This article is part of our “Business Planning Guide”—a curated list of our articles that will help you with the planning process!
Starting and running a nonprofit is an exhilarating experience, but it also requires thoughtful planning and execution to be successful. Nonprofit organizations share many overlapping needs with traditional for-profit ventures, including the need for a good business plan.
At some point in the process of starting or managing your nonprofit, you will probably realize that you need a business plan. Someone—maybe a trusted advisor or potential board member—asks to see your business plan or suggests that you create one, or perhaps your organization has received a generous donation and it’s time to strategize the use of those funds. Maybe a potential donor has requested to see a business plan prior to footing the bill for a major project. Or, the best possible reason, you want to manage better, prioritize, set tasks and schedules, review performance metrics, and improve accountability.
Whatever prompts the writing of your business plan, creating it should be a beneficial and rewarding experience. When all is said and done, you’ll have a thorough, living document that you can come back to time and again to help guide the future of your organization. In fact, if you don’t plan to revisit it every month, you’re not optimizing your management, or your plan.
Write for your business purpose
Why are you writing a business plan? Who will use it, who will execute it? Who will read it? Don’t assume plans are only for show—most are for improving management. Typically, a nonprofit creates a business plan because they want to manage better, which means they share it internally, or with potential donors. You may be in the process of starting a nonprofit, or you may be an existing nonprofit wanting to optimize management, find funding, or looking to hash out a long-term plan of action for your organization.
And if you are writing one as a formal document, then who will see this plan, and what do you need them to glean from it? For many nonprofits, writing a business plan won’t be motivated by the more traditional needs for creating one, such as applying for a small business loan.
Creating the business plan for your organization can be a great way to get your management team or board to connect over the vision, goals, and future of your nonprofit. It will allow you and your peers to take a step back and get some high-level perspective. Writing a business plan for a nonprofit can be an opportunity to examine the heart of your mission, the financing you’ll need to bring that mission to fruition, and your plan to sustain your operations into the future.
Remember that this is your plan, and you can always go back to what you’ve written and make changes as time goes on, as circumstances change, or as you find that you have a new audience to write for.
Assess the need
Many nonprofits perform what is referred to as a “needs analysis” or “needs assessment.” This is the process of researching the intended focus for your organization or project. You’re going to drill down into the details: Is the project you have in mind the project that your targeted community or population truly needs?
If you’re already up and running, is your organization going in the right direction? You want to make sure that your programs are relevant and effective. Look into organizations in your community that already exist to make sure you aren’t covering the same ground or proposing a redundant service. If you discover you’re going to be reaching an underserved population, so much the better. Now you’ll have hard numbers to showcase the immense value of your organization.
Part of the planning process is recognizing when an idea is out-dated or a non-starter. This is similar to a traditional business performing market research as they develop their plan—it helps you to see what has potential, what doesn’t, and what information you should include to flesh out and polish the business plan you’re creating.
Especially if you are using this plan to seek financing, having solid research to demonstrate the efficacy of your proposed program is vital.
A nonprofit plan outline
Keep in mind that developing a business plan is an ongoing process, it isn’t about writing a physical document that stays static, but a continually evolving strategy and action plan as your business progresses over time.
With that said, when you’re actually writing a business plan document, what should it look like? A nonprofit business plan will include many of the same sections of a standard business plan:
An executive summary of a business plan is typically the first section of the plan to be read, but the last to be written. This is because this section is a general overview of everything else in the business plan, the overall snapshot of what your vision is for this organization.
Take a big picture perspective in the writing here. Imagine that an important donor was reading only this section. You want to be sure you’re putting your best foot forward and addressing all of the essential points.
Are you making a life-changing product at little to no cost for a population in need? Are you providing an essential service to your community? If something was successful in the past but is now underfunded or defunct, are you planning on giving it new life?
Your organization is special or you wouldn’t spend so much time devoted to it. Lay out some of the nuts and bolts about what makes it great. Your nonprofit probably changes lives, changes your community, or maybe even changes the world. Explain how it does this.
This is a section where you really go into detail with the description of your current program, and the program(s) you’d like to have in the future. This section is where you can recount your past accomplishments, your present strengths and challenges, and expand on the mission of your organization.
If this plan is about receiving funding for a specific project or program, you’ll want to really sell the goals or existing outcomes of that project and provide any related research material.
Analyzing your market means where knowing your money comes from. Who are your supporters? What kind of person donates to your organization? Creating a “donor persona” could be a useful exercise to help you reflect on this subject and streamline your fundraising approach.
Include in this section how you will conduct donor outreach, what your fundraising targets are, and who your competitors are.
Unfortunately, since the recession in 2008, public arenas that were hit hard and lost funding (such as local public schools) are now struggling. Nonprofits are competing with more than they were before the recession, and some people are feeling strained about how charitable they can be financially. At this point, your organization may have a lot of current competition, but it could also be an opportunity to really get creative about fundraising and donor outreach. You could take a look at the methods you’ve used successfully in the past, the methods your competitors are using, and try to build an approach that is the best of both worlds.
Who is going to be involved and what are their duties? What do these individuals bring to the table?
Include both the management team of the day-to-day aspects of your nonprofit as well as board members, and mention those who may overlap between the two roles. Highlight their qualifications: titles, degrees, relevant past accomplishments, and designated responsibilities should be included in this section. It adds a personal touch to mention team members who are especially qualified because they’re close to the cause or have special first-hand experience with or knowledge of the population you’re serving.
There are probably some amazing, dedicated people with stellar qualifications on your team—this is the place to feature them (and don’t forget to include yourself!).
The financial plan is essential to any organization that’s seeking funding, but also incredibly useful internally to keep track of what you’ve done so far financially and where you’d like to see the organization go in the future. The financial section of your business plan should include a long-term budget and cash flow statement with a three to five year forecast. This will allow you to see to it that the organization has its basic financial needs covered. Any nonprofit has its standard level of funding required to stay operational, so it’s essential to make sure your organization will consistently maintain at least that much in the coffers.
From that point, it’s all about future planning: If you exceed your fundraising goals, what will be done with the surplus? What will you do if you don’t meet your fundraising goals? Are you accounting for appropriate amounts going to payroll and administrative costs over time? Thinking through a forecast of your financial plan over the next several years will help ensure that you are sustainable.
Money management skills are just as important in a nonprofit as they are in a for-profit business. Knowing the financial details of your organization is incredibly important in a world where the public is ranking the credibility of charities on the internet based off what percentage of donations makes it to the programs and services. As a nonprofit, people are interested in the details of how money is being dispersed within organizations, with this information often being posted online on sites like Charity Navigator, so the public can make informed decisions about donating.
Potential contributors will do their research—so make sure you do too. No matter who your donors are, they will want to know they can trust your organization with their money. A robust financial plan is a solid foundation for reference that your nonprofit is on the right track.
It’s important to remember as you plan that a business plan doesn’t have to be set in stone. It acts as a roadmap, something that you can come back to as a guide, then revise and edit to suit your purpose at a given time.
As you progress with the writing of your plan, it can be helpful to check out completed nonprofit business plan examples for reference. Or, if you’d rather leave it to the pros, check out LivePlan’s business consulting—you’ll get an MBA-written business plan in five business days.
In order to make strong choices that guide your nonprofit in the right direction, a business plan is essential. The planning process can be one of the most important tools you’ll have in successfully managing a nonprofit organization.