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.
However, it’s an unfortunate fact that 30% of nonprofits cease to exist within ten years from being chartered. A Forbes study even goes further to say that nearly half of all nonprofits are set up to fail within a few years of getting chartered.
The report states that the primary reason for this is the lack of a business plan that clearly defines a nonprofit’s vision and its path to achieve it. Running a nonprofit without a plan is just like shooting an arrow in the dark; you’re more likely to miss what you were aiming for and fail.
But you don’t just need a business plan for your nonprofit to guide your efforts to achieve your vision. You also need it to persuade major donors and secure grants from foundations.
Because foundations and donors don’t want to give away their money to an organization that doesn’t have any defined goals and a path to achieve them.
Think about it from their perspective, if you were a major donor, would you rather give your money to an organization that may just provide meals to a thousand people and be done or has a plan to end hunger in a community?
A nonprofit business plan is essential for the organization’s success, and in this post, we’ll go over what needs to be included in it.
What is a nonprofit business plan?
To be honest, a nonprofit business plan is no different from that of a for-profit business. It is created with the same intent of serving as a clear roadmap for your organization.
A nonprofit business plan explains the “who/what/when/where/how” of your organization, typically answering questions like:
- Who are your target prospects?
- Who will help you get to your objectives?
- What problems are you trying to solve, or what are you trying to achieve?
- What is unique about your organization?
- When do you plan to achieve your short-term and long-term goals?
- Where will you find the beneficiaries to serve?
- How do you plan to procure the required resources?
In overview, your nonprofit’s business plan is an action plan with not just your tasks and goals laid out, but also potential risks and contingencies mapped out in writing.
Why do nonprofits need a business plan?
The words “nonprofit” and “business plan” may seem contradictory when put together. But nonprofits still need it because most of the same rules of for-profit businesses apply to nonprofits too.
- Both nonprofits and for-profits have well-defined goals and missions; businesses have financial goals, whereas nonprofits aim for social impact.
- Nonprofits and corporations need to conduct a market analysis to understand why they are needed and to provide services accordingly.
- Like a private company, nonprofits also have to satisfy the needs of various stakeholders.
- Nonprofits and businesses have board members, managers, and different levels of staff to help the organization’s operations.
- Both nonprofits and for-profits need revenue to cover their daily expenses like overhead costs, software subscriptions, etc.
This is why your nonprofit needs a business plan to:
- Better understand your beneficiaries, partners, and other stakeholders so you can create targeting strategies to reach out to them more effectively.
- Assess your nonprofit fundraising model and its feasibility to keep your organization running long term.
- Plan for contingencies if you aren’t able to achieve crucial milestones with the original strategies.
- Craft a clear message for your organization and its mission. This, in turn, will be used in all your nonprofit communications to appeal to your target audience.
What should be in a nonprofit business plan?
Before crafting a business plan, you need to understand its format and have a basic understanding of what it entails.
A typical business plan for nonprofits consists of the following:
- Executive summary
- Organizational summary
- Customer & Market Analysis
- Marketing plan
- Operations plan
- Financial plan
- Impact plan
This is the chronology that your readers will read the business plan in. Let’s take a detailed look at what each of these sections entails.
1. Executive summary
The executive summary of your nonprofit business plan is a quick overview of everything included in the plan.
While it is the first page of the plan, the summary is generally written at the end after you craft the entire plan.
Typically, the executive summary consists of:
- Your nonprofit’s mission and vision.
- A summary of your market analysis.
- The reason why your organization is needed and how it plans to meet that need. You just have to give a brief of this here; you’ll expand on it in your market analysis section.
Since this is the first thing a reader reads, you have to make sure that the section is crafted in a tone that captures attention and motivates them to keep reading.
2. Organizational summary
As the name suggests, this section of the plan highlights the details of your organization. This includes:
- The type of nonprofit organization you are.
- The history of your organization. If you are a newly chartered organization, you can talk about the vision that led you to establish this organization instead.
- Details about your leadership, team and location.
- Services you offer or plan to offer.
The organizational summary is often combined with the executive summary. However, I would not recommend that as it makes your executive summary longer and may put people off. A longer summary may also distract the reader from key details (like your vision) that may compel them to read your plan further.
At this point in your nonprofit business plan, you have to start getting into the details of your work.
You start this section to clearly highlight what your nonprofit is doing or plans to do to achieve your vision. You will need to provide details about:
- The products or services you offer to help beneficiaries.
- Social programs or campaigns you wish to organize to raise money.
- The benefits that the community will derive from your work.
- Any other plans (like contingencies) to help you meet your needs to support your work.
Keep in mind that this section needs to be really specific. For example, saying that you “help underprivileged children” is not specific enough. You need to clearly state what help you’re providing (like education, food boxes, etc.).
The products/services/programs section is also a great place to add some visuals or photos from your past efforts (if possible) to keep the reader engaged.
