Creating a business plan is essential for any business, but it can be especially helpful for nonprofits. A nonprofit business plan allows you to set goals and track progress over time. It can also help you secure funding from investors or grant-making organizations.
A well-crafted business plan not only outlines your vision for the organization but also provides a step-by-step process of how you are going to accomplish it. In order to create an effective business plan, you must first understand the components that are essential to its success.
This article will provide an overview of the key elements that every nonprofit founder should include in their business plan.
What is a Nonprofit Business Plan?
A nonprofit business plan is a formal written document that describes your organization’s purpose, structure, and operations. It is used to communicate your vision to potential investors or donors and convince them to support your cause.
The business plan should include information about your target market, financial projections, and marketing strategy. It should also outline the organization’s mission statement and goals.
Why Write a Nonprofit Business Plan?
A nonprofit business plan is required if you want to secure funding from grant-making organizations or investors.
A well-crafted business plan will help you:
- Define your organization’s purpose and goals
- Articulate your vision for the future
- Develop a step-by-step plan to achieve your goals
- Secure funding from investors or donors
- Convince potential supporters to invest in your cause
Entrepreneurs can also use this as a roadmap when starting your new nonprofit organization, especially if you are inexperienced in starting a nonprofit.
Writing an Effective Nonprofit Business Plan
The key is to tailor your business plan to the specific needs of your nonprofit. Here’s a quick overview of what to include:
- Executive Summary
- Organization Overview
- Products, Programs, and Services
- Industry Analysis
- Customer Analysis
- Marketing Plan
- Operations Plan
- Management Team
- Financial Plan
The executive summary of a nonprofit business plan is a one-to-two page overview of your entire business plan. It should summarize the main points, which will be presented in full in the rest of your business plan.
- Start with a one-line description of your nonprofit organization
- Provide a short summary of the key points of each section of your business plan.
- Organize your thoughts in a logical sequence that is easy for the reader to follow.
- Include information about your organization’s management team, industry analysis, competitive analysis, and financial forecast.
This section should include a brief history of your nonprofit organization. Include a short description of how and why you started it and provide a timeline of milestones the organization has achieved.
If you are just starting your nonprofit, you may not have a long history. Instead, you can include information about your professional experience in the industry and how and why you conceived your new nonprofit idea. If you have worked for a similar organization before or have been involved in a nonprofit before starting your own, mention this.
You will also include information about your chosen nonprofit business model and how it is different from other nonprofits in your target market.
Products, Programs, and Services
This section is all about what your nonprofit organization offers. Include information about your programs, services, and any products you may sell.
Describe the products or services you offer and how they benefit your target market. Examples might include:
- A food bank that provides healthy meals to low-income families
- A job training program that helps unemployed adults find jobs
- An after-school program that helps kids stay out of gangs
- An adult literacy program that helps adults learn to read and write
Include information about your pricing strategy and any discounts or promotions you offer. Examples might include membership benefits, free shipping, or volume discounts.
If you offer more than one product or service, describe each one in detail. Include information about who uses each product or service and how it helps them achieve their goals.
If you offer any programs, describe them in detail. Include information about how often they are offered and the eligibility requirements for participants. For example, if you offer a job training program, you might include information about how often the program is offered, how long it lasts, and what kinds of jobs participants can expect to find after completing the program.
The industry or market analysis is an important component of a nonprofit business plan. Conduct thorough market research to determine industry trends, identify your potential customers, and the potential size of this market.
Questions to answer include:
- What part of the nonprofit industry are you targeting?
- Who are your competitors?
- How big is the market?
- What trends are happening in the industry right now?
You should also include information about your research methodology and sources of information, including company reports and expert opinions.
As an example, if you are starting a food bank, your industry analysis might include information about the number of people in your community who are considered “food insecure” (they don’t have regular access to enough nutritious food). You would also include information about other food banks in your area, how they are funded, and the services they offer.
For each of your competitors, you should include a brief description of their organization, their target market, and their competitive advantage. To do this, you should complete a SWOT analysis.
A SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis is a helpful tool to assess your nonprofit’s current position and identify areas where you can improve.
Some questions to consider when conducting a SWOT analysis include:
- Strengths: What does your nonprofit do well?
- Weaknesses: What areas could your nonprofit improve?
- Opportunities: What trends or changes in the industry could you take advantage of?
- Threats: What trends or changes in the industry could hurt your nonprofit’s chances of success?
After you have identified your nonprofit’s strengths, weaknesses, opportunities, and threats, you can develop strategies to improve your organization.
