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Statistics from the National Center for Charitable Statistics (NCCS) show that there are over 1.5 million nonprofit organizations currently operating in the U.S. alone. Many of these organizations are hard at work helping people in need and addressing the great issues of our time. However, doing good work doesn’t necessarily translate into long-term success and financial stability. Other information has shown that around 12% of non-profits don’t make it past the 5-year mark, and this number expands to 17% at the 10-year mark.
12% of non-profits don’t make it past the 5-year mark and 17% at the 10-year mark
There are a variety of challenges behind these sobering statistics. In many cases, a nonprofit can be sunk before it starts due to a lack of a strong nonprofit business plan. Below is a complete guide to understanding why a nonprofit needs a business plan in place, and how to construct one, piece by piece.
The purpose of a nonprofit business plan
A business plan for a nonprofit is similar to that of a for-profit business plan, in that you want it to serve as a clear, complete roadmap for your organization. When your plan is complete, questions such as "what goals are we trying to accomplish?" or "what is the true purpose of our organization?" should be clear and simple to answer.
Your nonprofit business plan should provide answers to the following questions:
1. What activities do you plan to pursue in order to meet the organization’s high level goals?
2. What's your plan on getting revenue to fund these activities?
3. What are your operating costs and specifically how do these break down?
Note that there’s a difference between a business plan and a strategic plan, though there may be some overlap. A strategic plan is more conceptual, with different ideas you have in place to try and meet the organization’s greater vision (such as fighting homelessness or raising climate change awareness). A business plan serves as an action plan because it provides, in as much detail as possible, the specifics on how you’re going to execute your strategy.
- What is the Difference Between a Business Plan and a Strategic Plan?
- Business Planning for Nonprofits
Creating a nonprofit business plan
With this in mind, it’s important to discuss the individual sections of a nonprofit business plan. Having a proper plan in a recognizable format is essential for a variety of reasons. On your business’s end, it makes sure that as many issues or questions you may encounter are addressed up front. For outside entities, such as potential volunteers or donors, it shows that their time and energy will be managed well and put to good use. So, how do you go from conceptual to concrete?
Step 1: Write a mission statement
Having a mission statement is essential for any company, but even more so for nonprofits. Your markers of success are not just how the organization performs financially, but the impact it makes for your cause.
One of the easiest ways to do this is by creating a mission statement. A strong mission statement clarifies why your organization exists and determines the direction of activities.
At the head of their ethics page, NPR has a mission statement that clearly and concisely explains why they exist. From this you learn:
- The key point of their mission: creating a more informed public that understands new ideas and cultures
- Their mechanism of executing that vision: providing and reporting news/info that meets top journalistic standards
- Other essential details: their partnership with their membership statement
You should aim for the same level of clarity and brevity in your own mission statement.
The goal of a mission statement isn’t just about being able to showcase things externally, but also giving your internal team something to realign them if they get off track.
For example, if you're considering a new program or services, you can always check the idea against the mission statement. Does it align with your higher level goal and what your organization is ultimately trying to achieve? A mission statement is a compass to guide your team and keep the organization aligned and focused.
Step 2: Collect the data
You can’t prepare for the future without some data from the past and present. This can range from financial data if you’re already in operation to secured funding if you’re getting ready to start.
Data related to operations and finances (such as revenue, expenses, taxes, etc.) is crucial for budgeting and organizational decisions.
You'll also want to collect data about your target donor. Who are they in terms of their income, demographics, location, etc. and what is the best way to reach them? Every business needs to market, and answering these demographic questions are crucial to targeting the right audience in a marketing campaign.
You'll also need data about marketing costs collected from your fundraising, marketing, and CRM software and tools. This data can be extremely important for demonstrating the effectiveness of a given fundraising campaign or the organization as a whole.
Then there is data that nonprofits collect from third-party sources as to how to effectively address their cause, such as shared data from other nonprofits and data from governments.
By properly collecting and interpreting the above data, you can build your nonprofit to not only make an impact, but also ensure the organization is financially sustainable.
Step 3: Create an outline
Before you begin writing your plan, it’s important to have an outline of the sections of your plan. Just like an academic essay, it’s easier to make sure all the points are addressed by taking inventory of high level topics first. If you create an outline and find you don’t have all the materials you need to fill it, you may need to go back to the data collection stage.