4. Customer & market analysis
While the terms being used may sound too businessy, it’s important for nonprofits too. This is the part where you prove why your presence is essential to bring change.
In this section, you talk about the customers you serve, i.e., your beneficiaries.
You start this section with an explanation of the issues that made you decide to start your organization. This is where you expand on the brief you gave in the executive summary. After that, you move on to specifics about your beneficiaries like:
- Demographics: Age, gender, income, location, etc. For animal welfare organizations, you can talk about the specific animals, breeds, survival rates, etc.
- Their volume in the regions you plan to serve.
- Their needs and how are you planning to meet them.
- Existing organizations working to help them, and what they are doing well and where they are lacking.
Keep in mind that this section of your nonprofit business plan, facts, and figures are the most important thing. So make sure you do your research well to fill it out.
5. Marketing plan
Just like any business, marketing is a crucial part of a nonprofit too. After all, this is what will generate awareness about you and get you in front of:
- The people you serve so they can approach you for help.
- Your potential donors who will fund your efforts.
- Prospective volunteers to help you with your operations.
While you may have a detailed nonprofit marketing plan drafted for internal use, you don’t have to provide all the details in the business plan, just a brief. Make sure you provide relevant information on:
- Promotional strategies that you will be relying on to spread the word. For example, SMS marketing, posters or banners, etc.
- The reason you’ve chosen these strategies. You can talk about your track record of success if you’ve used them in the past or point out industry average statistics if it’s your first time.
- The approximate costs and ROI of these marketing strategies.
You can also talk about donor retention strategies here that you plan to implement. But of course, that would be something for you to refer to more than for your readers.
6. Operational plan
This section of your nonprofit business plan describes the “how” of all your efforts. Basically, you’ll be talking about the range of tasks you undertake to implement the programs and marketing strategies.
For example, if one of your programs is conducting a blood donation drive, then you will need to explain everything you need for the drive, how you will procure them, what will be happening on the day of the drive, who will be in charge of what, etc.
Typically, a good way to structure the operational plan is to split it into two major sections:
- Short-term operations: This will include your nonprofit’s day-to-day tasks. You can also talk about daily or short-term goals you plan to achieve through these activities.
- Long-term operations: Here, you’ll talk about the long-term goals you wish to achieve, like expanding to new locations or providing new services and the tasks you’ll undertake to accomplish them.
7. Financial plan
This is an important aspect, especially if you’re using your business plan to secure a loan, a grant, or a major donation. Your finances are something that these parties will scrutinize.
This section of your plan will include:
- Your current financial status including your current assets, cash on hand, liabilities, etc.
- Financial documents like balance sheets, income statements, cash flow sheets, or ways for the reader to access them.
- Grants or major contributions received.
- Positive cash flow sources like sponsorships, corporate partnerships, membership subscriptions, etc.
- Costs incurred like marketing costs, employee salaries, software subscriptions, legal expenses, permits or licensing, rent and utilities, etc.
- Fundraising expectations and plan on how you’ll use the excess funds.
For new nonprofits, most of the details might be assumptions or approximate values.
8. Impact plan
For businesses, the financial returns are the impact that people look at. For nonprofits, however, it’s about the social impact they make, which is why you need this section.
This is where you will talk about:
- What change are you trying to bring? Your vision for your organization will inform this.
- How are your efforts going to bring about this change in society?
- How will you measure the change you bring?
- Details of the impact you’ve made so far and how you’re going to take it further.
So, for example, if the change you’re trying to bring is ending hunger in all surrounding communities:
- Your efforts could entail setting up a fund to bear the costs of providing meals to the underprivileged.
- You could measure your success by taking into consideration the total number of meals you distribute over a specific period of time.
And finally, the last page of your nonprofit business plan. Generally, the appendix serves as a space to attach additional documents. These may not fit into your business plan but are important to support your claims.
Some documents that you can add to your appendix are:
- Balance sheets.
- Resumes of key staff and details on your board members.
- Your nonprofit impact report.
- Market research documentation.
- Copy of your IRS status letter.
And that’s it. With that, your nonprofit business plan is all set and ready to be used!
Many nonprofits start out with a lot of enthusiasm and passion for bringing change but fail on the way just because they don’t have a proper business plan to guide them.
This happens primarily because of the misconception that nonprofits are not like for-profit businesses and hence don’t need a “business plan.”
But you have to understand this; a business plan is nothing but a way to:
- Define clear objectives that all departments collectively work towards.
- Have a constructive plan to achieve said objectives.
- Plan ahead for your operations and reduce friction for added efficiency.
- Convey these aspects of your nonprofit to sponsors, funders, and beneficiaries to persuade them to get on board with you.
So, while the goals of nonprofits are different from that of for-profits, the way they achieve them is very similar, which makes a detailed business plan an asset for both entities.
Feature image source: Startup Stock Photos