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what to do when the rug is pulled out from under you

Now What? Practical Steps When Expected Funding Disappears

You open the email, envelope or funding announcement with anticipation—maybe even excitement—and then… nothing. ZERO. That grant you’ve counted on year after year? Gone. And your mind races through the ripple effect this could have on your organization, your team, and your mission.

It’s shocking. A gut punch. Panic-inducing.

But there are ways forward, even when the funding rug gets pulled out from under you. Here are some practical steps you can take now to stabilize the ship and start thinking creatively about what’s next.

1. Take Stock (and Don’t Panic)

First things first: take a deep breath. It’s normal to feel blindsided when you’re counting on funds and they vanish. You’re not alone in this—many organizations are facing the same challenges, and it isn't necessarily a reflection of your organization's worth.

First Steps: Gather your team or board to review financials. Identify what’s immediately impacted by the loss of funding and what can wait. You need a clear picture before making any big decisions.
Be Specific: If you can’t run certain programs without this funding, can you delay them rather than canceling them entirely? Are there expenses—like event materials, contractors, or travel—that can be postponed? Even small reductions add up.

Pro Tip: Reach out to your board or trusted financial advisors. Often, a fresh perspective can help you see where adjustments can be made without derailing your core work.

2. Communicate Transparently (But Stay Calm)

Your instinct might be to pull up a megaphone and announce that disaster has struck, but hold off for a second. It’s important to share this news with your stakeholders—your board, your staff, and maybe even some of your loyal donors—but the tone matters.

First Steps: Talk to your board first, as they’re your most immediate allies. Then, inform your staff and key donors about the situation. Be clear and focused on solutions: “We’re facing a challenge, and here’s how we’re adapting.”
Be Specific: Frame it as an opportunity for supporters to step up and help. People want to feel they’re making a difference, especially if you can show them how their support helps overcome a specific challenge.

Pro Tip: Don’t wait too long to communicate. Transparency builds trust, and you’ll need your stakeholders on board with the decisions you make in the coming weeks.

3. Reevaluate Your Priorities

Now comes the less fun part: the financials. Ask some hard questions about your budget. You might have to make some tough calls, but this is about survival and sustainability. If you have a finance committee or a board member with financial chops, lean on them for help. This may actually be a valuable opportunity to re-prioritize with a sharp focus on what’s mission-critical. It's OK to push some things to "next year" (because yes, there will be a next year).

First Steps: Identify which programs, staff positions, or initiatives are non-negotiable. Then, look at where you can tighten your belt. Can you push back on certain vendor contracts? Are there equipment or material purchases that can be delayed?
Be Specific: Focus your budget on what you do best—those programs or services that have the most impact and community engagement. It might mean scaling back on some things for now—even though they are “nice,” “fun,” or “a tradition”—but keeping your core mission strong is the priority.

Pro Tip: Get your board involved in these discussions. Their support in trimming non-essential expenses can help ease the process, and their expertise might reveal opportunities for cost savings you haven’t thought of.

4. Engage Your Donors Strategically

You might be tempted to blast your donors with a “Help, we’re broke!” email, but this is rather an opportunity to thoughtfully engage your most committed supporters. Frame this as an opportunity for them to step up as partners. You might be surprised by the level of support you can rally when a need is clear.

First Steps: Identify your most loyal major donors—those who’ve supported you through thick and thin—and reach out to them personally. Let them know how critical their support is during this time, and be specific about what their gift will do.
Be Specific: For example, ask three donors for a one-time gift of $5,000 each to help keep a specific program running or cover operational costs. Donors respond better when they know their contribution will make a direct, tangible impact.

Pro Tip: This is also a good time to consider a “matching challenge” campaign, where one major donor agrees to match the gifts of smaller donors, effectively doubling the impact. It’s a great way to rally support from all levels.

5. Contract a Consultant for Specialized Support

If the situation feels overwhelming or you’re facing a specific challenge (like rewriting grants or restructuring your budget), this might be the moment to call in outside help. A consultant can bring fresh expertise, helping you navigate tricky waters more efficiently.

