This article is part of our Business Planning Guide and our Nonprofit Business Startup Guide—curated lists of our articles that will help you with the planning and starting process!
If you’re thinking about launching a nonprofit, or if you’re at the helm of established 501c3, you need a business plan.
Because your organization is mission-driven, maybe you tend to shy away from using the words “business planning,” but whether you call it a strategic plan or a business plan, nonprofits need good business planning and access to real-time financial information as much as (and sometimes more than) for-profit businesses.
Why does a nonprofit need a business plan?
Good business planning is about management, accountability, tracking performance metrics, and improving over time. Even when your goal isn’t to increase profits, you still need to be able to run a fiscally healthy organization.
Business planning also creates an opportunity to examine the heart of your mission, the financing you’ll need to bring that mission to fruition, and your plan to sustain your operations into the future.
Nonprofits are also responsible for reporting regularly to the board of trustees. Using your business plan as a living document—a tool that’s reviewed and updated regularly—for tracking financials and monitor project-based and funding milestones can make that process more streamlined.
It can also help you court major donors who will probably be interested in having a deeper understanding of how your organization works and your fiscal health and accountability. You’ll definitely need a formal business plan if you plan to seek outside funding for capital expenses—it’s required by lenders.
Creating the business plan for your organization can be a great way to get your management team or board to connect over your vision, goals, and trajectory. Just going through the planning process with your colleagues will help you take a step back and get some high-level perspective.
A nonprofit business plan outline
Keep in mind that developing a business plan is an ongoing process, it isn’t about writing a physical document that is static, but a continually evolving strategy and action plan as your business progresses over time. It’s essential that you run regular business plan review meetings—they might coincide with monthly board of trustee meetings.
With that said, when you’re actually writing a business plan document, what should it look like? A nonprofit business plan will include many of the same sections of a standard business plan. If you’d like to start simple, you can download our free business plan template as a Word document, and adjust it according to the nonprofit plan outline specified below.
An executive summary of a business plan is typically the first section of the plan to be read, but the last to be written. This is because this section is a general overview of everything else in the business plan, the overall snapshot of what your vision is for this organization.
Write it as though you might share with a prospective donor, or someone unfamiliar with your organization: avoid internal jargon or acronyms, and write it so that someone who had never heard of you would understand what you’re doing.
For now, read on, and revisit the executive summary business plan section when you’re finished writing your plan.
Problem and solution
Start this section of your business plan by describing the problem that you are solving for your clients or your community at large. Then say how your organization solves the problem.
Do a “needs assessment” to help you articulate why your solution is viable:
- Is the project you have in mind the right one for the community or population that you intend to serve? Is it needed and useful?
- How many people will you serve?
- Is anyone else serving this same population?
Your organization is special or you wouldn’t spend so much time devoted to it. Lay out some of the nuts and bolts about what makes it great. Your nonprofit probably changes lives, changes your community, or maybe even changes the world. Explain how it does this.
This is where you really go into detail about the programs you’re offering or planning to offer if you haven’t launched yet.
Market analysis with a donor or funding focus
Now that you’ve laid out the problem that your organization solves and how you’re going about it, now it’s time to think about funding. For this part of the business plan, think about how you plan to fund your program, and who will use your services.
Some programs receive state or federal grant money based on the number of people they serve. Others look for private donor support through fundraising campaigns.
Your target supporters
Analyzing your target market means where knowing your money comes from. Who are your supporters? What kind of person donates to your organization? Creating a “donor persona” could be a useful exercise to help you reflect on this subject and streamline your fundraising approach. Include in this section who your prospective fundraising targets are, and who your competitors are. You’re probably going to include information about your annual giving program (usually lower tier donors) and your major gifts program (folks who give larger amounts).
If you’re a private school, for example, you might think of your main target market as alumni who graduated during a certain year, at a certain income level. If you’re building a bequest program to build your endowment, your target market might be a specific population with interest in your cause who is at retirement age.
Do some research. The key here is not to report your target donors as everyone in a 3,000-mile radius with a wallet. The more specific you can be about your prospective donors—their demographics, income level, and interests, the more targeted (and less costly) your outreach can be.
If you have ideas but no proof about who your target donors (and clients) should be, do some market research, or even a formal market analysis. It will help you save money in the long run.
Your target client population
If your program is funded (by state, local or federal programs) based on participation, do clients need a referral from a social worker? How do social workers find out about your program?
Your target market might include social workers who work with children in a particular geographical location. Again, if you’re not sure who exactly your target clients are, do some market research to make sure your assumptions are true. Before you secure funding, you want to make sure there’s actually a need for what you’re offering.
Everyone has competition—nonprofits too. You’re competing with other nonprofits for donor attention and support, and you’re competing with other organizations serving your target population. Even if you’re program is the only one in your area serving your target population, you still have competition.
Think about what your prospective clients were doing about their problem (the one your organization is solving) before you came on this scene. If you’re running an after-school tutoring organization, you might be competing with after school sports programs for clients, even though your organizations have fundamentally different missions.
Future products and service
If you’re running a regional nonprofit, do you want to be national in five years? If you’re currently serving children ages two to four, do you want to expand to ages five to 12? Use this section to talk about your long-term goals.
Strategies for funding and promotion
In a for-profit business plan, this section would be about marketing and sales strategies. For nonprofits, in this section, you’re going to talk about how you’re going to reach your target funding sources (donors, foundations) and how you’re going to reach your target client population.
