How To Write an Effective Nonprofit Business Plan in 10 Steps
We know that starting a nonprofit organization is a difficult task. Between all of the paperwork and meetings, it can be hard to stay focused on your mission.
A great way to stay on the right track is to have a project management mindset by creating a business plan in the early stages of your nonprofit.
Acting as a free resource for your nonprofit, we have laid out the 10 steps to writing a business plan:
- Why You Need a Business Plan
- Who You Should Target
- Executive Summary
- Who You Are
- What You Do
- Operations and Strategy
- Market Analysis
- Marketing Plans
- Financial Information
Download the template for your nonprofit's business plan
If you are not a business guru, don’t fret, we are here to help you every step of the way!
Let’s dive in!
Why You Need a Business Plan
I know what you are thinking: business plans are for traditional businesses, so why does my nonprofit need one?
Starting a nonprofit is an adventure, and a detailed business plan will be your map to guide you when you get a little bit off track. Basically, it is a way of putting all of your ideas onto paper. This will help you organize your actions and predict your future.
In addition to this, if you hope to gain any sort of funding, you will need a business plan. Whether you are getting your financing through grants or donors, you will need to have a document to show them where their money is going.
A business plan is also a great way for potential volunteers, employees, and members to see what it is that you do. Of course, your website will have the basic information, but a business plan will enable you to provide more details.
This brings us to our next question….
Who You Should Target
We already mentioned how a business plan helps with donors, volunteers, employees, members, directors, and grantors. In reality, you need to write this document with one target in mind.
Before you try to find out who your audience will be, you need to answer what you hope to gain from drafting this business plan. Are you trying to gain funding? Are you looking for new board members? Once you know what it is you want, you can determine who you should be writing your business plan for.
For example, let’s say you are looking for funding. If your target audience is grantors who can provide you with that funding, your business plan needs to answer any questions that they may have about what your nonprofit does.
You have gotten past the preparation stage and now it's time to put pen to paper!
The executive summary is exactly what it sounds like: a summary of everything in the business plan. This section is usually written last but goes at the beginning of your document. Writing the summary last is more efficient because you have already thought out each section in detail and it will be easier for you to sum them up in a sentence or two.
By the end of your nonprofit’s business plan, you won’t have any doubts about what you are going to do and how. This is vital information for your executive summary! A general executive summary will contain the problem your nonprofit is trying to solve, your solution to this problem, the need for your nonprofit, and how you will accomplish your mission. The answer to these questions should not be too long, as the executive summary is usually one page.
Lucky for you, you can answer the problem and solution together in the mission statement. For traditional businesses, the executive summary encompasses the company’s vision, mission, and values. If you have these, go ahead and add them in! If not, don’t sweat it. Just make sure you clearly state what you want to do, and how you are going to do it.
You should be aware that sometimes your audience may only read your executive summary, so take your time to write exactly what you want this person to know about your organization.
Who You Are: Team and Structure
Now it is time to show who you are, and don’t be afraid to brag a little! Remember that potential donors or financiers will be looking at this. It is known in the world of entrepreneurs that the funder chooses a person, not a company. While this is different for nonprofit organizations, you will still need to prove that you can handle this challenge, and lead your team to success.
You won’t need to describe each person in your nonprofit, but your audience will probably be looking for the head(s) of operations, your finance guru, and your HR or volunteer coordinator. If you don’t have these roles it is no big deal, pick the people that make your nonprofit shine and describe what they do!
After describing who you and your team are you can show the structure of your nonprofit. For some nonprofits, an organizational structure will come easily, and that is great! Put that in this section.
For others, you might not have any idea what your structure is, and may not want an official structure. That is okay. We recommend that you map out the areas of operation for your nonprofit, and who falls under these categories. You can draw communication lines between them to have a better idea of which departments will be in the most and least communication. This is more for you, but can also help outsiders to understand how your organization operates.
What You Do: Product and/or Service
This section is where you answer what products and/or services you provide. Chances are you have already thought about what it is you want to do. Go ahead and put those ideas in this section of your business plan.
Once you start writing your ideas down it will help you to have a clearer picture of exactly what your nonprofit will do. Another way of thinking of this section is as a more detailed version of your mission. Essentially you are answering "What are you doing?" and "How does this help your community?".
You don’t need to be too lengthy, as long as you answer these questions. Also, keep in mind that business plans change, so don’t be afraid to write exactly what you want to provide at this moment. If that changes it is okay, you can always go back and modify things later.
