Lesson 2 in the course How to Write a Nonprofit Business Plan
In our first lesson, we covered the basic gist of how to write a nonprofit business plan. If you’d like to have an overview of the process and a list of the sections included in a nonprofit business plan, take a look. Moving forward, we’re going to take a look at each section of the nonprofit business plan individually. This will give you a good understanding of the point of each section, as well as some fuel to help get you started.
What is the nonprofit description?
The first main section is the nonprofit description, which is similar to an elevator pitch you would give to a prospective donor to quickly explain the bigger elements of the nonprofit, so that they would give you money for the cause. In this section, you want the reader to quickly understand the major goal of the nonprofit and to comprehend your unique ability to meet the goal.
Let’s talk about your nonprofit. What made you decide to start it in the first place? Was there a specific need that tugged at your heart? Did you see an opportunity to help where others did not? People want to know the “why” just as much as the “what.” When you tell people why you started a nonprofit, you’ll be able to better connect to them, and them to the cause.
After you explain why you started your nonprofit, the nonprofit description section should detail your nonprofit as it is today or where you would like it to be in the future. Give a brief explanation about the location, who (specifically) is served by the nonprofit, what business model is used (donations vs. selling a product/service or a hybrid), and how you define your impact. Lastly, describe why you think you’ll be successful as a nonprofit.
Where is the nonprofit located?
List your address, but don’t stop there. Your location description should list demographic traits for your area. More specifically, give details about trends you see. It should help the reader get sense of how the nonprofit fits in the community. Why is this location ideal for your nonprofit? Perfect locations are not always based on “cheap rent.” Although that would be great, a physical location should also be selected based on the ability to make a bigger impact. Are you close to those you serve? Are you close to other organizations that offer complimentary services? Does your location give you greater access to some resource that you need?
Who does the nonprofit serve?
With any cause, it is very important to define the people, animals, communities, etc. that the nonprofit will serve. This helps keep the nonprofit focused, so that it doesn’t fall victim to mission drift. By being specific, it means that most people, animals, or communities will NOT be served by your nonprofit. This is actually a good thing. It may sound harsh, but if you try to be everything to everyone, you’ll end up being nothing to anyone. Clearly defining those who your nonprofit serves is an important piece to being a successful organization. It will help guarantee that limited resources go to the exact cause served by the nonprofit, not just a “good” cause.
What is your business model?
The business model answers the question, “how does the nonprofit make money?” Unlike traditional businesses, nonprofits can have two very different business models. An earned income model or a donation model.
With a traditional business, a company provides a solution to someone who has a pain. If the solution is “worth it” to the person, they become a customer and pay for it. For example, if I had a business selling ice cream to people, a simple business model could be:
- 1) Buy ice cream cone supplies from vendors A and B
- 2) Use those supplies to make ice cream cones at an average cost of $.50 per serving
- 3) Offer ice cream cones to people in the selected location for $2.00 each
- 4) Sell at least 100 cones per week to pay for my operating expenses (we’ll talk more about these later)
- 5) Sell more than 100 cones per week to earn a profit (proceeds)
With a nonprofit, you can choose a similar approach where you sell a good or service to a customer and use the proceeds to advance the cause of the nonprofit. For example, Lanna Coffee sells specialty coffee from Thailand to the general public and all profits generated are reinvested into micro-economic development programs in the hill-tribes of Thailand.
Or, you can choose an approach where the person paying for the solution is not the person who actually receives the product or service. In the second scenario, donors give to the cause so that someone else will benefit. This means you will have to identify the benefit to donors by accepting their donations, as well as the pain you are solving with your cause.
Donors give for multiple reasons. Identifying why they give is a very important part of your business model. Generally, donors give because they want to make a difference and do something good. However, more specifically, they give either because the cause matters to them or YOU matter to them. By giving to the cause they care about, it helps them to exercise a need to help in some way. By giving to you (a person they believe in), it helps them to exercise the need to support a friend. In either case, you are offering a solution to donors.
Using the same ice cream cone example as before, this type of business model could be:
- 1) Solicit donations from donors who believe everyone should have the chance to eat ice cream on a hot day
- 2) Use those donations to pay vendors A and B for ice cream cone supplies
- 3) Offer ice cream cones to people in the selected location for free
- 4) Give away at least 100 cones per week to reach the desired impact
- 5) Raise at least enough money in donations to pay for all ice cream cones given away and to pay for operational expenses
When writing a business plan for your nonprofit, you’ll need to address the business model in detail.
How does your nonprofit define its impact?
One of the most powerful and useful things a nonprofit can do is define its impact. This is important for knowing when the nonprofit is successful as well as for attracting and keeping donors. People love to win. It’s even more fun when winning means making the world a better place! So, what outcomes does your nonprofit achieve? Do you save lives? Do you help feed hungry people? How many? Where? How do you define success for your nonprofit? How do you measure that success? What is the end result you are hoping for?
Why will your nonprofit be successful?
Why will your nonprofit be successful? Do you have a unique understanding of the cause that others do not? Are you intimately connected to a specific problem or opportunity? Do you have access to resources specifically used to solve the problem you hope to solve? Have you rallied enough support to take care of the specific need?
In this piece, you’ll want others to know what it is that will make you successful. Think of this as an area to list specific things that will lead to great execution on your behalf. This is not an area to hope or dream. This is an area to show readers that you have your feet firmly on the ground and that you are uniquely positioned to meet the needs you care about.
There’s nothing worse than creating a perfect business plan that focuses on everything you want to accomplish, then finding that some of your decisions are causing your nonprofit to drift from its core mission. Khan Academy Founder, Sal Khan, discusses in this short video that a nonprofits biggest challenge is staying true to their mission. Along with this, another challenge the nonprofit world faces is understanding how well exactly they’re doing in accomplishing their mission. Steven McCormick believes nonprofits focus more on tactics and activities as the measure of success, rather than focusing on the outcomes. Take a few minutes to watch all of these inspiration videos to find out if your nonprofit is measuring its impact and delivering value to your audiences.
Now that you’ve learned a bit about this section of the nonprofit business plan, you should have some fuel to get you going. Our next lesson will cover the needs assessment – a logical approach to looking at your cause to determine what the exact need is, how it is being addressed, and what you might be able to do to help.
Take a look at our other courses in the Aplos Academy for this and other lessons that will help you operate a better nonprofit.