If you work in the nonprofit sector, when you hear "business plan" you may think it doesn't apply to your work setting. But nonprofits, just like for-profits, need to use their resources wisely and plan for the future. Business plans in both the for-profit and nonprofit worlds provide a picture of an organization's current capabilities and serve as a resource to build a strategic plan for future development and sustainability.
Creating a Business Plan
A solid business plan ideally should be in place from the beginning of an organization's life. Through the process of developing a business plan, you'll be forced to answer questions such as:
What is our mission?
What service/products/support will we provide?
Who will we serve?
Where will we work?
What need are we addressing?
How will our organization complement the work of other nonprofit organizations doing similar work?
How will our organization be structured (i.e., management and staffing structure)
How will we fund our work and ensure long-term sustainability?
The business plan is a living document. It will need to be reviewed at least annually to make sure it continues to reflect the work of the organization and its priorities.
One way to generate ideas for your business plan is to conduct what is known as a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Going through a SWOT analysis with your colleagues can help you identify areas where your organization needs to apply more focus or that require a change of direction.
Strategic Plans vs. Business Plans
In the nonprofit sector, it is much more common to hear references to strategic plans than to business plans. While the two are related, they serve slightly different purposes. You'll want to develop both as part of your organizational planning process.
In the business plan, you define what you do, whom you work with, whom you compete against, and whom you serve. A strategic plan builds off of the business plan and gets at the next question, which is how to make things happen. In the strategic plan, you'll define the specific steps you're going to take to realize your organizational goals.
In the process of developing your strategic plan, you'll also get to explore your "why": Why are you doing what you do? And are you using your resources--human, time, financial--effectively as you pursue your desired outcome?
Your strategic plan is also where you define what success looks like for your organization and how you'll measure it.
Why You Need Business & Strategic Plans
if You Want to Win Grants
In the private sector, potential investors expect to see a solid business plan before they decide to invest their money in a company or start-up. When a company produces a solid business plan and demonstrates that it has a strategic plan to meet its goals, it reassures potential investors that the company has its act together. While a business plan doesn't guarantee that the company will be a good steward of its resources, it is a sign that the company is disciplined enough to plan and strategize for its future growth.
Foundations and government agencies are the nonprofit sector's investors.
Just like individuals evaluating a company to determine whether to invest in it, foundations and government agencies want some reassurance that if they give your organization funding, you'll be able to--not just launch a project--but deliver results. They want a return on their investment in the form of social impact.
Going through the process of developing business and strategic plans will help ensure that you'll be prepared to discuss with potential funders what your organization stands for, how it is structured, and how you plan to meet your goals.
Will you need to send potential funders copies of your business or strategic plans as part of the grant application process? Probably not. However, you should expect to draw from your business and strategic plans when writing proposals. After you have your business plan in place, you can use excerpts of your plans in your grant proposals to describe your organization's leadership, structure, mission, direction and, perhaps most importantly, financial health and long-term sustainability.
Resources for Nonprofit Business Plans
There are both for-profit and nonprofit resources to help you craft your business plan. Below are some options to explore including articles, websites, and books. Note that this list is based on research and review only and is not a list of endorsed products or services. Before you download, purchase, or commit to a service or product, always investigate the company and its services carefully to decide if they are right for you.
You can find free resources on how to develop business and strategic plans on the websites of both for-profit companies and nonprofit resource centers. Many of the resources below include downloadable templates that you can use as a framework to develop your business plan.
Elements of a Business Plan for a Nonprofit Organization by Joanne Fritz posted on about.com/money
"How Do I Write a Business Plan for Nonprofit Organization?" Q&A posted on Grantspace, a service of the Foundation Center. Grantspace lists several links to additional resources including:
Nonprofit Management 101 by Darian Rodriguez Heyman
Starting & Building a Nonprofit: A Practical Guide by Peri Pakroo
The Jossey-Bass Handbook of Nonprofit Leadership and Management 3rd Edition, David O. Renz, ed.
Managing the Nonprofit Organization by Peter F. Drucker