The Great Culling Is Here. Is Your Organization Ready?
In December, I warned of a tough season for nonprofits and now we are seeing some of it happen. Right now, across the country, organizations that have done meaningful work for decades are closing. Some are doing it responsibly, with communication plans and transition support. Others are simply running out of road. Here in Richmond, we've watched three of our own in recent weeks — Art 180, CCHASM, and Swift Creek Mill Theatre — announce closures or pause operations. These are beloved organizations. They served real people. While the individual story about what happened could be different, the pattern should not be ignored.
The Numbers Are Not Reassuring
If you think this is a Richmond problem or a funding-cycle problem, the national data backs it up. The Nonprofit Finance Fund's 2025 State of the Nonprofit Sector survey found that 36% of nonprofits ended 2024 with an operating deficit — the highest rate in ten years of their survey data. Separately, 52% of nonprofits have three months or less in cash reserves, with many depending heavily on one or two major funding sources just to survive.
The federal funding environment has made things significantly worse. By January 2026, the Department of Government Efficiency had driven the termination of 15,887 federal grants totaling approximately $49 billion — and the Urban Institute reported that one in three nonprofit service providers experienced a government funding disruption in the first four to six months of 2025. The Nonprofit Alliance has noted that due to 2025 federal funding cuts and the compounding impacts of the 2025 government shutdown, additional funding challenges are anticipated for nonprofit organizations in 2026, including staffing and service cuts.
Here's what that means in plain terms: a significant percentage of nonprofits are operating right now with no margin for error, in a funding environment that has become actively hostile. Organizations that entered this moment already weakened — carrying deficits, without reserves, without a current strategic plan, or dependent on a single funding stream — are the ones most at risk and I think more will follow.
The hard truth about what's happening in Richmond — and what's happening nationally — is that external pressures are the match, not the fuel. The fuel is the accumulated instability that built up inside organizations over years of deferred decisions. When boards are not asking hard questions about reserves, when strategic plans are six years out of date, when leadership transitions happen without succession planning, when single-source dependency gets normalized — organizations become fragile. When a hard moment arrives, fragile organizations can’t make it through.The sector has to get honest about what the governance failures actually cost — in community impact, in staff livelihoods, in trust.
What Boards Must Do Right Now
Boards, this section is for you. Not staff. You.
Your fiduciary responsibility does not end at approving the budget and attending the annual gala. It means asking the questions that nobody else in the room has the standing to ask. Here are the ones that matter most right now.
Do you know your real financial position? Not the version that feels manageable — the actual numbers. What are your reserves in months, not dollars? What percentage of your revenue comes from your single largest source? If that source disappeared tomorrow, what would you do? If you can't answer these questions fluently, that is a problem that belongs on the agenda at your next meeting. You don’t have to have a financial background to really dig in – Drop the statements in a closed AI tool and ask it to suggest trends and risks to help inform your question asking.
Is your strategic plan actually guiding decisions? A strategic plan that lives in a drawer is not a strategic plan. It's a document. If your plan is more than three years old, or if your leadership team doesn't reference it regularly when making decisions, you are operating without a compass. We've written before about when it's time to refresh versus rebuild — but right now, the question is simpler: is there one, and is it alive?
Have you had an honest conversation about funding concentration risk? Financial experts broadly recommend that no single funder provide more than 15-20% of an organization's budget. That's the ideal. Many organizations can't hit that — but the gap between where you are and where you should be needs to be a named, tracked, active board concern.
Are you prepared for a leadership transition? Succession planning is one of the most consistently deferred governance responsibilities in the sector. Most boards know they should do it. Very few have done it. If your executive director left tomorrow — voluntarily or not — what would happen? If the honest answer is "we'd be in serious trouble," that is a risk your board is currently carrying without a mitigation plan.
What Leaders Must Do Right Now
Executive directors and senior leaders: you cannot fix what you can't name. And many of you are managing around hard truths right now because naming them feels like giving up, or like it will panic your board, or because there simply hasn't been time. What you need to do is make time and name the truth.
The leaders who navigate this moment well will be the ones who bring their boards the real picture — the reserves number, the dependency percentage, the strategic plan gap — and who frame it not as crisis, but as information. Information that allows the board to govern and the organization to act.
A few specific places to focus:
Diversify before you have to. Revenue diversification used to be best practice. Right now it is survival strategy. If a significant portion of your budget depends on federal pass-through funding, government contracts, or a single major foundation, that risk needs to be actively managed — not acknowledged and moved past.
Build or revisit your mission-based decision framework. When resources get tight, the instinct is to cut everything equally. That's the wrong move. The right move is to protect your mission core — the programs and functions without which you are not actually doing your work — and make deliberate choices about what is mission-adjacent or mission-optional. We use this framework regularly in our work with clients, and it turns an overwhelming budget conversation into one that is values-led.
Have the merger conversation early. Mergers take 12 to 18 months to execute well. They require both organizations to have enough runway to do the due diligence right. If you are looking at a difficult horizon, reach out to peer organizations now — not in the crisis. A well-executed merger is not a failure. It is often the most mission-aligned decision available.
Ask for help. The leaders I most respect in this sector are the ones who know when they are in over their head and say so. Find a peer. Find a coach. Find a consultant. The isolation that comes with leadership in a hard season makes every decision harder. You don't have to figure this out alone.
What Next?
The organizations that will come through this moment are not necessarily the largest or the best-funded. They are the ones that entered this environment with honest boards, current strategic plans, diversified revenue, and leaders who were willing to name hard truths before the crisis forced them to. If you want a thinking partner for any of it — a financial health conversation, a strategic planning process, a succession planning framework, or just a frank assessment of where your organization stands — we'd love to be in that conversation with you.