e-newsletter: Connect to Solutions

Nonprofit Business Planning - A Path to Sustainability
by Jeffrey S. Vengrow, Director of CNE Solutions

Unlike for-profit corporations, a nonprofit organization has to manage a “double bottom line” – it has to have enough money to operate effectively and efficiently AND it has to fulfill its social purpose. This balancing act between money and mission is best achieved when there’s a clear business plan.

A business plan is a written document that serves as a structured management tool. It requires a disciplined process that helps nonprofit organizations decide how to allocate resources. It is useful when a nonprofit is considering whether to set up or close a program, invest in current activities to improve outcome and impact, expand a program or respond to rapid growth or decline.

Generally, the “businesses” of a nonprofit organization are core mission-related programs, products and/or services that are delivered at either no charge or for a fee. However, there is a growing trend among nonprofits to also deliver for a fee services or products that are UNRELATED to its mission. (Such endeavors have IRS tax code implications pertaining to unrelated business income that warrant professional advice.)

Business plans can be shorter or longer term in nature. The time period covered varies with the organization, the availability of dependable information, and the clarity of its environment. Longer term plans generally include trend information as a way to more accurately assess the future. For example, will more people need this product or service over time? What’s going on with funding sources? What are the overall trends in the community that relate to the services? How are these trends reflected in the plan?

Each core program or “line of business” should be reflected in the plan. Key components of a business plan include:

• Description of the organization/management structure
• Products/services and what makes them unique
• Competitive analysis
• Marketing plan that supports the sustainability of fund sources
• Goals and the measures that will used to track progress
• Financial and budgetary requirements
• A timetable for each of the major actions required to fulfill the plan.

Several methods can be used to gather the information needed to help formulate the plan. These include internet research, public information statistics, advisory committees, individual phone calls, through written or electronic surveys, and/or through focus groups.

There are six important questions that you will be able to answer at the conclusion of the business planning process.

1. Who are our “customers” ?

2. What do they value? Do they want what you provide?
     a. when you provide it?
     b. where you provide it?
     c. how you provide it?
     d. at the fee required (if any)?

3. Where do we want to go tomorrow?

4. What gets done today?

5. Who does what?

6. How will we know if it happened?

Business Plan development requires time and effort on the part of the staff and management team. However, the data collected through the process equips the organization’s leadership with the information necessary to make sound business decisions, thus enabling an organization to operate effectively and achieve its social purpose.

References/Sources

The Nonprofit Board Answer Book II. BoardSource. 2002.
The Nonprofit Survival Guide. BoardSource. 2003.
Boschee, Jerr. But Will It Fly? National Center for Social Enterprise. 1996.
Brinckerhoff, Peter. Social Entrepreneurship. John Wiley & Sons. 2000.
Hopkins, Bruce; Hummel, Judy. Starting and Managing a Nonprofit Organization. John Wiley & Sons. 2001.
Larsen, Rolfe. Venture Forth: The Essential Guide to Starting a Money Making Business. Amherst J. Wilder 
     Foundation. 2002.
Kawasaki, Guy. The Art of the Start: Time-tested, Battle-hardened Guide for Anyone Starting Anything. Portfolio. 2004.

Contact Jeff Vengrow by calling 330.315.0432 or emailing him at vengrow@cfnpe.org.