In the 21st century, it is said that business plans are not necessary. Instead, corporations should be able to make their own assumptions about what will happen in the future and adjust as needed. However, these new models have led some nonprofits to question whether they need a plan at all. The results of this shift can be seen on our website where you’ll find plenty of resources for nonprofits who want one or any individual considering starting a nonprofit organization
There is a lot of talk about how to start a nonprofit business, but what does it take to actually write one? This article will help you get started with the basics.
Creating a business plan for a nonprofit organization, believe it or not, isn’t all that different from preparing for a conventional company.
Nonprofits sometimes avoid using the phrases “business planning” in favor of terms like “strategic plan” or “operational plan.” However, creating a strategy for a for-profit company and a nonprofit organization are both very comparable procedures. Both kinds of organizations must develop income projections and plan how they will spend the money they receive. They must also manage their finances and guarantee that they can meet their objectives while being viable.
In this article, I’ll show you how to create a strategy for your nonprofit that will impress your board of directors, make fundraising easier, and guarantee that you meet your goal.
Why is it necessary for a charity to have a business plan?
Setting objectives, having everyone on the same page, monitoring performance indicators, and improving over time are all part of good company planning. Even if your aim isn’t to make more money, you still need to be able to manage a financially sound business.
Business planning gives you the chance to look at the core of your goal, the funding you’ll need to see it through, and how you’ll keep your operations going in the future.
Nonprofits are also required to meet with a board of directors on a regular basis, and reporting on your organization’s finances is an important component of that meeting. You may compare your actual results to your financial projection in your company plan as part of your regular financial review with the board. Are you on track with your fundraising objectives and your spending? Is the organization’s financial situation where you want it to be?
A strong business plan may also help you attract big contributors who are interested in learning more about how your organization operates, as well as your financial health and responsibility. If you want to seek outside financing for capital expenditures, you’ll need a formal business plan—needed it’s by lenders.
Making a business plan for your company is a wonderful approach to bring your management team or board of directors together behind your vision, objectives, and trajectory. Simply going through the planning process with your coworkers will allow you to stand back and get some high-level perspective. 
An overview of a nonprofit business strategy
Remember that creating a company strategy is a continuous process. It’s not just about creating a static physical document, but about developing a strategy and action plan that evolves as your company grows. To monitor your success against your strategy, you must have frequent plan review sessions. This will most likely coincide with regular reports and meetings with the board of directors for most organizations.
Many of the components of a conventional business plan outline will appear in a nonprofit business plan. If you want to get started quickly, download our free business plan template as a Word document and modify it to suit the nonprofit plan framework below.
a brief overview
A nonprofit business plan’s executive summary is usually the first part to be read, but the last to be prepared. This is because this part serves as a summary of everything else in the business plan — a broad overview of your vision for the company.
Avoid internal language or acronyms, and write it as if you were sharing it with a potential donor or someone who is unfamiliar with your organization: avoid using internal jargon or acronyms, and write it such that someone who has never heard of you would understand what you’re doing.
Your executive summary should provide a quick outline of your company’s purpose. It should explain who you serve, how you provide the services you give, and how you generate money.
If you’re putting up a plan to share with prospective contributors, be sure to include a summary of what you’re asking for and how you plan to utilize the money you collect.
Opportunity
Begin this part of your nonprofit strategy by explaining the issue you’re trying to solve for your customers or the general public. Then describe how your company addresses the issue.
A positioning statement is an excellent approach to showcase your opportunity. Here’s a formula to help you figure out where you want to be:
[This product] [how it fulfills the requirement] for [target market description] who [target market need]. It [most significant differentiating characteristic] in comparison to [major competitor].
Here’s an example of a positioning statement that incorporates the formula:
Tutors Changing Lives (your organization or program name) assists youngsters aged five to twelve (target market) who are suffering with reading (their need) achieve up to grade-level reading via a once-a-week session (your solution).
Unlike the school district’s broad after-school homework lab (your state-funded competitor), our program focuses on teaching youngsters to read in only six months (how you differ).
You wouldn’t dedicate so much time to your organization if it wasn’t exceptional. In this part of your business strategy, lay out some of the nuts and bolts of what makes it exceptional. Your charity most likely makes a difference in people’s lives, communities, and even the globe. Describe how it does this.
