing levels intact. If you’re running an after school program, social distancing protections may require you to reduce the number of students you serve, or move to staggered programming. That’s a variable that will have both financial and programmatic implications.

4. Make assumptions.

You won’t know the answers to all of your unknown questions before you need to make a decision. So, you need to model your choices based on assumptions. For example, we could assume an annual fund donor attrition rate and model what would happen if you lose 10%-20%-30% of your annual fund donations. What are some hoped for revenue sources (e.g., PPP loans, emergency grants, donor appeals)? How likely is each (we usually rank each source at 25%, 50%, or 75% and exclude sources that are less than 25% likely)?

5. Develop a timeline and milestones.

At what point do critical decisions need to be made? For example, the PPP loan may cover some or all of your staffing costs through the end of June. When do you need to make staffing decisions for July forward? Are there key variables (e.g., an emergency grant decision) that, when better known, will influence how much longer you can maintain your current headcount?

If your head is still swimming, you’re not alone. This is tough stuff, and you will probably need some people to lean on. When we develop contingency plans for clients, we use an Excel spreadsheet like the one above to build it out just so we can visualize all of the known and unknown variables, assumptions, and repercussions of possible choices. You may have board members who are able to roll up their sleeves and help you think this through. And we’re offering complimentary office hours to help you get started. Use the “Contact Us” form below to set something up.

Of course, the choices you need to make aren’t just about math. You may have to rethink your organization’s strategic approach in order to survive and rebound on the other side of the crisis. In our next post, my colleague, Amanda Zieselman, will share some of the strategic questions you need to ask in a contingency plan.