For example, if you are starting a food bank, your SWOT analysis might reveal that there is a need for more food banks in your community. You could use this information to develop a marketing strategy to reach potential donors who might be interested in supporting your organization.
If you are starting a job training program, your SWOT analysis might reveal that there is a need for more programs like yours in the community. You could use this information to develop a business plan and marketing strategy to reach potential participants who might be interested in enrolling in your program.
This section should include a list of your target audience(s) with demographic and psychographic profiles (e.g., age, gender, income level, profession, job titles, interests). You will need to provide a profile of each customer segment separately, including their needs and wants.
For example, if you are starting a job training program for unemployed adults, your target audience might be low-income adults between the ages of 18 and 35. Your customer analysis would include information about their needs (e.g., transportation, childcare, job readiness skills) and wants (e.g., good pay, flexible hours, benefits).
If you have more than one target audience, you will need to provide a separate customer analysis for each one.
You can include information about how your customers make the decision to buy your product or use your service. For example, if you are starting an after-school program, you might include information about how parents research and compare programs before making a decision.
You should also include information about your marketing strategy and how you plan to reach your target market. For example, if you are starting a food bank, you might include information about how you will promote the food bank to the community and how you will get the word out about your services.
Develop a strategy for targeting those customers who are most likely to use your program, as well as those that might be influenced to buy your products or nonprofit services with the right marketing.
This part of the business plan is where you determine how you are going to reach your target market. This section of your nonprofit business plan should include information about your marketing goals, strategies, and tactics.
- What are your marketing goals? Include information about what you hope to achieve with your marketing efforts, as well as when and how you will achieve it.
- What marketing strategies will you use? Include information about public relations, advertising, social media, and other marketing tactics you will use to reach your target market.
- What tactics will you use? Include information about specific actions you will take to execute your marketing strategy. For example, if you are using social media to reach your target market, include information about which platforms you will use and how often you will post.
Your marketing strategy should be clearly laid out, including the following 4 Ps.
- Product/Service: Make sure your product, service, and/or program offering is clearly defined and differentiated from your competitors, including the benefits of using your service.
- Price: How do you determine the price for your product, services, and/or programs? You should also include a pricing strategy that takes into account what your target market will be willing to pay and how much the competition within your market charges.
- Place: Where will your target market find you? What channels of distribution will you use to reach them?
- Promotion: How will you reach your target market? You can use social media or write a blog, create an email marketing campaign, post flyers, pay for advertising, launch a direct mail campaign, etc.
For example, if you are starting a job training program for unemployed adults, your marketing strategy might include partnering with local job centers and adult education programs to reach potential participants. You might also promote the program through local media outlets and community organizations.
Your marketing plan should also include a sales strategy, which includes information about how you will generate leads and convert them into customers.
You should also include information about your paid advertising budget, including an estimate of expenses and sales projections.
This part of your nonprofit business plan should include the following information:
- How will you deliver your products, services and/or programs to your target market? For example, if you are starting a food bank, you will need to develop a system for collecting and storing food donations, as well as distributing them to the community.
- How will your nonprofit be structured? For example, will you have paid staff or volunteers? How many employees will you need? What skills and experience will they need to have?
- What kind of facilities and equipment will you need to operate your nonprofit? For example, if you are starting a job training program, you will need space to hold classes, as well as computers and other office equipment.
- What are the day-to-day operations of your nonprofit? For example, if you are starting a food bank, you will need to develop a system for accepting and sorting food donations, as well as distributing them to the community.
- Who will be responsible for each task? For example, if you are starting a job training program, you will need to identify who will be responsible for recruiting participants, teaching classes, and placing graduates in jobs.
- What are your policies and procedures? You will want to establish policies related to everything from employee conduct to how you will handle donations.
- What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?
The operations plan is the section of the business plan where you elaborate on the day-to-day execution of your nonprofit. This is where you really get into the nitty-gritty of how your organization will function on a day-to-day basis.
This section of your nonprofit business plan should include information about the individuals who will be running your organization.
- Who is on your team? Include biographies of your executive director, board of directors, and key staff members.
- What are their qualifications? Include information about their education, work experience, and skills.
- What are their roles and responsibilities? Include information about what each team member will be responsible for, as well as their decision-making authority.
- What is their experience in the nonprofit sector? Include information about their work with other nonprofits, as well as their volunteer experiences.
This section of your plan is important because it shows that you have a team of qualified individuals who are committed to the success of your nonprofit.
Nonprofit Financial Plan
This section of your nonprofit business plan should include the following information:
- Your budget. Include information about your income and expenses, as well as your fundraising goals.
