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The Economics of Prevention

Coined by Ben Franklin, the phrasean ounce of prevention is worth a pound of cure,” has long been a way to say that it is better to stop a problem from happening in the first place than it is to correct it after it has started. Whether that be illness, addiction, business closure, etc., this theme is still pertinent today: it is better to plan ahead in order to prevent a problem than it is to try to fix the problem after it has already occurred.   

Preventative health care, for example, while helping an individual to stay healthy, lowers both the individual’s and insurance company’s costs. Annual check-ups, cancer screenings, immunizations, and the like will reduce the risk for future diseases, disabilities, and fatalities. The National Institute on Drug Abuse reports that “prevention is the best strategy,” and reaffirms that “evidence-based interventions for substance use can save society money in medical costs and help individuals remain productive members of society.”   

Many organizations throughout the U.S. provide preventative trainings, services, and life-saving interventions in an effort to prevent the cycles of substance abuse, homelessness, human trafficking, etc. in our society before it begins, which not only saves lives but also saves our communities and taxpayers money. But Franklin’s words also apply to these organizations today in terms of taking preventative measures to ensure their own financial health.   

Many organizations focus hard and fast on helping others but often fail to focus on the financial health of their own organizations. In order for an organization to be effective and maximize impact in the long term, the organization needs a solid strategic plan to ensure their organization does not become financially “ill” or worse, have to close doors due to a lack of preventative measures. 

According to the 2021 nonprofit trends and impacts report, “The disruptions of 2020 were felt by nonprofits of all sizes, but small organizations, which make up most of the sector and depend most heavily on donations, experienced decreased donations in 2020 in greater numbers than large nonprofits. Forty-two percent of organizations with budgets under $500,000 experienced decreased donations in 2020, compared with 29 percent of organizations with budgets of $500,000 or more.”  

The National Council of Nonprofits reports that “92 percent of all reporting public charities had annual revenue of under one million dollars,” and that outside of private fees for services, government grants were the largest source of income for nonprofits.

There is still good news. We have seen more flexibility with government grants in regard to general support and operating expenses. We strongly urge organizations to take preventative action by planning strategically. This is a financial marathon, not a financial sprint.  It is not enough to say “We have enough money to get us through this year,” or worse, “We’re running out of money, we need to get a grant.”  Government grants make up a large portion of earnings for non-profits, however, it can take up to 18 months at times to receive these funds.  

Prevent closure, layoffs, and turning people away by planning for your organization’s future now. At The Woolf Group (TWG), we are passionate about helping organizations thrive in the long term so that they can serve with greater impact. TWG provides strategic planning guidance, as well as grant strategy and calendars in order to maximize donor potential without wasting valuable time. If you’re ready to focus on your organization’s long term financial health or need assistance getting back on track, look no further than TWG, because in the end, no organization wishes that they had not wasted time planning for their financial future.  

Sarah Nantel, Policy Associate & Strategy Consultant