The National Center for Charitable Statistics shows over 1.5 million nonprofit organizations operating in the U.S. alone. Many of these organizations are hard at work helping people who need it and addressing great issues like poverty, education, etc. Yet sadly enough, 12% of nonprofits don’t make it past five years, while 17% fail within ten years. Considering these statistics, it is clear that a nonprofit business plan is essential for the success of a nonprofit business.
In many cases, nonprofits can be sunk before they start due to the lack of a strong nonprofit business plan. There are several reasons for such sobering statistics. Below is an in-depth guide to understanding why nonprofits need their own business plans and how you can construct them one piece by piece.
A nonprofit business plan is a living document that should be updated frequently. It describes your nonprofit as it currently is and lays out your goals for the next three to five years. Your goal might not just be about making money but also about promoting change in society or solving a need within a community that you identify with.
Why you should create a non-profit business plan
A nonprofit business plan s very similar to that of other businesses. It should serve as a clear, complete map of your organization’s goals. At the end, when it is done, questions such as “What goal are we trying to accomplish?” “What is the purpose of our organization?”, will be simple and easy to answer.
Your plan should have answers to questions like:
- What activities will be executed by your organization?
- How are you going to fund these activities?
- What are the costs of operations?
It is essential to know the difference between business plans and strategic plans. A strategic plan with different ideas to be executed for the goal of an organization is more conceptual. On the other hand, a business plan serves as a step toward executing your strategy because it contains all specifics on how you are going to do so.
Steps to create a non-profit business plan
Having a proper nonprofit business plan in an understandable format is essential for various reasons. On your end, it makes sure that as many issues or questions you may encounter are addressed upfront. For people such as potential volunteers or donors, it shows them how well and wisely their time will be managed and put to good use if they do choose to get involved with your organization.
Step 1 – Create a mission statement
A mission statement is crucial for any company, but it’s even more so for nonprofits and charities. Your determiners of success are not just how your nonprofit performs financially, but also the impact and difference you make regarding your cause.
A strong mission statement will clarify why your organization exists and determine what direction its activities take to impact your nonprofit’s purpose or goal.
The mission statement should convey:
- The key point of their mission
- Mechanism to accomplish this mission
- Other details like partnerships
The goal of a mission statement is not just about being able to show things externally but giving your internal team something to realign them if they get off track. When you create clarity and brevity in your company’s mission statement, it becomes easier for people who work there to know what their role is.
Step 2 – Data collection
You need data from the past, present, and future to prepare for what’s coming. For instance, financial data is crucial if you’re already in operation.
Data related to operational finances, i.e., revenue and expenses, are essential for budgeting decisions and organizational choices like hiring or firing employees. Alternatively, secured funding (if you are about to start up) will be necessary too.
You will need to collect data about:
- Your target donor – In terms of their income, demographics, and location, these are people who should be targeted in marketing campaigns. Every business needs to market itself, and answering these demographic questions will help you reach the right audience for your campaign!
- Marketing costs – In order to demonstrate the effectiveness of a fundraising campaign or your organization, you’ll need data about marketing costs. This information can be collected from CRM software and tools, and from other kinds of software.
- Data from third-party sources – Nonprofits collect data about how to address their cause effectively, including shared data from other nonprofit organizations and government data.
Collecting and interpreting the data mentioned above is vital to building your nonprofit so that you make an impact on those around you and ensure your organization is financially sustainable.
Step 3 – Create an outline
Before you start writing your nonprofit business plan, it’s important to outline what topics will be covered. An outline is an excellent way to check that all the points are addressed before moving on. If you create an outline and find out that there are still materials left for research, go back to the data collection stage so we can add everything necessary in this section.
An outline can help you create an organized, well-flowing piece that is easy to understand and follow.
Sections in a non-profit business plan
The content of your nonprofit business plan will vary based on your organization’s size, purpose, and nature. However, there are some sections that every business plan needs to have for investors/donors/lenders to take you seriously.
Generally, the outline for a nonprofit business plan is built around these main sections:
Executive summary
Many people write the executive summary last, even though it should come before everything else. This is because the goal of an executive summary is to provide a general overview of your entire business plan. It may be easier for you to put this at the end after all other sections have been completed.
The Executive Summary is the section in which you sell your nonprofit and its ideas. Here, you should describe the organization clearly and concisely. Make sure to customize it depending on your audience (i.e., if you’re looking for a grant or board member).
When you read an executive summary, a person should ideally have a general idea of what the entire plan covers.
Sometimes, people may be interested in learning about your non-profit but don’t have time to read a long document that is 20+ pages. In this case, it can make all the difference whether or not you land them as one of your major donors.
Services and programs
This section of your nonprofit business plan should include what exactly your organization does. It should answer the following questions:
- What products, services, and programs does your organization provide?
- How do your organization’s actions benefit the community?
- What need is your organization meeting?
- What will it execute to meet this need?
Your services should make your potential donors feel like they are getting their money’s worth. For example, saying “helps inner-city children” isn’t specific enough.
Are you offering free education or financial resources? Your non-profit business plan readers should obtain as much detail as possible to understand how the benefits of donating come about.
Your programs, products, and services section sums up what your organization offers. These offerings include everything for customers, donors, volunteers, and recipients.
A farmers market may sell tables to its vendors and give branded totes bags to donors or sell handmade goods to shoppers while creating programs that feed underprivileged families.
Marketing
For a non-profit to succeed, it needs donors and volunteers. Marketing is key here just as in a conventional business. This section should outline who your target audience is, what you’ve already done/plan on doing to reach this audience, and how you explain that for the stage of development your nonprofit organization is at:
- Nonprofits not in operation
Non-profits are difficult to market, especially when they’re not operational yet. But you still need a marketing plan in place! You need to be able to showcase your organization’s goals and objectives to potential donors so that people will want to help out. To do this, you’ll want the data about your target audience; outline how you intend to reach them by profiling all of the information.