- Your sources of funding. Include information about your grants, donations, and other sources of income.
- Use of funds. Include information about how you will use your income to support your programs and operations.
This section of your business plan is important because it shows that you have a clear understanding of your organization’s finances. It also shows that you have a plan for raising and managing your funds.
Now, include a complete and detailed financial plan. This is where you will need to break down your expenses and revenue projections for the first 5 years of operation. This includes the following financial statements:
Your income statement should include:
- Revenue: how will you generate revenue?
- Cost of Goods Sold: These are your direct costs associated with generating revenue. This includes labor costs, as well as the cost of any equipment and supplies used to deliver the product/service offering.
- Net Income (or loss): Once expenses and revenue are totaled and deducted from each other, what is the net income or loss?
Sample Income Statement for a Startup Nonprofit Organization
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Revenues||$ 336,090||$ 450,940||$ 605,000||$ 811,730||$ 1,089,100|
|Total Revenue||$ 336,090||$ 450,940||$ 605,000||$ 811,730||$ 1,089,100|
|Direct Costs||$ 67,210||$ 90,190||$ 121,000||$ 162,340||$ 217,820|
|Total Direct Costs||$ 67,210||$ 90,190||$ 121,000||$ 162,340||$ 217,820|
|GROSS PROFIT||$ 268,880||$ 360,750||$ 484,000||$ 649,390||$ 871,280|
|Salaries||$ 96,000||$ 99,840||$ 105,371||$ 110,639||$ 116,171|
|Marketing Expenses||$ 61,200||$ 64,400||$ 67,600||$ 71,000||$ 74,600|
|Rent/Utility Expenses||$ 36,400||$ 37,500||$ 38,700||$ 39,800||$ 41,000|
|Other Expenses||$ 9,200||$ 9,200||$ 9,200||$ 9,400||$ 9,500|
|Total Other Expenses||$ 202,800||$ 210,940||$ 220,871||$ 230,839||$ 241,271|
|EBITDA||$ 66,080||$ 149,810||$ 263,129||$ 418,551||$ 630,009|
|Depreciation||$ 5,200||$ 5,200||$ 5,200||$ 5,200||$ 4,200|
|EBIT||$ 60,880||$ 144,610||$ 257,929||$ 413,351||$ 625,809|
|Interest Expense||$ 7,600||$ 7,600||$ 7,600||$ 7,600||$ 7,600|
|PRETAX INCOME||$ 53,280||$ 137,010||$ 250,329||$ 405,751||$ 618,209|
|Taxable Income||$ 53,280||$ 137,010||$ 250,329||$ 405,751||$ 618,209|
|Income Tax Expense||$ 18,700||$ 47,900||$ 87,600||$ 142,000||$ 216,400|
|NET INCOME||$ 34,580||$ 89,110||$ 162,729||$ 263,751||$ 401,809|
|Net Profit Margin (%)||10%||20%||27%||32%||37%|
Include a balance sheet that shows what you have in terms of assets, liabilities, and equity. Your balance sheet should include:
- Assets: All of the things you own (including cash).
- Liabilities: This is what you owe against your company’s assets, such as accounts payable or loans.
- Equity: The worth of your business after all liabilities and assets are totaled and deducted from each other.
Sample Balance Sheet for a Startup Nonprofit Organization
|Year 1||Year 2||Year 3||Year 4||Year 5|
|Cash||$ 105,342||$ 188,252||$ 340,881||$ 597,431||$ 869,278|
|Other Current Assets||$ 41,600||$ 55,800||$ 74,800||$ 90,200||$ 121,000|
|Total Current Assets||$ 146,942||$ 244,052||$ 415,681||$ 687,631||$ 990,278|
|Fixed Assets||$ 25,000||$ 25,000||$ 25,000||$ 25,000||$ 25,000|
|Accum Depreciation||$ 5,200||$ 10,400||$ 15,600||$ 20,800||$ 25,000|
|Net fixed assets||$ 19,800||$ 14,600||$ 9,400||$ 4,200||$ 0|
|TOTAL ASSETS||$ 166,742||$ 258,652||$ 425,081||$ 691,831||$ 990,278|
|LIABILITIES & EQUITY|
|Current Liabilities||$ 23,300||$ 26,100||$ 29,800||$ 32,800||$ 38,300|
|Debt outstanding||$ 108,862||$ 108,862||$ 108,862||$ 108,862||$ 0|
|Total Liabilities||$ 132,162||$ 134,962||$ 138,662||$ 141,662||$ 38,300|
|Share Capital||$ 0||$ 0||$ 0||$ 0||$ 0|
|Retained earnings||$ 34,580||$ 123,690||$ 286,419||$ 550,170||$ 951,978|
|Total Equity||$ 34,580||$ 123,690||$ 286,419||$ 550,170||$ 951,978|
|TOTAL LIABILITIES & EQUITY||$ 166,742||$ 258,652||$ 425,081||$ 691,831||$ 990,278|
Cash Flow Statement
Include a cash flow statement showing how much cash comes in, how much cash goes out and a net cash flow for each year. The cash flow statement should include:
- Income: All of the revenue coming in from clients.
