As an emerging nonprofit, you may not consider yourself a business, but even so, you still need to have a business plan in place to get your project off the ground and attract funders. What differentiates your business plan from a for-profit company's business plan is that as a nonprofit, you have a double bottom line: you need to generate enough revenue to keep your organization running, but you also need to successfully fulfill your charitable mission.
How do you get started on a business plan? We've been planning a couple of events here at the Foundation Center to help you figure out the basics. Coming up on March 6, we're featuring the third and final installment of our Lessons Learned series for nonprofit start-up organizations led by Danielle Lanyard, Business Plans for Start-Ups. The program will feature lessons learned from nonprofit founders who have been through the process.
On February 22, meanwhile, we offered a program in collaboration with the Arts & Business Council of New York called Creating a Nonprofit Business Plan That Works, with a panel featuring Alvin J. Donius, former director of planning at Otis Elevator and Turner Construction and a longtime Business Volunteer for the Arts; Elaine Grogan Luttrull, founder of Minerva Financial Arts; and Fran Smyth, manager of Arts & Business Services at the Arts & Business Council of New York. From our panelists' discussion, here are the rudiments of structuring your business plan and its components:
Executive summary. This will be the first section of your plan, noting highlights such as your mission, your board and staff, what services you plan to offer and how you plan to fund and sustain those services, and some general details on when your group was founded, where you plan to operate, and who your competition may be. It is sometimes handy for this executive summary to be available as an external document for people beyond your staff and prospective funders to learn more about what you do.
Market analysis. Here's where you need to demonstrate that you have done your research on your field. Provide a concise summary of the subject area in which you are working, and the constituents you intend to serve. You need to show what kinds of services are currently being offered in this area, and what your nonprofit can offer that will satisfy a need that is not already being filled.
Quantify this information in whatever way you can, noting the size of your target market, specific geographic details, and what kind of growth you expect for your market in the coming years.
Company description. In this part, give a history of your organization, including who founded it, when and why, and how you initially got your idea off the ground. This is where you will discuss your mission and vision, and describe in more detail the issues your nonprofit intends to address, or the specific problems it intends to solve.
Organization and management. This section is where you'll delve deeper into the information presented in your company description.
- Who are your board members?
- Do you have staff members yet, or are you the sole staff member?
- Do you have your 501(c)3 status?
If you are fiscally sponsored rather than a 501(c)3, mention it here, and note whether you plan on remaining with a fiscal sponsor or if you intend to become a 501(c)3 nonprofit.
Marketing and sales. This part is somewhat similar to your market analysis, but more tightly focused on who you understand your “competition” to be. In this analysis, be sure to highlight what your organization will do that is different or more effective than your competitors, and explain why you think you will be able to secure the necessary funding for this.
Finances. After explaining why you think you deserve funding, here is where you describe how you plan to acquire the funding, manage it, and sustain it.
Discuss whether you plan to rely on grants, loans, earned income, individual donors, etc. Include an annual budget for your first year, with revenue and expenses, and try to include a projected three-year or five-year budget as well. Also, include a cash-flow analysis and cost-per-unit information – if your organization serves children, for instance, this would be cost-per-child, while a performing arts group would use cost-per-performance.
Appendix. This final section will often include such items as your 501(c)3 letter of approval, your state charter, letters of support, publicity-related items, and any other relevant documents and details that are not already included in the previous portions of your business plan. To learn more about writing nonprofit business plans, have a look at our Knowledge Base article on the subject, which includes a comprehensive listing of web sites that offer further information and copies of sample plans.
You can also delve deeper into the topic by browsing some books in our library collection. Some of our best titles covering nonprofit business plans include:
Melissa M. Montalvo's The Business Plan That Got Funding: A Complete Model for a Nonprofit (or Profit) Organization (Call # 660 MON)
Jim Horan's** The One Page Business Plan: The Fastest, Easiest Way to Write a Business Plan (Call # 660 HOR)
Andrew Wolk and Kelley Kreitz's Business Planning for Enduring Social Impact: A Social-Entrepreneurial Approach to Solving Social Problems (Call # 660 WOL)
(** Take a look at a live chat program presented on GrantSpace by Jim Horan and Chataun R. Denis entitled What Should Be In Your Nonprofit's Business Plan?)
Finally, to ready yourself even more for drafting a business plan, remember to sign up for Launching a Nonprofit Organization: Business Plans for Start-Ups on March 6. This free seminar will explore business planning in nonprofits further, with insights and advice to help you build your business plan into the most effective document it can be. We hope to see you there!
-- Tracy Kaufman