Nonprofit Succession Planning Through A Financial Lens

Most succession plans focus on recruitment and culture. They prepare your nonprofit to hire a new executive and integrate them into your team.

While recruitment and culture matter, don’t overlook the financial element of succession planning. A leadership transition can be costly, causing financial distress for your organization if you don’t prepare in advance.

To avoid setbacks in your financial strategy following an executive departure, you must build financial management into your plan. This guide will explore nonprofit succession planning through a financial lens, providing tips for navigating leadership changes without compromising your organization’s financial stability.

1. Budget for departure and transition costs.

An executive change will naturally come with its own expenses. If you prepare for these costs in advance, you’ll have enough funds to support the transition when the time comes. Your budget should account for expenses related to the following:

• Executive search. Many nonprofits work with executive search firms to find their ideal candidates. In addition to these firms’ fees, you may also incur expenses related to advertising the position, subsidizing candidate travel, and offering relocation assistance.

• Severance and payouts. A nonprofit executive’s severance package can range from several weeks’ to several months’ worth of their salary. Additionally, depending on your employment contract, you may need to pay out accrued paid time off (PTO) and continue covering health benefits throughout the severance period.
• Dual salaries. If your nonprofit pays severance or the new executive starts before the former executive finishes their role, a period of salary overlap will occur. That means you’ll need enough funding to compensate both staff members for a certain time frame.

Additionally, to secure a top candidate, you might have to pay the incoming executive a higher salary than the outgoing executive. Research what a competitive salary looks like for the position you’re hiring for to ensure your offers align with market rates.

2. Implement financial stability protocols.

As YPTC’s nonprofit financial management guide explains, “[Y]our nonprofit’s leadership team is responsible for managing your organization’s financial operations on a day-to-day basis.” Financial stability protocols can ease transition periods when those leaders are absent. Maintain control over your finances during this uncertain time by:

• Establishing a spending freeze. By halting non-essential spending, you not only preserve funds to cover transition costs, but you also leave room for the new executive to provide input on your financial management strategy.

• Strengthening cash flow monitoring. Considering your organization will have heightened expenses at this time and less oversight, closely monitor your cash flow to ensure you have enough cash to cover all expenses. For example, if you typically prepare cash flow forecasts on a monthly basis, consider increasing the frequency to weekly.
• Requiring dual authorization. Without a central executive, your organization is left more vulnerable to fraud and embezzlement. Requiring two signatures on large payments during this time ensures no one staff member has too much influence. Additionally, two rounds of review make it easier to catch errors, such as incorrect vendor invoice amounts or duplicate payments.

3. Build flexibility into your plan.

While you can do your best to plan for all potential expenses and scenarios, leadership transitions may introduce unexpected costs. By incorporating flexibility into your nonprofit succession plan’s budget, you can pivot and keep your nonprofit on track. Flexibility in this instance may look like:

• Using conservative revenue projections. Donors and sponsors may hesitate to contribute to your organization during a leadership transition. Their uncertainty about your next leader’s priorities may lead to less revenue than you typically generate, so be conservative with your revenue estimates to buffer against funding fluctuations.

• Creating a strategic reserve fund. When your new executive arrives, they should be able to start addressing pressing priorities right away. By setting aside a small strategic reserve fund, you empower the incoming leader to immediately allocate funding toward your organization’s needs without waiting for board approval. For example, if your donor management software lacks the capacity to handle your growing supporter base, the new leader may use the strategic reserve fund to upgrade your nonprofit’s technology so you can continue building relationships with each supporter.

• Prioritize staff retention. Leadership transitions can also cause uncertainty among your staff. Recognize their dedication and encourage them to stay at your organization by allocating resources toward staff retention initiatives.

Considering one-third of nonprofits experienced at least one type of government funding disruption in the first four to six months of 2025, you may have already experienced additional funding uncertainty. In addition to financial complications related to executive transitions, a flexible budget can also help you buffer against fluctuations in government funding.

4. Prioritize financial knowledge transfer and documentation.

Setting your new executive up for success requires sharing information about your financial data, strategy, and commitments. Ensure your outgoing executive compiles relevant financial resources for the new leader, such as:

• All financial passwords in an encrypted format
• A list of all bank accounts, credit cards, and signing authorities
• Vendor and lease contracts
• Audit firm contacts
• Past Form 990s

During the leadership transition, staff members may assume responsibilities typically reserved for the executive director, such as approving payroll, signing contracts, and communicating with major donors. After your board delegates authority for these tasks, train the designated team members to handle them. For instance, your nonprofit’s succession plan may include a list of major donors and how often your executive director typically communicates with them, allowing the staff member responsible for this task to maintain a consistent messaging cadence.

At FundMiner, we empower nonprofits to manage funds transparently, honor donor intent, and maintain stability through change. Our platform bridges fundraising and finance systems, giving teams real-time visibility into fund activity and reporting. Built for flexibility and collaboration, FundMiner helps mission-driven organizations strengthen stewardship, simplify compliance, and sustain long-term impact, especially during leadership transitions, when financial continuity matters most.

Book a strategy conversation with a Fund Management Expert to strengthen your organization’s financial resilience and unlock the full potential of your funds.

While these tips will help you refine the financial side of your nonprofit’s succession planning, an expert can help your team feel more confident in its plan. Consider partnering with a nonprofit controller to ensure your succession plans are financially sound.