Preparing a Business Plan for your Non-Profit
Writing a business plan for your Non-Profit is a great way to start your organization on the right foot.5 min read
2. What does a Business Plan Look Like?
2.1. Executive Summary 2.2. Internal Structure2.3. Operations 2.4. Market Plan2.5. Risks 2.6. Financials 3. Final Tips
You’ve created your mission statement. Now it’s time to create the plan to carry out that mission statement and turn your passion into results. In the business and marketing plan, all the details of your non-profit plan can be fully flushed out.
Why is a Business Plan Important?
A well-thought-out plan is important for any organization, no matter how small. To gain tax-exempt status from the Internal Revenue Service (IRS), I will need to fill out an application that asks for every detail regarding your organization, including details on your mission statement, the board of directors, staff, fundraising activities, and sources of revenue. You need a plan for how you are going to do everything before the IRS can grant you tax-exempt status, and the IRS’s application can be complicated. A well-written business plan helps me complete your application faster, which can mean the difference between getting tax-exempt status in a few months as opposed to a few years.
In addition, thinking through goals, potential problems, and solutions will help an organization succeed. A non-profit can’t be “winging it” if it wants to succeed. In fact, 12% of non-profits don’t even make it to the 5-year mark, according to the National Center of Charitable Statistics.
Likewise, the parties that will be involved with your non-profit will want to see your business plan. This includes donors and volunteers, but it also includes banks, businesses, partners, board members, and the like. A business plan shows other parties that you mean business (pun intended).
What does a Business Plan Look Like?
A business plan can be as short as a few pages or as long as 50 pages, depending on the size and type of non-profit. It’s broken down into different sections covering different topics. Here’s what a standard business plan looks like and what’s in each section.
After the cover page and table of contents, the Executive Summary is the first part of your Business Plan. You can think of the Executive Summary as the middle ground between the Mission Statement and the Business Plan. In effect, it is the summary of the business plan, covering your mission, the problem to be solved, and the implementation plans. An executive summary is usually no more than 1-2 pages. If parties are rushed for time, they may skip the rest of the business plan and just read the executive summary. So, you want to make sure that it covers everything important clearly.
The next section tells your reader more about your organization, its history, and who is involved. You can think of it as the biography section. Sometimes it can also be called the “People”, “Overview”, or “History” Section. Here are some questions that are worth answering in this section (some questions are only applicable for non-profits that have been operating for a while):
- Where and when did your non-profit originate?
- What changes have happened to the non-profit since origination?
- What has the non-profit already accomplished?
- Who is the leadership at the non-profit?
- What are their credentials?
- Why are they passionate about the non-profit?
- Who else will do work for the non-profit?
This next section discusses the programs that your non-profit will operate. It can also be called the “Product” or “Services” Section. It will evaluate the programs at a “day to day” level and on a longer-term scale. Here are some questions that you can consider.
- What is the problem that your non-profit is working to solve?
- How will the non-profit work to solve the problem?
- What is the cost-benefit of certain solutions versus others?
- What impact is expected to be made?
- How will you use any received funding?
- What could you do with more funding?
- What is your organization’s “value driver”? Or, how is the non-profit unique?
- What will an average day look like at the non-profit?
- What is a realistic set of goals? 1 month? 6 months? 1 year? 3 years?
- How will the future goals be achieved?
- For all of these questions, what data is available?
Your market plan is a very important section. The market plan provides a survey of the environment of the non-profit. It also discusses how your non-profit will interact with other parties. This is a section that you should spend a lot of time reflecting and researching on. Understanding all the moving parts will help in the later sections. Here are some questions to get you started:
- Whom are you trying to help?
- What is your geographical area?
- Who could be potential partners?
- Are there any relevant laws or government bodies to be aware of?
- Whom would we be competing with?
- Who could donate to you?
- Who could volunteer with you?
How could you connect with more people? What would the cost/benefit be?
- E.g., outreach events, advertising, campaigns.
- What is the current market presence?
- For all of these questions, what data is available?
- For all of these questions, how will this change in the future?
After providing detail on the operations, you’ll next discuss what could jeopardize those operations. Depending on the industry, this section may be a bit more nuanced.
What could jeopardize the non-profit’s survival?
- E.g., lawsuits, regulations, etc.
How is the organization protecting itself from these risks?
- E.g., insurance, warnings, training.
- What assumptions have been made in this business plan?
You’ll want to end with a section to talk about your financial health now and in the future. This section may also reference attachments or an appendix to keep the page limit small. You may want to consider establishing a relationship with an accountant to help you with this section and your finances in the future. Here are some matters that you will want to discuss in this section.
- The current monthly costs (aka “burn rate”) or start-up costs
- Expected additional costs within the next five years
- Current financial strength (aka “cash on hand”) and capital structure
- Current revenue streams and their strength
- Potential revenue sources and their likelihood
- Past balance sheets, income statements, cash flow statements, etc.
- Future financial projections (five years recommended)
- How you will manage gaps and tough times.
- Plans for surplus revenue.
Lastly, here are some final tips on drafting, formatting, and getting started.
- Use graphs and relevant pictures to attract attention and emphasize points.
Keep formatting consistent and professional.
- Use size 12 font, 1-inch margins, and professional font.
- Use clear and easy-to-understand language (limit the technical jargon).
- Get to the point! Don’t fluff the text and bore your reader.
- Customize your business plan to your intended audience.
- Update your business plan as your non-profit changes and grows.
- Use page breaks in-between sections.
- Have your team read the business plan and provide feedback. The more eyes, the better.
- Don’t wait until the last second. Now get started!
In my next article, we will discuss choosing a name for your non-profit.