This is where you get into the nitty gritty of the programs you’re providing. You’ll need to say how many individuals you serve and how they’re served.
the intended audience
This part of a for-profit company plan would be utilized to identify your target market. It’s essentially the same idea for nonprofits, but it’s framed in terms of people you’re helping with your organization. That are the people who profit from your services?
Because not all companies have direct customers, you may choose to skip this section if that’s the case. An environmental preservation group, for example, may seek to acquire property in order to protect natural ecosystems. The organization isn’t focused on helping specific groups of individuals, but rather on improving the environment as a whole.
organizations that are similar
Nonprofits, like everyone else, face competition. You’re up against other charities for donor attention and funding, as well as other groups that serve your target demographic. You still have competition even if your program is the only one in your region that provides a particular service.
Consider what your potential customers were doing to solve their issue (the one your company is addressing) before you arrived. If you operate an after-school tutoring program, you may find yourself vying for customers with after-school sports programs. Despite the fact that your organizations’ objectives are fundamentally different.
Competition for financing is a major problem for many nonprofit groups. You should utilize this part of your strategy to describe why people would donate to your organization rather than comparable organizations.
Services and initiatives in the future
Do you aspire to be a national nonprofit in five years if you’re operating a regional one? Do you wish to extend your existing service area from two to four years old to five to twelve years old? Use this area to discuss your long-term objectives.
You’ll profit from setting out a long-term strategy, just like you would in a conventional company. It not only assists in the direction of your charity, but it also serves as a road map for the board of directors and prospective investors.
Promotional and public relations tactics
This part would be about marketing and sales tactics in a for-profit company strategy. For nonprofits, you’ll discuss how you’ll reach out to your target customer demographic.
You’ll most likely perform a mix of the following:
- Print and direct mail advertising, television and radio advertising, and so forth.
- Press releases, brand awareness initiatives, and so on are examples of public relations.
- Website, email, blog, social media, and other forms of digital marketing
If you don’t advertise your company to customers and others who utilize your services, you may delete this part, much like the “target audience” section above.
Fees and costs
A charity business plan should contain an expenses or fees part instead of a price one.
Discuss how your program is financed, and if your customers’ fees are the same for everyone, or depending on their income level, or anything else. How will you make up the difference if your customers pay less for your service than it costs to operate the program?
You may indicate that you don’t charge for your services and programs here or leave this area blank.
Sources of funding
The majority of nonprofit organizations rely on fundraising to stay afloat. Your main funding sources will be included in this section of your company plan.
You’ll want to know who your fundraising target market is, just as you’ll want to know who your target audience is for your services. Who are your most ardent supporters? What kind of individual contributes to your cause? Creating a “donor persona” may be a helpful exercise in reflecting on this topic and streamlining your fundraising strategy.
You should also identify various levels of potential contributors and how you intend to communicate with them. You’ll almost certainly include details about your yearly giving program (for lower-tier contributors) and your big contributions program (folks who give larger amounts).
If you’re a private school, for example, you could consider your primary target market to be alumni who graduated in a certain year and with a specific income level. If you’re establishing a bequest program to increase your endowment, your target market might be a particular demographic of retirees who are interested in your cause.
Make some inquiries. The trick is to not list your target contributors as everyone with a wallet within a 3,000-mile radius. The more precise you can be about your potential contributors’ demographics, income level, and interests, the more focused (and cost-effective) your outreach will be.
Activities to raise funds
How will you deliver your message to your donors? Explain how you will promote your organization to prospective contributors and create income in this part of your business plan.
You may utilize a mix of direct mail, advertising, and fundraising activities to achieve your goal. Describe the main actions and initiatives you’ll utilize to reach out to potential contributors and generate funds.
Partnerships and strategic alliances
Discuss how you’ll collaborate with other groups in this area. For the first year, you may need to operate your program out of a room in the local public library. Perhaps your group collaborates with your school system to offer mental health counselors in local schools.
In certain cases, you may be reliant on public health programs like Medicaid to cover the expenses of your program. Mention all of your key relationships here, particularly if your program wouldn’t be able to function without them.
Metrics and milestones
It will be more difficult to carry out your nonprofit’s purpose without milestones and measurements. Milestones and metrics are markers along the road that show how well your program is functioning and how healthy your company is.
They may contain aspects of your fundraising objectives, such as monthly or quarterly contribution targets, or they could focus on your participation metrics. Don’t feel obligated to re-write every single objective and statistic for your organization since most charities dealing with foundations for funding undertake complicated reporting on some of them. Consider your long-term objectives, and if necessary, add additional material to the appendix of your business plan.