Before you get too far into your strategies, put together your positioning statement. Everyone in your organization should get really clear on this statement.
You can use this simple formula to develop a positioning statement:
For [target market description]who [target market need], [this product][how it meets the need]. Unlike [key competition], it [most important distinguishing feature].
Maybe it looks something like this:
For children ages five to 12 (target market) who are struggling with reading (their need), Tutors Changing Lives (your organization or program name) helps them get up to grade level reading through an once a week class (your solution).
Unlike the school district’s general after-school homework lab (your state-funded competition), our program specifically helps children learn to read within six months (how you’re different).
Costs and service or product fees
Instead of including a pricing section, a nonprofit business plan should include a costs or fees section.
Talk about how your program is funded, and whether the costs your clients pay are the same for everyone, or based on income level, or something else. If your clients pay less for your service than it costs to run the program, how will you make up the difference?
Promotion and outreach
In this section, you’ll detail how you’ll reach your prospective clients as well as your supporters. Your tactics might be similar for each group, or they might be completely different.
You’ll probably do some combination of:
- Advertising: print and direct mail, television, radio, and so on.
- Public relations: press releases, activities to promote brand awareness, and so on.
- Digital marketing: website, email, blog social media, and so on.
As you think through your promotions and outreach plans, don’t forget to articulate your target audience, specifying whether you want to reach supporters or potential clients.
Strategic alliances and partnerships
Use this section to talk about how you’ll work with other organizations. Maybe you need to use a room in the local public library to run your program for the first year. Maybe your organization provides mental health counselors in local schools, so you partner with your school district.
In some instances, you might also be relying on public health programs like Medicaid to fund your program costs. Mention all those strategic partnerships here, especially if your program would have trouble existing without the partnership.
Milestones and metrics
Without milestones and metrics for your nonprofit, it will be more difficult to execute on your mission. Milestones and metrics are guideposts along the way that are indicators that your program is working and that your organization is healthy.
They might include elements of your fundraising goals—like quarterly monthly donations goals, or it might be more about your participation metrics. Since most nonprofits working with foundations for grants do complex reporting on some of these, don’t feel like you have to re-write every single goal and metric for your organization here. Think about your bigger goals, and if you need to, include more information in your business plan’s appendix.
If you’re revisiting your plan on a monthly basis, and we recommend that you do, the items here might speak directly to the questions you know your board will ask in your monthly trustee meeting. The point is to avoid surprises by having eyes on your organization’s performance. Having these goals, and being able to change course if you’re not meeting them, will help your organization avoid falling into a budget deficit.
Key assumptions and risks
Your nonprofit exists to serve a particular population or cause. Before you designed your key programs or services, you probably did some research to validate that there’s a need for what you’re offering.
But you probably are also taking some calculated risks. In this section, talk about the unknowns for your organization. If you name them, you can address them.
For example, if you think there’s a need for a children’s literacy program, maybe you surveyed teachers or parents in your area to verify the need. But because you haven’t launched the program yet, one of your unknowns might be whether the kids will actually show up.
Management team and company
Who is going to be involved and what are their duties? What do these individuals bring to the table?
Include both the management team of the day-to-day aspects of your nonprofit as well as board members and mention those who may overlap between the two roles. Highlight their qualifications: titles, degrees, relevant past accomplishments, and designated responsibilities should be included in this section. It adds a personal touch to mention team members who are especially qualified because they’re close to the cause or have special first-hand experience with or knowledge of the population you’re serving.
There are probably some amazing, dedicated people with stellar qualifications on your team—this is the place to feature them (and don’t forget to include yourself!).
The financial plan is essential to any organization that’s seeking funding, but also incredibly useful internally to keep track of what you’ve done so far financially and where you’d like to see the organization go in the future.
The financial section of your business plan should include a long-term budget and cash flow statement with a three to five-year forecast. This will allow you to see to it that the organization has its basic financial needs covered. Any nonprofit has its standard level of funding required to stay operational, so it’s essential to make sure your organization will consistently maintain at least that much in the coffers.
From that point, it’s all about future planning: If you exceed your fundraising goals, what will be done with the surplus? What will you do if you don’t meet your fundraising goals? Are you accounting for appropriate amounts going to payroll and administrative costs over time? Thinking through a forecast of your financial plan over the next several years will help ensure that you are sustainable.
Money management skills are just as important in a nonprofit as they are in a for-profit business. Knowing the financial details of your organization is incredibly important in a world where the public is ranking the credibility of charities on the internet based on what percentage of donations makes it to the programs and services. As a nonprofit, people are interested in the details of how money is being dispersed within organizations, with this information often being posted online on sites like Charity Navigator, so the public can make informed decisions about donating.
Potential contributors will do their research—so make sure you do too. No matter who your donors are, they will want to know they can trust your organization with their money. A robust financial plan is a solid foundation for reference that your nonprofit is on the right track.
It’s important to remember as you plan that a business plan doesn’t have to be set in stone. It acts as a roadmap, something that you can come back to as a guide, then revise and edit to suit your purpose at a given time.
Business planning is ongoing
Our free business plan template can help you work through each section. It can be helpful to check out complete nonprofit business plan examples for reference. Or, if you’d rather leave it to the pros, check out LivePlan’s business consulting—you’ll get an MBA-written business plan in five business days.
The most important part of your plan is reviewing it regularly so you can track where you are against your projections. Put those plan review meetings on the calendar, so you don’t lose track. Good luck!
Editor’s note: This article was originally published in 2014. It was updated in 2018.