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Nonprofits need to rethink the ‘business plan’

“Nonprofits should be run like a business” – this is a popular philosophy that often influences how nonprofits approach strategic planning and operational management.

Adopting a business mindset for a nonprofit can help create better financial sustainability and improved operational outcomes. For instance, for the same reasons a for-profit business should always aim for its revenue to exceed its expenses, so too should a nonprofit.

While ‘thinking like a business’ provides some merits to nonprofits; it also has its limits and can be detrimental. Nonprofits are not businesses. They require different strategies and approaches to be successful. Key examples are donor management and fundraising strategies.

What the standard business plan does not include

The business plan is a foundational strategic document that helps businesses plan, organize and structure themselves to achieve their goals. Creating a business plan is a commonly sought after activity for both new and established nonprofits, however many nonprofits simply use standard business plan templates that often miss critical elements required for nonprofits to achieve their goals.

The standard business plan template focuses on various aspects of business planning such as market analysis, sales and marketing plans, an operating plan, a human resources plan, and a financial plan. While completing a standard business plan as a nonprofit will provide some value, it is likely not enough to help achieve the nonprofit’s goals. In most cases, the business plan becomes ‘shelfware’ (i.e. an unused document that accumulates dust on a shelf), however in worst case scenarios the business plan can send nonprofits down a path towards failure.

Key planning activities for nonprofits that are not typically found in a business plan template include:

  • Analysis of both clients and donors – as a nonprofit, it’s important to both thoroughly understand your ‘clients’ (i.e. the individuals you will be helping through your cause) and your donors. The differences in demographics and profiles between your clients and donors will result in different outreach and marketing strategies.
  • Identify sources of support for the nonprofit’s cause – identifying an underserved cause with strong demand for assistance does not necessarily translate into a viable nonprofit idea. A good nonprofit plan couples a high impact cause that has demand, with supply of funding or resources from donors and supporting organizations.
  • Define in detail your program models – the programs through which nonprofits deliver services are at the heart of the organization. These are the core products and services that help nonprofits achieve their mission. Clearly defined programs with operating models, and measurable outcomes and budgets will not only help the nonprofit run better but also serve as necessary inputs to sources of funding, such as grants.
  • Define your fundraising plan – a nonprofit business plan without a fundraising plan is like a box of cereal without the cereal. The vast majority of nonprofits rely on fundraising, whether through donations, in-kind gifts or grants to support their operations. Developing a plan and approach to build sustainable fundraising revenue streams is critical to the success of a nonprofit.

Creating a successful nonprofit business plan or strategic roadmap

A strong nonprofit business plan, or strategic roadmap, will include program models, budget and financials, a fundraising strategy, and capabilities as its core pillars. Technology, people and processes should also be woven through the plan, particularly in the program models and fundraising strategy.

If you are a new nonprofit starting your journey, or an established nonprofit looking to refresh your business plan, remember to include the key nonprofit planning pillars in your business plan.

A good strategic expert can help you define these pillars and build an effective strategic roadmap. Please contact QRius Consulting if you want to learn more.

Laurent is the CEO & Co-Founder of QRius Pay and Lead Strategist at QRius Consulting

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