January 01, 2017
If you work in the nonprofit sector, you may think "business plan" 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 sectors provide a picture of an organization's current capabilities and serve as a resource for building a strategic plan for future development and sustainability.
Creating a Business Plan
Ideally, a solid business plan 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 are our target beneficiaries?
Where will we work?
What need(s) 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 ensure it continues to reflect the organization's work and priorities.
One way to generate ideas for your business plan is to conduct a SWOT analysis. SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Conducting a SWOT analysis with your colleagues can help you identify areas where your organization needs to focus more or change direction.
If you need an introduction or refresher to the SWOT analysis process, check out Mind Tools and the Management Study Guide.
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, who you work with, who you compete against, and who you serve. A strategic plan builds on the business plan and addresses the next question: how to make things happen. In the strategic plan, you'll define the specific steps you'll take to achieve 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 investing in a company or start-up. When a company produces a business plan and demonstrates a strategic plan to meet its goals, it reassures potential investors that it is well organized. 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.
Developing business and strategic plans helps ensure you're 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 draw on your business and strategic plans when writing proposals. After you have your business plan in place, you can use excerpts from it in your grant proposals to describe your organization's leadership, structure, mission, direction, and, perhaps most importantly, its financial health and long-term sustainability.
Resources for Nonprofit Business Plans
Below are resources to support your planning process, including articles, websites, and books. Please note that this list is based solely on research and review. It is not a list of endorsed products or services. Before you download, purchase, or commit to any service or product, always investigate the company and its offerings carefully to determine whether they are right for you.
Web-Based Resources
You can find lots of free resources online to help you develop business and strategic plans, including on the websites of for-profit companies and nonprofit resource centers. In addition, many sites, including several in the resource list below, offer downloadable templates that you can use as a framework to develop your business plan.
Why Most SWOT Analyses Stink and How You Can Make SWOT Work for You, www.nonprofithub.org
Business Planning for Nonprofits, National Council of Nonprofits
Free Nonprofit Business Plans by Bplans. Also, see a related article on the Bplans site, "How to Write a Nonprofit Business Plan" by Angelique O'Rourke.
Books
Nonprofit Management 101 by Darian Rodriguez Heyman
Starting & Building a Nonprofit: A Practical Guide by Peri Pakroo
Strategic Planning for Public and Nonprofit Organizations: A Guide to Strengthening and Sustaining Organizational Achievement, 5th edition by John M. Bryson
The Jossey-Bass Handbook of Nonprofit Leadership and Management 3rd Edition, David O. Renz, ed.
Managing the Nonprofit Organization by Peter F. Drucker