Every nonprofit needs a mission statement that demonstrates how the organization will support a social cause and provide a public benefit. A nonprofit business plan fleshes out this mission statement in greater detail. These plans include many of the same elements as a for-profit business plan, with a focus on fundraising, creating a board of directors, raising awareness, and staying compliant with IRS regulations. A nonprofit business plan can be instrumental in getting your organization off the ground successfully.
Start with your mission statement
The mission statement is foundational for your nonprofit organization. The IRS will review it in determining whether to grant you tax-exempt status. This statement also helps you recruit volunteers and staff, fundraise, and plan activities for the year.
[Read more: Writing a Mission Statement: A Step-by-Step Guide]
Therefore, you should start your business plan with a clear mission statement in the executive summary. The executive summary can also cover, at a high level, the goals, vision, and unique strengths of your nonprofit. Keep this section brief, since you will be going into greater detail in later sections.
Identify a board of directors
Many business plans include a section identifying the people behind the operation: your key leaders, volunteers, and full-time employees. For nonprofits, it’s also important to identify your board of directors. The board of directors is ultimately responsible for hiring and managing the CEO of your nonprofit.
“Board members are the fiduciaries who steer the organization towards a sustainable future by adopting sound, ethical, and legal governance and financial management policies, as well as by making sure the nonprofit has adequate resources to advance its mission,” wrote the Council of Nonprofits.
As such, identify members of your board in your business plan to give potential donors confidence in the management of your nonprofit.
Describe your organization’s activities
In this section, elaborate on what your nonprofit does on a day-to-day basis. What products, training, education, or other services do you provide? What does your organization do to benefit the constituents identified in your mission statement? Here’s an example from the American Red Cross, courtesy of DonorBox:
“The American Red Cross carries out their mission to prevent and relieve suffering with five key services: disaster relief, supporting America’s military families, lifesaving blood, health and safety services, and international service.”
This section should be detailed and get into the operational weeds of how your business delivers on its mission statement. Explain the strategies your team will take to service clients, including outreach and marketing, inventory and equipment needs, a hiring plan, and other key elements.
The mission statement is foundational for your nonprofit organization. The IRS will review it in determining whether to grant you tax-exempt status. This statement also helps you recruit volunteers and staff, fundraise, and plan activities for the year.
Write a fundraising plan
This part is the most important element of your business plan. In addition to providing required financial statements (e.g., the income statement, balance sheet, and cash flow statement), identify potential sources of funding for your nonprofit. These may include individual donors, corporate donors, grants, or in-kind support. If you are planning to host a fundraising event, put together a budget for that event and demonstrate the anticipated impact that it will have on your budget.
Create an impact plan
An impact plan ties everything together. It demonstrates how your fundraising and day-to-day activities will further your mission. For potential donors, it can make a very convincing case for why they should invest in your nonprofit.
“This section turns your purpose and motivation into concrete accomplishments your nonprofit wants to make and sets specific goals and objectives,” wrote Donorbox. “These define the real bottom line of your nonprofit, so they’re the key to unlocking support. Funders want to know for whom, in what way, and exactly how you’ll measure your impact.”
Be as realistic as possible about the impact you can make with the funding you hope to gain. Revisit your business plan as your organization grows to ensure the goals you set both align with your mission and continue to be within reach.
[Read more: 8 Signs It's Time to Update Your Business Plan]
Budgeting and financial planning for nonprofits
Your fundraising plan should be complemented by a budget and other financial projections. Nonprofits with employees need an annual budget that’s approved by the board and serves as a guide for financial activity. It serves as a guide to plan for the future and ensure fundraising supports ongoing cash flow.
To build your budget, start by determining your project’s goals and deliverables. Review the current year’s income and expenses to see where the organization stands. Then, draft an expense budget outlining the costs you plan to incur while reaching the program’s goals. Because your nonprofit, by definition, isn’t charged with creating profit, starting with expenses ensures you fundraise enough to serve your mission.
Once you outline expenses, project income based on any fundraising and revenue activities. Review and approve the draft with other key stakeholders and monitor the budget to respond as things change.
In addition to maintaining a budget, most nonprofits prepare and retain at least these four generally accepted accounting principles‑style financial statements each year:
- A statement of financial position (balance sheet: assets, liabilities, net assets at year‑end).
- A statement of activities (income statement: revenues, expenses, change in net assets for the year).
- A statement of cash flows (cash in and out by operating, investing, financing activities).
- A statement of functional expenses (expenses by program, management/general, and fundraising, often required for 501(c)(3)s).
These statements should be supported by detailed ledgers, reconciliations, and documentation (invoices, receipts, grant agreements, payroll records). Make sure you include provisions for these documents as part of your nonprofit business plan.
Nonprofit SWOT analysis and market research
A typical for-profit business plan includes a section dedicated to a competitor analysis. Nonprofits can perform a similar analysis with a different lens. Consider using the SWOT (strengths, weaknesses, opportunities, and threats) framework for an internal review (what’s going on inside your organization), and combine it with external market research (what’s happening around you) to guide strategy and fundraising.
Ideally, your SWOT analysis will focus on a specific fundraising campaign, program activity, or business decision. Keep the scope small to get a deeper analysis that can be used to inform a wider strategy.
Here are a few examples of questions to ask as you perform your SWOT exercise:
- Strengths:
- What programs and activities do people like about your nonprofit?
- What do your donors (recurring donors, members, major donors, sponsors) love about your nonprofit?
- What drove your success in getting a major donation in the past?
- Weaknesses:
- What have beneficiaries and donors mentioned as a problem?
- Where do your knowledge and resources fall short?
- Did you fail to meet the fundraising goals of your last few online campaigns?
Use external research to identify opportunities and threats that could impact your nonprofit. For instance, opportunities could include new grant programs, policy changes that favor your cause, rising public interest, or potential partnerships. External risks include things such as funding cuts, competing organizations, political shifts, economic downturns, or changes in client needs.
Appendices: What documents to include
The documents you include in your nonprofit business plan appendices should support the assertions you make throughout the document. Include core organizational and legal documents, such as your IRS determination letter, articles of incorporation, tax-exempt status registration, and your organizational chart.
Financial documents are also important to include. Add your fiscal year budget and one to three years of financial projections. Some established nonprofits also include recent financial statements and their IRS Form 990.
Finally, include any documents that verify your expertise. This can include board member bios, key funding commitments (such as award letters or memorandums of understanding), letters of support from partners or community leaders, and press coverage.
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