If you review your plan on a monthly basis, as we suggest, the items below may speak directly to the questions you anticipate your board of trustees asking during your monthly trustee meeting. The goal is to prevent unpleasant shocks by keeping a watch on your company’s performance. These objectives, as well as the ability to alter direction if they are not met, will aid your company in avoiding a budget deficit.
Risks and key assumptions
Your charity exists to help a certain group or cause. You presumably conducted some research before designing your main programs or services to ensure that there is a need for what you’re providing.
You are, however, most likely taking some calculated risks. Discuss the unknowns for your company in this area. You may address them if you give them a name.
For example, if you believe a children’s literacy program is needed, you might conduct a survey of local teachers or parents to confirm the need. However, since you haven’t started the program yet, one of your unknowns may be whether or not the kids will show up.
Company and management team
Who will be engaged, and what will their responsibilities be? What value do these people bring to the table?
Include members of your nonprofit’s day-to-day management staff as well as board members, as well as individuals who may overlap between the two positions. This section should highlight their credentials, including titles, degrees, significant previous achievements, and assigned duties. Mentioning team members who are particularly qualified because they are connected to the cause or have unique first-hand experience with or understanding of the demographic you’re serving gives a personal touch.
This is the area to highlight the outstanding, committed individuals on your team who have excellent credentials (and don’t forget to add yourself!).
a financial strategy
The financial plan is important for any group seeking financing, but it’s also very helpful for keeping track of what you’ve done financially so far and where you’d want to see the organization go in the future internally.
A long-term budget and cash flow statement with a three- to five-year projection should be included in the financial part of your company plan. This will enable you to verify whether the organization’s fundamental financial requirements have been met. Any charity needs a certain amount of money to remain afloat, so make sure yours does, too.
It’s all about future planning after that: What will you do with the extra money if you surpass your fundraising goals? What will you do if your fundraising targets aren’t met? Are you keeping track of how much money goes to payroll and administrative expenses over time? Making a projection of your financial strategy for the next several years can assist you guarantee that your business is viable.
In a nonprofit organization, money management skills are equally as essential as they are in a for-profit company. Knowing your organization’s financial information is critical in a world where the public evaluates organizations’ trustworthiness based on the proportion of contributions that go to programs and services. People are interested in the specifics of how money is distributed inside nonprofits, and this information is often provided online on sites like Charity Navigator so that the public may make educated giving choices.
Potential donors will do their homework, so do yours as well. Your contributors, no matter who they are, will want to know that they can put their confidence in you with their money. A strong financial strategy provides a solid basis for determining whether or not your charity is on track.
The process of business planning is continuous.
It’s essential to keep in mind that a business strategy doesn’t have to be rigid. It serves as a road map that you may return to as a reference point, then update and alter to fit your needs at the moment.
I suggest reviewing your financial plan once a month to check whether your company is on track, and then revising it as needed.
Additional Assistance
You may use our free business plan template to guide you through each component of your strategy. Also, for reference, go at a full charity business plan sample.
If you’re searching for a tool to assist you in writing your business plan, LivePlan is a good place to start. It may be simply customized to generate a charity business plan with step-by-step instructions. Through a single dashboard, you’ll be able to quickly create predictions and compare them to your actuals, allowing you to actively plan, modify, and show to investors and board members. It’s a wonderful idea to keep company planning simple so you can concentrate on helping the people you want to assist.
Note from the editor: This story was first published in 2014. In the year 2021, it was upgraded.
The “charity business plan template” is a document that includes all of the information about your nonprofit. It will help you to write a great business plan, and it’s been updated for 2021.
Frequently Asked Questions
How do you write a non-profit business plan?
A: Well, there are a few different ways to do this. You can search online for non-profit business plans that you might be able to find and use as a model for your own plan. Alternatively, you could ask someone whos done it before how they would approach the process of writing a nonprofit business plan so you know what topics and ideas should be addressed in order to make sure the success of your mission is successful. Lastly, if none of these suggestions work out, then I recommend going on Google and searching how write non profit business plan. There will likely be plenty of resources found by doing this type of search which will give guidance into completing an effective nonprofit business planning document
What is the correct order for the four steps nonprofits must use in the business planning process?
A: There is no correct order for these steps. They are all equally important and must be followed in any type of business plan.
What is a business plan for a non-profit?
A: A business plan is a document that outlines the owners plans for turning their idea into a profitable venture.
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