Overview: Discover how writing a nonprofit business plan can help your organization as it currently exists and present a roadmap for the future. Learn how to write a nonprofit business plan!
In the jungle of businesses, a nonprofit is an unusual animal. Most businesses are founded with the primary goal of making a profit, but the purpose of a good nonprofit business is to serve the public good, whether in maters of health, education, philanthropy, religion, the arts, or any other reason that benefits society.
Starting your business as a nonprofit is an excellent way to pursue what you’re passionate about. It’s nice to know that such organizations are exempt from federal and state taxes on any profit earned, but if you want to keep such a company going, you must also formulate a nonprofit business plan!
A common misconception among aspiring nonprofit entrepreneurs is that a nonprofit doesn’t need to be operated like a for-profit business. This is far from the truth. Passion and enthusiasm without practical application can only get you so far.
If you’re contemplating starting a nonprofit business, begin with designing your nonprofit business plan.
How to Write a Nonprofit Business Plan:
No matter where your nonprofit business is leading or what you’re looking forward to achieving, a thoroughly designed business plan will help you reach your goal much faster than you would by trying to operate without one.
The nonprofit business plan helps you figure out the directions of your nonprofit, the resources you’ll require, and the quickest path to success.
Create an Executive Summary:
The first section your nonprofit business should address is the executive summary. Don’t let this word overwhelm you! It’s easy to understand. The executive summary is what describes your organization and the basic state of your nonprofit business. However, this section shouldn’t be more than a page long. What it briefly covers is the following:
The concept: The concept of your executive summary should summarize the aspirations of your nonprofit organization. This part should state what your organization is/will be doing. It’s not unreasonable to say that the quality of the executive summary will influence almost every big decision inside a company during the decision-making process. Make sure you’re creating a good one to stand out.
Goals and vision: Your passion drives you to begin working on a cause to bring changes in the world. State what your goals are and the methods you’re planning to use to achieve them.
Marketing strategy: Who is your audience, and how do you plan to reach them? State your marketing strategy, keeping in mind the role of social media in bringing people together.
Current and projected financial state: State your present earning means, and your current cash flow numbers. Don’t forget to mention what you foresee making through upcoming fundraising and how it’s going to benefit your cause.
The request/ask: This isn’t the easiest part to write, but it’s essential. You’ll be sending the executive summary to potential donors when you’re asking for funds. Mention why you’re requesting/asking for funds and what you plan to do with them.
Introduce your team: It’s nice to put a human face on an organization. A business plan can contain photos and brief bios of your team members or volunteers. This helps the reader get to know you.
Related Reading: How to write a compelling executive summary
Write the Organization Summary:
The executive summary is done, but you still have some work to do. The executive summary sets the stage for the next documents in your business plan, including the organization summary. The organization summary focuses on what you do and aspire to do. Use this section to identify the industry/area of interest your organization is working in.
State and identify the structures of your organization. A nonprofit is a tax-exempt and non-for-profit entity that invests funds back into the cause. For a nonprofit, you’ll register yourself under 501(c)(3); however, you’ll be required to choose your business structure from the list:
Unincorporated associations: With the S-corporation nonprofits option, you don’t need to file any paperwork. Since it keeps the owners away from the hustle, they usually start as unincorporated associations.
Trust: This structure states that all the funds entrusted to the organization will go to charitable use.
Corporation: While this structure offers protection from liabilities, the downside is that it comes with a lot of paperwork and fees.
Limited Liability Company or LLC: LLCs offer tax benefits and limited fee but doesn’t protect as the corporation does. All LLC members must be 501(c)(3) organizations.
State Your Vision & Mission:
Your vision and mission section of the business plan serves as the foundation for why your nonprofit exists amidst the crowd of so many businesses, and this “why” influences the decision-making process. It’s also an effective marketing tool for getting in touch with your audience and reaching your organization’s full potential.
