jeffatjitasa
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Sarah – We did the same. I spent a good bit of time over the past year studying companies that have been virtual for a decade or more. There is more than a few of them. The pandemic forced a lot of us into it, but there are great lessons that can be learned by those who went before us. I have a “Distributed Workforce Playbook” that is Jitasa-specific, but includes a lot of links to the research and articles I found most helpful. I’m happy to share (wish I could just add the doc here), so email me and I can send it over. As for the cost, we basically took the rent expense that we are no longer paying, divided by 2, and made that our Travel & Event budget for bringing people together.
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We advise that the level of reserves should really be related to consistency, stability, and diversity of your funding. While we know that macro events can create massive change, there are types of nonprofit revenue sources that are less volatile than others. For example, we work with a variety of youth camping organizations. Highly reliable revenue. Until COVID. Others rely on government contracts that seem reliable, but not if it is 65% of your revenue.
People talk about the panacea of earned income, but I disagree. Business is hard. 80% of businesses fail. That number is quite likely higher for nonprofits attempting earned income. But I believe there is a place for it as part of a diversified revenue stream. If you have 1,000 donors each giving you relatively the same amounts, you need less cash reserves. Because the chances of all 1,000 abandoning you at the same time is very very low. If you have 1,000 donors and 1 of them makes up 50% of your donations, then you need a far higher cash reserve because the chances of that 1 person abandoning you is very real.
So while 3 to 6 months is a handy quick benchmark, I think it really takes analyzing the diversity, stability, and consistency of your funding. Assess the risk. And then set the appropriate level. And to go a step further, many banks will provide lines-of-credit to nonprofits if they have donors or Board members who will guarantee them. This can help you reduce your cash reserves so you can pump it into missions, but still have the ability to access cash when and if a storm hits.
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We have a client that receives $11 / hour reimbursement for CNAs. They had to shut down the program because they simply can’t hire CNAs at that salary.
Another one of our clients remarked to us, “We can’t just increase the price of care. We aren’t Starbucks, we can’t just add 50 cents to the price of a cup of coffee.”
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I love this idea of a one-time cost of living bonus. The nice thing is it then gives you time to see if inflation subsides. Taking away a pay increase is nearly impossible, not giving the bonus next year is easy and budget friendly. Or you buy yourself time to raise the money, or reallocate money, to ensure you can give significant raises. The challenge is most people give our raises annually, but inflation hits immediately. Which is why I LOVE the bonus idea.