First Steps: Reach out to the Network or ask for recommendations from other nonprofits that have worked with consultants. Whether you need help with grant writing, financial strategy, or donor engagement, the right consultant can offer targeted advice.
Be Specific: Consultants can help you strengthen future grant applications, streamline operations, or even help you pivot to new funding models. Sometimes, an outsider’s perspective makes all the difference.

Pro Tip: If your budget is tight, ask consultants if they offer sliding scale rates for small nonprofits.

6. Rethink Your Grant Strategy

This situation is tough, but it also presents an opportunity to learn. Seek feedback, and review it carefully. Did you talk with the grantor about your proposal to ensure it was a good fit? Were you rushed in your application? Was there a major change to the process you missed? Grants might look different in the future, and nonprofit organizations must be nimble to adapt to new directions.

First Steps: Review your denied application. Reach out to the grantmaker for feedback and make note of what can be improved next time.
Be Specific: For next year’s application cycle, start earlier. One common major misstep is waiting until the last minute. Those who apply early often have time to catch and correct compliance issues before submission—something you want to avoid repeating.

Pro Tip: If writing grants is not your strong suit, it might be time to contract a grant writer or consultant to help you navigate the process. Investing in professional expertise can often yield a much higher return.

7. Build Long-Term Resilience

This might be the most important step of all. The fact that a single grant could shake your organization may be a red flag—it means you're too dependent on one source of funding. While it's tough to think long-term when you're putting out immediate fires, remember that the healthiest nonprofits have a diverse mix of revenue streams. Start laying the groundwork now, so you're less vulnerable to these kinds of funding shocks in the future.

First Steps: Start by diversifying your revenue streams. Build up your monthly donor program, strengthen relationships with local businesses for sponsorships, and don’t forget about annual fundraising campaigns.
Be Specific: Focus on creating more sustainable income streams. For instance, launching a monthly donor program can provide a reliable base of support that doesn’t fluctuate with grant cycles. Invest more time into your donor stewardship efforts—this is about building long-term relationships, not just seeking immediate gifts.

Pro Tip: If your organization does not already have a reserve fund, create a multi-year plan to set aside 3-6 months of operational expenses for future unexpected financial challenges.

8. Increase Efficiency: Narrow Your Focus and Invest in Professional Development

Sometimes, the best way to manage a funding shortfall is by getting leaner and smarter. Narrowing your focus to the programs or services that have the greatest impact can streamline your operations, while investing in your team’s skills can pay off long-term.

First Steps: Identify what your organization does best, and double down on that. This might mean scaling back on smaller projects or experimenting with more efficient ways to deliver services.
Be Specific: Look for professional development opportunities that can help your staff work smarter. Greater expertise can save both time and money in the long run. For example, leveraging technology and tools—like AI for administrative tasks—can increase your capacity without adding extra costs.

Pro Tip: We are offering a Level Up workshop on using AI to increase capacity this October. This is a great way to boost efficiency and productivity, especially if you’re trying to do more with less.

For Organizations on the Brink

If your organization is already struggling, and this funding shortfall feels like the final straw, it’s time to have some hard conversations.

Assess Sustainability: Is this just a temporary crisis, or is it part of a deeper financial issue? You may need to explore whether partnerships, mergers, or restructuring are necessary for the long-run.
Talk to Your Board: Engage your board in candid discussions about your organization’s future. Their support and guidance are essential when navigating these kinds of challenges.
Consider Crisis Fundraising: If you’re at the brink, a targeted crisis campaign can help. Make a clear case to the community about what’s at stake and how immediate donations can help you stay afloat—but it must be accompanied by a new strategy for sustainability. No one wants to bail out something more than once.

Final Thoughts

The same creativity and passion that drive your mission are a great gift in the face of unexpected financial challenges. While the loss of significant funding is tough, these steps can help you navigate the challenge, adapt, and ultimately strengthen your organization for the future. Keep your mission front and center, and lean on your community.

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