- Expenses: All of your monthly bills and expenses. Include operating, marketing and capital expenditures.
- Net Cash Flow: The difference between income and expenses for each month after they are totaled and deducted from each other. This number is the net cash flow for each month.
Using your total income and expenses, you can project an annual cash flow statement. Below is a sample of a projected cash flow statement for a startup nonprofit.
Sample Cash Flow Statement for a Startup Nonprofit Organization
|Year 1||Year 2||Year 3||Year 4||Year 5|
|CASH FLOW FROM OPERATIONS|
|Net Income (Loss)||$ 34,580||$ 89,110||$ 162,729||$ 263,751||$ 401,809|
|Change in Working Capital||$ (18,300)||$ (11,400)||$ (15,300)||$ (12,400)||$ (25,300)|
|Plus Depreciation||$ 5,200||$ 5,200||$ 5,200||$ 5,200||$ 4,200|
|Net Cash Flow from Operations||$ 21,480||$ 82,910||$ 152,629||$ 256,551||$ 380,709|
|CASH FLOW FROM INVESTMENTS|
|Fixed Assets||$ (25,000)||$ 0||$ 0||$ 0||$ 0|
|Net Cash Flow from Investments||$ (25,000)||$ 0||$ 0||$ 0||$ 0|
|CASH FLOW FROM FINANCING|
|Cash from Equity||$ 0||$ 0||$ 0||$ 0||$ 0|
|Cash from Debt financing||$ 108,862||$ 0||$ 0||$ 0||$ (108,862)|
|Net Cash Flow from Financing||$ 108,862||$ 0||$ 0||$ 0||$ (108,862)|
|Net Cash Flow||$ 105,342||$ 82,910||$ 152,629||$ 256,551||$ 271,847|
|Cash at Beginning of Period||$ 0||$ 105,342||$ 188,252||$ 340,881||$ 597,431|
|Cash at End of Period||$ 105,342||$ 188,252||$ 340,881||$ 597,431||$ 869,278|
This section of your nonprofit business plan should include information about your fundraising goals, strategies, and tactics.
- What are your fundraising goals? Include information about how much money you hope to raise, as well as when and how you will raise it.
- What fundraising strategies will you use? Include information about special events, direct mail campaigns, online giving, and grant writing.
- What fundraising tactics will you use? Include information about volunteer recruitment, donor cultivation, and stewardship.
Now include specific fundraising goals, strategies, and tactics. These could be annual or multi-year goals. Below are some examples:
Goal: To raise $50,000 in the next 12 months.
Strategy: Direct mail campaign
- Create a mailing list of potential donors
- Develop a direct mail piece
- Mail the direct mail piece to potential donors
Goal: To raise $100,000 in the next 24 months.
Strategy: Special event
- Identify potential special event sponsors
- Recruit volunteers to help with the event
- Plan and execute the special event
Goal: To raise $250,000 in the next 36 months.
Strategy: Grant writing
- Research potential grant opportunities
- Write and submit grant proposals
- Follow up on submitted grants
This section of your business plan is important because it shows that you have a clear understanding of your fundraising goals and how you will achieve them.
You will also want to include an appendix section which may include:
- Your complete financial projections
- A complete list of your nonprofit’s policies and procedures related to the rest of the business plan (marketing, operations, etc.)
- A list of your hard assets and equipment with purchase dates, prices paid and any other relevant information
- A list of your soft assets with purchase dates, prices paid and any other relevant information
- Biographies and/or resumes of the key members of your organization
- Your nonprofit’s bylaws
- Your nonprofit’s articles of incorporation
- Your nonprofit’s most recent IRS Form 990
- Any other relevant information that may be helpful in understanding your organization
Writing a good business plan gives you the advantage of being fully prepared to launch and grow your nonprofit organization. It not only outlines your vision but also provides a step-by-step process of how you are going to accomplish it. Sometimes it may be difficult to get started, but once you get the hang of it, writing a business plan becomes easier and will give you a sense of direction and clarity about your nonprofit organization.
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