Creating a business plan is essential for any business, but it can be especially helpful for nonprofit organization owners who want to improve their strategy and/or raise funding.
A well-crafted business plan not only outlines the vision for your company, but also documents a step-by-step roadmap 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 provides an overview of the key elements that every nonprofit organization owner should include in their business plan.
What is a Nonprofit Organization Business Plan?
A nonprofit organization business plan is a formal written document that describes your company’s business strategy and its feasibility. It documents the reasons you will be successful, your areas of competitive advantage, and it includes information about your team members. Your business plan is a key document that will convince investors and lenders (if needed) that you are positioned to become a successful venture.
Why Write a Nonprofit Organization Business Plan?
A nonprofit organization business plan is required for banks and investors. The document is a clear and concise guide of your business idea and the steps you will take to make it profitable.
Entrepreneurs can also use this as a roadmap when starting their new company or venture, especially if they are inexperienced in starting a business.
Writing an Effective Nonprofit Organization Business Plan
The following are the key components of a successful nonprofit organization business plan:
The executive summary of a nonprofit organization 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 in each section of your business plan, which includes information about your company’s management team, industry analysis, competitive analysis, and financial forecast among others.
This section should include a brief history of your company. Include a short description of how your company started, and provide a timeline of milestones your company has achieved.
If you are just starting your nonprofit organization, you may not have a long company history. Instead, you can include information about your professional experience in this industry and how and why you conceived your new venture. If you have worked for a similar company before or have been involved in an entrepreneurial venture before starting your nonprofit organization firm, mention this.
You will also include information about your chosen nonprofit organization business model and how, if applicable, it is different from other companies in your industry.
The industry or market analysis is an important component of a nonprofit organization business plan. Conduct thorough market research to determine industry trends and document the size of your market.
Questions to answer include:
- What part of the nonprofit industry are you targeting?
- How big is the market?
- What trends are happening in the industry right now (and if applicable, how do these trends support the success of your company)?
You should also include sources for the information you provide, such as published research reports and expert opinions.
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, a nonprofit organization’s customers may include individuals, families, businesses, government agencies, or other nonprofit organizations.
Your target market analysis should also include information about your competition and how you will differentiate your company from them.
You can include information about how your customers make the decision to buy from you as well as what keeps them buying from you.
Develop a strategy for targeting those customers who are most likely to buy from you, as well as those that might be influenced to buy your products or nonprofit organization services with the right marketing.
The competitive analysis helps you determine how your product or service will be different from competitors, and what your unique selling proposition (USP) might be that will set you apart in this industry.
For each competitor, list their strengths and weaknesses. Next, determine your areas of competitive differentiation and/or advantage; that is, in what ways are you different from and ideally better than your competitors.
This part of the business plan is where you determine and document your marketing plan. . Your plan should be clearly laid out, including the following 4 Ps.
- Product/Service: Detail your product/service offerings here. Document their features and benefits.
- Price: Document your pricing strategy here. In addition to stating the prices for your products/services, mention how your pricing compares to your competition.
- Place: Where will your customers find you? What channels of distribution (e.g., partnerships) will you use to reach them if applicable?
- Promotion: How will you reach your target customers? For example, you may use social media, write blog posts, create an email marketing campaign, use pay-per-click advertising, or launch a direct mail campaign. You may also promote your nonprofit organization via public relations or by exhibiting at trade shows.
This part of your nonprofit organization business plan should include the following information:
- How will you deliver your product/service to customers? For example, will you do it in person or over the phone only?
- What infrastructure, equipment, and resources are needed to operate successfully? How can you meet those requirements within budget constraints?
The operations plan is where you also need to include your company’s business policies. You will want to establish policies related to everything from customer service to pricing, to the overall brand image you are trying to present.
Finally, and most importantly, in your Operations Plan, you will lay out the milestones your company hopes to achieve within the next five years. Create a chart that shows the key milestone(s) you hope to achieve each quarter for the next four quarters, and then each year for the following four years. Examples of milestones for a nonprofit organization include reaching $X in sales. Other examples include adding new product/service lines, expanding to new markets, or hiring new staff.
List your team members here including their names and titles, as well as their expertise and experience relevant to your specific nonprofit industry. Include brief biography sketches for each team member.
Particularly if you are seeking funding, the goal of this section is to convince investors and lenders that your team has the expertise and experience to execute on your plan. If you are missing key team members, document the roles and responsibilities you plan to hire for in the future.
Here you will include a summary of your complete and detailed financial plan (your full financial projections go in the Appendix).
This includes the following three financial statements:
Your income statement should include:
- Revenue: how much revenue you generate.
- 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, this is the net income or loss.
Sample Income Statement for a Startup Nonprofit Organization
|Year 1||Year 2||Year 3||Year 4||Year 5|
Include a balance sheet that shows your 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|
|Office Space & Furniture||$5,000||$6,000||$8,000||$10,000||$12,000|
|LIABILITIES & EQUITY|
|Credit Card Debt Owed||$1,500||$2,000||$3,000||$4,000||$5,000|
|Owner Equity / Capital||$18,100||$22,700||$31,800||$41,900||$51,100|
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:
- Cash Flow From Operations
- Cash Flow From Investments
- Cash Flow From Financing
Below is a sample of a projected cash flow statement for a startup nonprofit organization.
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)||$83,530||$144,020||$216,112||$306,933||$420,293|
|Change in Working Capital||($34,300)||($12,600)||($15,200)||($11,100)||($21,600)|
|Plus Preliminary exp written off||$0||$0||$0||$0||$0|
|Net Cash Flow from Operations||$54,430||$136,620||$206,112||$301,033||$402,893|
|CASH FLOW FROM INVESTMENTS|
|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||$154,662||$0||$0||$0||($154,662)|
|Net Cash Flow from Financing||$154,662||$0||$0||$0||($154,662)|
|Net Cash Flow||$184,092||$136,620||$206,112||$301,033||$248,231|
|Cash at Beginning of Period||$0||$184,092||$320,712||$526,824||$827,857|
|Cash at End of Period||$184,092||$320,712||$526,824||$827,857||$1,076,089|
You will also want to include an appendix section which will include:
- Your complete financial projections
- A complete list of your company’s business policies and procedures related to the rest of the business plan (marketing, operations, etc.)
- Any other documentation which supports what you included in the body of your business plan.
Writing a good business plan gives you the advantage of being fully prepared to launch and/or grow your nonprofit organization. It not only outlines your business vision but also provides a step-by-step process of how you are going to accomplish it.
A well-written business plan is an essential tool for any new nonprofit organization. The plan can help attract donors and investors, as well as convince government agencies, foundations and corporations to provide funding. It can also be used as a management tool to help track progress and ensure that your nonprofit organization is on track to achieve its goals.