- Get your financial house in order. Year to date budgets need to be up to date, program and operating expenses need to be fully captured, and cash flow needs to be accurately described. Set aside the time for your staff to prepare.
- Create a dashboard or operational snapshot. After all of your accounts are reconciled, it needs to be meaningfully conveyed to a variety of parties. While the source data will likely need to be made available if the merger or acquisition gets further along, for early conversations, a snapshot will help keep things moving while painting a picture of the nonprofit operations.
- Understand seasonality and other factors that affect service needs. The environmental landscape may be different even between two nonprofits that are working on the same issue. Perhaps one may be more affected by the political situation because of previous funding relationships. Alternatively, the board may have committed to serving a geographic area or continuing a particular program that the other nonprofit may not serve.
- Catalogue your resource and be sure to think beyond financial. This can look like a robust database, a responsive volunteer base, or even a strong social media following or e-communications list. While endowments and strong cash flow are highly coveted resources in nonprofits, there are a number of other assets a nonprofit may bring to the table.
- Initiate and encourage discussions and buy in from senior leadership and the governing board. Significant operating changes cannot happen without executive agreement and while some initial exploratory conversations can happen before you have formal go-ahead, it would be wise to maintain an ongoing open dialogue with the governing board and executive leadership to ensure time is not wasted unnecessarily.
- Be prepared for one-time costs related not only to the eventual merger, but also to the exploration including due diligence and strategic planning. While some of these costs will yield returns down the line, like investments in a more sophisticated database or the elimination of redundant positions, for example, some will be transactional and not recouped, like the investment in an outside consultant or lawyer, for example.
- If a merger seems unlikely or is derailed by something, be open to other ways to partner. Partnerships can take many forms, both legally and practically. Identify where the gap or misconnect exists and consider ways to work together around them.
- Review online resources to manage your expectations, educate your team on what may come to pass, and to go into the process as informed as possible. Some great resources include:
- National Council of Nonprofits
- Nonprofit Sustainability Initiative
- Nonprofits Insurance Alliance
- The Bridgespan Group
- CompassPoint
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