Nonprofit leaders are built to think about how to solve our world’s biggest challenges over the long-term. We create bold vision statements, 10-year theories of change and 3–5 year strategic plans. But what happens when the ground beneath us shifts unexpectedly? We certainly learned what we were capable of during the COVID pandemic, and people are once again throwing around the words “unprecedented times” a lot lately, which begs the question, is planning possible?
We can answer this “yes,” if you’ve built a strategic plan that’s agile and updated often, using a system like objectives and key results. When created as a real-time document, your plan should serve as a flexible guide for your organization and stand the test of time. But increasingly, adding nonprofit scenario planning alongside traditional strategic planning is essential for ensuring your organization’s future health.
Today’s post will focus on when nonprofit scenario planning is necessary and how nonprofit organizations can do it.
What is nonprofit scenario planning?
Nonprofit scenario planning is the practice of imagining different future situations, and preparing for how they might impact your nonprofit. The most common scenario nonprofits plan for is loss of a significant funder, but there are other scenarios that warrant planning as well, such as:
- Local, state or federal regulations that could impact operations
- The transition of a founder or long-time executive director
- A merger with another organization
- The impact of an organizational rebrand
- The implications of staff restructuring
To evaluate potential scenarios that could impact your nonprofit, consider starting with a PESTLE analysis. This is a study of external market factors – Political, Economic, Social, Technological, Legal, Environmental – and how they might impact your organization.
How should nonprofits conduct scenario planning?
Once you’ve considered the various external factors that might impact your nonprofit, bring your staff and board members together around the purpose and scope of your nonprofit scenario planning. For example, you might decide you want to look at various funding scenarios for your organization over the next five years. Then, you’re going to want to brainstorm key uncertainties or driving forces of that funding loss.
So let’s say your organization has a $500,000 grant to provide housing and that funding is uncertain, you’ll build 3-4 narratives for how changes to that grant could impact your organization in the case:
- Scenario: Complete Loss of the Grant
- Scenario: 50% Reduction in Grant Funding
- Scenario: Grant Funding Is Increased
- Scenario: Grant Stays the Same
For each scenario, analyze the challenges and opportunities your organization could face and the strategic actions you will take.
Scenario: The Grant Goes Away Completely
Narrative: Our organization learns that the $500,000 annual grant we’ve relied on for the past five years is not renewed. This funding supports approximately 35% of our operating budget, including a significant portion of our community programming, evaluation efforts and three full-time staff roles.
In the short term, we initiate a managed reduction in expenses, including a pause on program expansion and a reevaluation of staffing levels. We also launch a “Bridge the Gap” fundraising campaign aimed at retaining core services through individual donor appeals, board engagement and targeted asks to lapsed funders. Long-term, we accelerate our revenue diversification strategy by expanding our major gifts program, pursuing new foundation prospects and exploring earned income opportunities. The loss, while difficult, forces us to build a more resilient and balanced funding model.
Scenario: The Grant Is Halved
Narrative: We are informed that our $500,000 annual grant is reduced to $250,000 next fiscal year due to shifting foundation priorities. This creates a $250,000 shortfall—impacting program delivery and staffing tied to the grant.
Our leadership team responds by prioritizing core outcomes supported by the grant and identifying areas for efficiency. We consider restructuring some programs to reduce costs while maintaining impact. In tandem, we develop a targeted fundraising initiative to close the gap, similar to the one we would launch if the funding went away entirely. This scenario underscores the importance of adaptive planning and pushes us to build a broader base of support.
Scenario: The Grant Is Increased
Narrative: To our surprise, the foundation not only renews our $500,000 grant but increases it to $750,000 as part of a new multi-year commitment. The funder expresses confidence in our results and encourages us to think boldly about scaling our impact.
In response, we convene staff and board leadership to assess strategic growth opportunities. Rather than simply expanding existing programs, we explore transformative investments, such as launching new initiatives in underserved areas, piloting innovative models or strengthening our internal capacity through technology and evaluation. We also set aside a portion of the increase for reserve funding, ensuring we’re prepared if future funding levels shift.
Scenario: The Grant Remains the Same
Narrative: The foundation renews our $500,000 annual grant for another year at the same level. While we’re relieved to have continued support, we recognize that costs have increased significantly due to inflation and program growth.
We use this moment to conduct a financial health check, making sure we’re not over-relying on this grant and that we’re accounting for cost creep. We hold steady on program delivery but begin conversations with the funder about a potential future increase. Internally, we continue diversifying our funding mix, using the stability of this grant as a strong foundation while cultivating new sources of support to grow sustainably.
Re-Evaluation and Iteration
Once you have the nonprofit scenario plans in place, you should revisit and update them often. If you’re looking for resources to help you, check out the Wallace Foundation’s StrongNonprofit’s Toolkit and this list of resources to navigate uncertainty, shared by the Minnesota Council of Nonprofits.
Scenario planning doesn’t have to be a massive undertaking—but it can be a powerful one. By intentionally exploring what could go wrong, what might go right and what’s simply uncertain, you can prepare your organization not just to survive change, but to adapt and thrive in the face of it.
Especially in a world where “unprecedented” seems to be the new normal, scenario planning is a strategic muscle worth developing. Start small, keep it collaborative and revisit often. You’ll not only build resilience, you’ll build confidence in your organization’s ability to lead through whatever comes next.