WATERisLIFE is an excellent example of a nonprofit organization. They found a hashtag and used it cleverly to draw donors’ attention. They used the popular hashtag #firstworldproblems, created a video with people in dire situations, and their boom began. They caught people’s attention and made them aware of their important mission, and they continue to be a successful nonprofit.
State the Problem & Value Proposition:
Your value proposition dictates why people should or shouldn’t choose to support your nonprofit over others. It outlines the competitive advantage for what sets you apart from other organizations vying for donations.
Short and long-term goals: Your nonprofit business plan should also focus on measurable short and long-term goals. One of the examples is The Empowerment Plan, an organization that hires single parents from shelters and trains them to make coats. They also share relevant metrics to show the impacts. These metrics are excellent measurable goals to include in the nonprofit business plan.
Conduct Market Analysis:
The market analysis section of your nonprofit business plan demonstrates that you’ve done thorough research before determining a need for your service and that people will potentially support your mission. Consider SWOT analysis to identify your current strengths, weakness, and opportunities.
Outline Your Management Members:
Every organization needs a skilled team to take care of its necessary tasks and run it successfully. A nonprofit business typically involves different departments with team members who have complementary areas of expertise. Ensure you’re mentioning them in the nonprofit business plan to show that you know what you’re doing.
Board of directors: Nonprofits typically have a board of directors with a leadership team to incorporate into the decision-making process before finalizing them.
Staff: These are paid employees with responsibilities, roles, and salaries.
Volunteers: You may not have specific people in mind for the volunteer roles. Some nonprofit organizations have different tiers of volunteers — lead volunteers or volunteer coordinators to supervise their daily tasks.
Donors: If you’ve any significant donors who plan to make or are already making a sizable contribution, include them in the donor section of your nonprofit business plan.
Recipients: These are the people you’re going to help by acting profoundly on your cause. This may not always be a person if you’re helping environmentally driven nonprofits, but here you’ll be mentioning the affected.
Future Service & Programs:
If you’re running a regional nonprofit, do you want to be on the national level in the next five years? If you’re serving children ages two to four, do you plan to expand it to ages five to 15? Use this section to talk about your long-term future goals.
Similar to a traditional business, you’ll benefit by laying out a long-term section in the business plan. Not only does it help guide your nonprofit, but it also provides a roadmap for the board as well as potential investors.
Your marketing plan section should address the specific target audience and how your services are/will be different from the existing nonprofits in terms of programs and fundraising. Describe how you’re going to market yourself in specific marketing strategies and associated costs such as:
Building, maintaining, and marketing your website and staying up-to-date with trends.
Fundraising and outreach events
Blogs and articles
If your nonprofit is already established, let your reader know how it has been in the past and progressed throughout the years.
This section is dedicated to describing the day-to-day services you’re performing. What do you and your staff do daily to fulfill your mission? How does cash flow in and out of your business on a regular basis? This information should be stated in the operational plan. If you have a five-year plan for expanding operations, include notes on that as well.
Expanded services you might mention include your vision of growing your services in terms of operation. If you run a food bank, are you planning to double the number of people you feed next year? And if you answer affirmatively, how will that affect the operation? Will you need more refrigerators, trucks, or staff and volunteers? Will you expand hours or hire extra employees to meet those needs? Consider as many possibilities you can so you can answer all these questions.
Some Tips for Your Nonprofit Business Plan:
Don’t use technical jargon or acronyms. Be concise and make the document easy for the average person to read.
Don’t use fonts that are too big or too small fonts. A 12-pt font printed on plain heavy white paper with headers and normal margins will work well.
Last but not least, have someone read over your nonprofit business plan before you send it out! Getting additional sets of eyes on your documents for proofreading purposes will ensure the documents don’t contain any embarrassing mistakes.
A well-written nonprofit business plan helps to map out the future, ensure secure donations, and attract potential board members who can bring in grants and loans. While writing a nonprofit business plan isn’t the most straightforward task in the world, it’s worth your time when you pin down the details and break them into sections to gain information. This will all help you fulfill your mission.
If you have any questions or need advice regarding the financial affairs of your business, feel free to contact our experts at Prospect Financial!