Writing an outline gives you something simple to read that can easily be circulated to your team for input. Maybe some of your partners will want to emphasize an area that you missed or an area that needs more substance.
Having an outline makes it easier for you to create an organized, well-flowing piece. Each section needs to be clear on its own, but you also don’t want to be overly repetitive.
As a side-note, one area where a lot of business novices stall in terms of getting their plans off the ground is not knowing what format to choose or start with. The good news is there are a lot of resources available online for you to draw templates for from your plan, or just inspire one of your own.
Using a business plan template
You may want to use a template as a starting point for your business plan. The major benefit here is that a lot of the outlining work that we mentioned is already done for you. However, you may not want to follow the template word for word. A nonprofit business plan may require additional sections or parts that aren’t included in a conventional business plan template.
The best way to go about this is to try and focus less on copying the template, and more about copying the spirit of the template. For example, if you see a template that you like, you can keep the outline, but you may want to change the color scheme and font to better reflect your brand. And of course, all your text should be unique.
When it comes to adding a new section to a business plan template, for the most part, you can use your judgment. We will get into specific sections in a bit, but generally, you just want to pair your new section with the existing section that makes the most sense. For example, if your non-profit has retail sales as a part of a financial plan, you can include that along with the products, services and programs section.
- Free Nonprofit Sample Business Plans - Bplans
- Non-Profit Business Plan Template - Growthink
- Sample Nonprofit Business Plans - Bridgespan
- Nonprofit Business Plan Template - Slidebean
- 23+ Non Profit Business Plan Templates - Template.net
Nonprofit business plan sections
The exact content is going to vary based on the size, purpose, and nature of your nonprofit. However, there are certain sections that every business plan will need to have for investors, donors, and lenders to take you seriously. Generally, your outline will be built around the following main sections:
1. Executive summary
Many people write this last, even though it comes first in a business plan. This is because the executive summary is designed to be a general summary of the business plan as a whole. Naturally, it may be easier to write this after the rest of the business plan has been completed.
After reading your executive summary a person should ideally have a general idea of what the entire plan covers. Sometimes, a person may be interested in learning about your non-profit, but doesn’t have time to read a 20+ page document. In this case, the executive summary could be the difference between whether or not you land a major donor.
As a start, you want to cover the basic need your nonprofit services, why that need exists, and the way you plan to address that need. The goal here is to tell the story as clearly and and concisely as possible. If the person is sold and wants more details, they can read through the rest of your business plan.
This is the space where you can clarify exactly what your non-profit does. Think of it as explaining the way your nonprofit addresses that base need you laid out earlier. This can vary a lot based on what type of non-profit you’re running.
This page gives us some insight into the mechanisms Bucks County Historical Society uses to further their mission, which is “to educate and engage its many audiences in appreciating the past and to help people find stories and meanings relevant to their lives—both today and in the future.”
They accomplish this goal through putting together both permanent exhibits as well as regular events at their primary museum. However, in a non-profit business plan, you need to go further.
It’s important here not only to clearly explain who benefits from your services, but also the specific details how those services are provided. For example, saying you “help inner-city school children” isn’t specific enough. Are you providing education or material support? Your non-profit business plan readers need as much detail as possible using simple and clear language.
For a non-profit to succeed, it needs to have a steady stream of both donors and volunteers. Marketing plays a key role here as it does in a conventional business. This section should outline who your target audience is, and what you’ve already done/plan on doing to reach this audience. How you explain this is going to vary based on what stage your non-profit is in. We’ll split this section to make it more clear.
Nonprofits not in operation
Obviously, it’s difficult to market an idea effectively if you’re not in operation, but you still need to have a marketing plan in place. People who want to support your non-profit need to understand your marketing plan to attract donors. You need to profile all the data you have about your target market and outline how you plan to reach this audience.
Nonprofits already in operation
Marketing plans differ greatly for nonprofits already in operation. If your nonprofit is off the ground, you want to include data about your target market as well, along with other key details. Describe all your current marketing efforts, from events to general outreach, to conventional types of marketing like advertisements and email plans. Specific details are important. By the end of this, the reader should know:
- What type of marketing methods your organization prefers
- Why you’ve chosen these methods
- The track record of success using these methods
- What the costs and ROI of a marketing campaign
This is designed to serve as the “how” of your Products/Services/Programs section.
