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3 Steps to Building an Effective Nonprofit Business Plan

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Why would a nonprofit organization need a business plan?

Nonprofits are not like your standard business, though there is a lot of debate over whether or not we should treat them as businesses.

I tend to fall on the side of treating a nonprofit like a business whenever possible. After all, you can’t provide the most help for your cause if your organization is standing on a weak business foundation.

Businesses require planning, organization, and proper documentation in order to succeed, and the first step toward those three needs is a nonprofit business plan.

1. Define the purpose of the business plan

First of all, you need to establish why you are developing a business plan and who it’s for.

For example, are you creating a business plan in order lay out the blueprint of your newly formed nonprofit, or are you looking to improve the management of your existing nonprofit? Who is the audience—who will read your business plan once it’s finished?

According to The Balance, there are four reasons your nonprofit might need to develop a business plan:

  1. Bringing in funding from new major donors or foundations
  2. Recruiting new board members
  3. Providing a direction with clear goals to keep your organization on track
  4. To apply for a business loan

Whether the purpose is one or more of these reasons, every nonprofit should have their own business plan at least for the sake of providing direction.

However, your business plan is not static. It can change as your organization scales to make room for new goals and direction.

Related reading: The Ultimate Guide on How to Start a Nonprofit Organization

2. Draft a needs assessment

In the simplest terms, a “needs assessment” is market research into the demand of whatever good or service you are hoping to provide.

While nonprofits aren’t in the business of making money, it’s still important to find out whether your organization stands a chance to make a difference in its market.

Social Solutions lays out the process for performing a needs assessment for your nonprofit:

1. Ask the big questions

These are the major questions you’ll need to answer when conducting a needs assessment:

  • Are there any other nonprofits out there already providing the same service or working toward the same goal?
  • How many people need this service?
  • Who is your target audience? Why would they care about your issue? What demographics make up your target audience?
  • Does the service you want to provide align with their needs or desires? What are the needs or desires of this audience?

2. Perform a SWOT analysis

“SWOT” stands for:

Strengths. What are you good at? What resources are at your disposal? What do you have that no one else does?

Weaknesses. Where do you fall short? What do you need to improve on?

Opportunities. Where could you either reduce costs or improve upon similar operations already carried out by other organizations?

Threats. What external factors threaten the existence of your organization or success in achieving your goals?

This analysis will help you establish what kind of impact you can hope to have on the issue(s) you choose to address, as well as formulate your marketing strategy.

3. Bring it all together

Once you’ve asked the big questions and conducted a SWOT analysis, you’ll have a better understanding of your focus, goals, and market viability. This information will determine whether or not you move forward with your business plan and if you decide to do so, it will also influence what to include in your plan.

3. Draft your business plan

Finally, we’ve made it to the creation of the business plan itself. Your plan will include the research you did before reaching this step, as well as some new elements. All of this will provide direction to your organization and build confidence among your donors and lenders.

As I said, your nonprofit business plan is not static and is subject to change, so be sure to keep a digital copy on hand for amendments and goal reassessments.

What your business plan needs:

  • Executive summary. An overview of your business plan. It informs your reader of your mission, your unique assets or position, your programs, and your financial proposals. Think of your executive summary as the “TL;DR” section for those who don’t have enough time to get into the weeds of your business plan.
  • Organizational structure. A clear description of who runs what in your organization. Include visuals to clearly lay out your structure.
  • Services or programs offered. What will you, or do you, currently offer? Here’s where you provide specifics about how you’ll use potential funds, so your readers can see where their money will go and the impact it could have. Don’t skimp out on program details, including the functions and beneficiaries.
  • Marketing strategy. Spell out how you propose to reach out to other donors and supporters.
  • Financial plan. What assets do you already have on hand, and how do you plan to procure more funds? What are your current expenses and overhead? Include a list of potential donors and lenders, as well as a budget.
  • Needs assessment. I told you this information would come in handy. Include all of the information you collected during your needs assessment to make the case for the existence of your nonprofit or program.
  • Appendix. This is the conclusion of your business plan. Be sure to include the resumes of key staff members, any important charts or graphs, an annual report (if you have one), and any other promotional material.

I can’t say enough times that even once you finish your nonprofit business plan, you should plan to revisit it regularly (whether that be quarterly, semiannually, or annually) to make sure you are meeting your goals.

If you want some further guidance on writing a nonprofit business plan, here are a few templates and samples you can use:

Other useful nonprofit guides

At Capterra, we strive to make your nonprofit experience as productive as possible, whether through nonprofit software tools, or through our advice and guides on the nonprofit technology blog.

If you found this blog post helpful, here are a few other pieces that may interest you:

Looking for Nonprofit software? Check out Capterra's list of the best Nonprofit software solutions.

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About the Author

Nick Morpus

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Nick Morpus is a Content Writer for Capterra, a free resource that matches buyers and sellers of business software. He has a background in politics, economics, and journalism, which he dedicates his off-time to contributing his thoughts to other political sites. In his free-time he enjoys reading, drawing, photography, playing guitar, writing, and cooking.

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