Freddy is doing great so far and is curious to know what else goes in a business plan
Operations and Strategy
What are you currently doing and what do you want to accomplish in the future?
How you write these sections will heavily tie back into the question of who your target audience is. Make sure you consider who you are writing this for and think about what they would want to know.
Pro Tip: Unsure where to begin? Try using the agile project management method. This will help guide your thinking on your overall strategy and verify that your goals are always customer (or beneficiary) centric!
Continuing with the style, you can think of this section as an even more detailed version of what you do. This is the technical information behind what you do.
So you are a nonprofit, what type of nonprofit? You want to open a food pantry, where are you getting your supplies? You have volunteers, what do they do? Do you have salaried workers, if so, why do you need them? Do you have any strategic partnerships or help from other nonprofits? I think you get the idea!
This section is all about answering the dreaded question, "where do you see yourself in five years?"
It is okay to live your wildest dreams in this section. If you have a big dream and are determined to accomplish it, write about it. If you have no idea what the future will look like, focus on growth. For example: if your nonprofit serves less than 50 people in your community, talk about how you want to expand to 100.
Your audience wants to know what your goals are, and they want to be a part of your plan to reach them! As we said, business plans will change, your nonprofit will change, and you cannot predict the future. Chances are the strategy in your first business plan won't be exactly what will happen.
Yes, we know this sounds scary. Up to now, we have been taking you gently through the process, now it’s time to tackle the hard stuff. Don’t worry, it is not nearly as complex as it sounds, and we have your back!
Your market analysis should cover the need for your nonprofit, your target market, who your "competitors" are, what they do, and how you are different from them. Your competitors are not necessarily competition for what you are doing but could be any nonprofit that may attract the same donors or volunteers.
Keep in mind that your need is different from your mission. Earlier we talked about what it is you want to do, that is your mission. The need for your nonprofit explains why there is a necessity for your nonprofit. You should have the bulk of this information, including hard data, already collected from your initial needs assessment.
Picking a target market is like choosing a target audience. A target market is a group of people that are the most likely users of your product and/or service.
Yes, we know, you want everyone to be interested in your nonprofit. We do too! However, there is someone that is your ideal target volunteer and donor. You need to decide what these people look like, and talk about how many of these people are in your market, or area. This will help give you and your readers an idea of how you can grow, and it will also help with your marketing plans.
So now you have mentioned who your target market is. If you want you can even create a persona for these people. Pick a name, gender, age, and other qualities that would fit your target. This will give your team a visual picture of who they are trying to reach.
Based on your target market, you can now decide the best way to communicate with them. For instance, if your target market is senior citizens you may not want to focus all of your energy on social media platforms like TikTok.
Once you have decided what type of marketing to do, you can start to figure out what kind of costs go into them. Emailing, website tools, and social media marketing are all great ways to market, but you might need to invest a little to see results.
This section can be as simple as talking about putting flyers in local businesses or can be more advanced by discussing a digital marketing strategy. You can choose what works best for you and your nonprofit!
Ah, our favorite dinner party subject: money. This is where you tell your audience what is in your bank account. This section covers what you have, what you hope to have, and how you will get financing for the future.
You need to mention your current financial situation and where you aspire to be in the next couple of years based on donations or any other factors.
You will need to mention if you don’t currently have the financial coverage that you need to support the organization. Don’t worry, this is normal and to be expected.
Pro Tip: During financial planning, make note of any potential costs related to software. For example, you might use Notion, Trello, or another organization software to stay on top of all of your tasks.
This is where a nonprofit organization is very different from a regular business. We have all seen those Shark Tank episodes where people are ripped apart for not having enough cash to support their business. On the contrary, grant financiers are looking for nonprofits that need their help the most.
With that being said, it is vital to be honest about this information. Most nonprofits have to report their financial situations annually, and if these two documents aren’t in alignment it will be difficult for you later. Be honest about grants you have already received, or any additional financial information that is important for your audience to know.
The appendix is the last part of your nonprofit’s business plan. It contains any documents that correspond to the contents of your business plan.
This section varies for each nonprofit, but it might have your nonprofit reporting, financial statements, articles of incorporation, market statistics, and more.
Use this article as a nonprofit template to help you craft your business plan! Let us know in the comments section if you have any questions during this process. 💙