For example, if your goal is to provide school supplies for inner-city schoolchildren, you’ll need to explain how you will procure the supplies and distribute them to kids in need. Again, detail is essential. A reader should be able to understand not only how your non-profit operates on a daily basis, but also how it executes any task in the rest of the plan.
If your marketing plan says that you hold community events monthly to drum up interest. Who is in charge of the event? How are they run? How much do they cost? What personnel or volunteers are needed for each event? Where are the venues?
This is also a good place to cover additional certifications or insurance that your non-profit needs in order to execute these operations, and your current progress towards obtaining them.
Your operations section should also have a space dedicated to your team. The reason for this is, just like any other business plan, is that the strength of an organization lies in the people running it.
For example, let’s look at this profile from The Nature Conservancy. The main points of the biography are to showcase Chief Development Officer Jim Asp’s work history as it is relevant to his job. You’ll want to do something similar in your business plan’s team section.
Equally important is making sure that you cover any staff changes that you plan to implement in the near future in your business plan. The reason for this is that investors/partners may not want to sign on assuming that one leadership team is in place, only for it to change when the business reaches a certain stage.
The sections we’ve been talking about would also be in a traditional for profit business plan. We start to deviate a bit at this point. The impact section is designed to outline the social change you plan to make with your organization, and how your choices factor into those goals.
Remember the thoughts that go into that mission statement we mentioned before? This is your chance to show how you plan to address that mission with your actions, and how you plan to track your progress.
Let’s revisit the idea of helping inner-city school children by providing school supplies. What exactly is the metric you’re going to use to determine your success? For-profit businesses can have their finances as their primary KPI, but it’s not that easy for non-profits. Let’s say that your mission is to provide 1,000 schoolchildren in an underserved school district supplies for their classes. Your impact plan could cover two metrics:
- How many supplies are distributed
- Secondary impact (improved grades, classwork completed, etc).
The primary goal of this section is to transform that vision into concrete, measurable goals and objectives. A great acronym to help you create these are S.M.A.R.T. goals which stands for: specific, measurable, attainable, relevant, and timely.
Vitamin Angels does a good job of showing how their action supports the mission. Their goal of providing vitamins to mothers and children in developing countries has a concrete impact when we look at the numbers of how many children they service as well as how many countries they deliver to. As a non-profit business plan, it’s a good idea to include statistics like these to show exactly how close you are to your planned goals.
Every non-profit needs funding to operate, and this all-important section details exactly how you plan to cover these financial needs. Your business plan can be strong in every other section, but if your financial planning is flimsy, it’s going to prove difficult to gather believers to your cause.
It's important to paint a complete, positive picture of your fundraising plans and ambitions. Generally, this entails the following parts:
- Current financial status, such as current assets, cash on hand, liabilities
- Projections based off of your existing financial data and forms
- Key financial documents, such as a balance sheet, income statements, and cash flow sheet
- Any grants or major contributions received
- Your plan for fundraising (this may overlap with your marketing section which is okay)
- Potential issues and hurdles to your funding plan
- Your plans to address those issues
- How you'll utilize surplus donations
- Startup costs (if your non-profit is not established yet)
In general, if you see something else that isn’t accounted for here, it’s better to be safe than sorry, and put the relevant information in. It’s better to have too much information than too little when it comes to finances, especially since there is usually a clear preference for transparent business culture.
- How to Make a Five-Year Budget Plan for a Nonprofit
- Financial Transparency - National Council of Nonprofits
Generally, this serves as a space to attach additional documents and elements that you may find useful for your business plan. This can include things like supplementary charts or a list of your board of directors.
This is also a good place to put text or technical information that you think may be relevant to your business plan, but might be long-winded or difficult to read. A lot of the flow and structure concerns you have for a plan don’t really apply with an appendix.
In summary, while a non-profit may have very different goals than your average business, the ways that they reach those goals do have a lot of similarities with for-profit businesses. The best way to ensure your success is to have a clear, concrete vision and path to different milestones along the way. A solid, in-depth business plan also gives you something to refer back to when you are struggling and not sure where to turn.
Alongside your business plan, you also want to use tools and resources that promote efficiency at all levels. For example, every non-profit needs a consistent stream of donations to survive, so consider using a program like GiveForms that creates simple, accessible forms for your donors to easily make donations. Accounting and budgeting for these in your plans can pay dividends later on.