- Nonprofits already in operation
Nonprofits are very diverse in terms of marketing plans. If you already have a nonprofit, you need to include details about your target market and other key pieces of data. Share all the current efforts for this nonprofit, from events to general outreach and traditional types of marketing like advertisements or email subscriptions.
Here you should answer the following questions:
- What marketing methods are you going to use?
- Why have you chosen these methods?
- What are the costs and ROI of these methods?
If your nonprofit is already in operation, describe in detail all current marketing activities: any outreach activities or campaigns you have undertaken and anything else that has been successful so far. Be specific about outcomes, activities, and costs – these three components are vital to the success of an organization’s initiatives. If your nonprofit is new, outline projections based on specific data you gathered about your market.
Operations
This section will provide details on exactly how you will accomplish everything you mentioned in the services section.
The operational plan is how your nonprofit plans to deliver activities. The importance of an evaluation of the impact on operations and programs is included in a good operational plan.
The daily operations of your organization should be outlined in the operational plan, such as other people you work with (e.g partners and suppliers), any legal procedures that your company needs to meet (compliance if distributing food), the insurance coverage you have, or will need, etc.
For example, when your goal is to provide school supplies for inner-city kids, explain how you will procure and distribute them. Detail is essential in communicating with a reader; they need to understand how your nonprofit functions daily and the approach it takes when executing any task listed elsewhere in the plan.
Equally important is ensuring that you cover any changes in your team in your nonprofit business plan. This is because partners may not want to sign on, assuming one leadership team will be in place, only to change when the company reaches a certain stage.
Impact
Unlike a traditional for-profit business plan, the sections we’ve been talking about would not be in this a nonprofit business plan. We start to deviate from that point on though. The impact section outlines the social changes you intend your organization to make and how those choices affect achieving them.
Answer these questions in your impact plan:
- What are the most important and meaningful goals for the community you aim to serve?
- How are you planning to achieve these goals through sequential objectives?
This section defines your nonprofit’s achievements in concrete terms and sets specific goals. These are the key to unlocking support, so they’re critical to your organization’s success.
This section aims to create a set of measurable goals and objectives. S.M.A.R.T., which stands for Specific, Measurable, Attainable, Relevant, and Timely
- Specificity will ensure that your vision becomes concrete with no room for confusion or misunderstanding
- Measurability means you can track progress easily over time;
- Attainability makes certain that you have what it takes to accomplish your goal
- Relevance ensures they are important enough so as not to be discarded
- Timely meaning there is a deadline that you have for yourself
Organizations with a non-profit focus typically include statistics like these to show how close they are to achieving their desired goals.
Funders want to know whom you are helping and how things will be measured for them- this is what helps determine whether or not they’ll donate money!
Financial plan
Non-profit organizations need funding in order to operate, and this section details the exact plans on how you will cover these financial needs. With a solid understanding of your finances along with every other part of your nonprofit business plan, it’ll be much easier for you to find followers who believe in what you’re doing.
Developing a financial plan is one of the most important steps in your nonprofit business plan. It will allow you to make sure that your organization has its basic financial needs covered. Some platforms where you can start a funding campaign for your nonprofit are GoFundMe, Fundly, JustGiving.
Steps to develop a financial plan:
- Explain the organization’s present financial status – this includes current assets, liabilities, and cash on hand
- Develop financial projections based upon the data reflected in the first step
- Include the key financial documents like balance sheet, cash flow statement, income sheets, etc
- List down any governmental or non-governmental grants that your organization has received
- Outline your plan for raising funds
- Identify the loopholes and gaps in your funding plan, and any hurdles you might face during fundraising. Also, brainstorm how you can manage these hurdles.
- Make a plan for what you will do with any surplus donation that you could receive
- If your nonprofit organization is not yet established, also include start-up costs
If your nonprofit is already operational, use current accounting records to develop this section of the nonprofit business plan. Knowing these financial details is essential in a world where people demand transparency about how donations are used.
The financials are better to include more information than not enough. People usually want a transparent culture, so it’s best to provide too much detail rather than insufficient evidence when it comes to your finances.
Appendix
Include any extra documents pertinent to your nonprofit organization in the additional information section, such as an organizational flow chart, a current fiscal year budget, or a list of board members. This usually serves as an attachment of supplementary documents and elements that you may find helpful in your business plan. You may also include documents about your I.R.S. status letter and balance sheets.
If you feel like text or technical information may be relevant to your business plan, but it might seem long-winded or confusing, this is a good place to put them. You can write about flow and structure concerns in an appendix that doesn’t apply here.
Templates for your nonprofit business plan
A template can be a great starting point for your business plan because it outlines most of the work you’ll need to do. However, it will not cover all the bases that your type of project may require. For example, a nonprofit organization will likely have extra sections or parts than what is seen in conventional templates.
For example, if you see a template that looks like something your brand may want, it would only make sense for you to change the color scheme and font to suit your company’s identity better. Of course, all of your text should be unique too! An excellent way to approach this is by trying not to copy the template but instead focus on how you can imitate its spirit and maintain a similar outline.
Here are some templates that you can try:
Conclusion
In summary, non-profits and for-profit businesses have a lot in common. One similarity is the way they both reach their goals.
The best way to ensure your success is to create a clear vision and path with different milestones along the way and have an in-depth plan that you can refer back to when struggling or not sure what direction to turn towards next.
It’s important to note that your nonprofit business plan shouldn’t be set in stone from the beginning. It can and should change and evolve as time goes on. It is a living organism, just like your nonprofit business plan will also need to change over time. Keep your audience in mind when you are crafting new plans for the future too.
