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The Important Role of Business Plans for Nonprofits

Business Plans | Pro-Bono | Commercial

There is a common misconception that business plans are only necessary when it comes to for-profit businesses, overlooking the value and importance of a business plan for nonprofits. Just as business plans for profit-driven businesses help them support, strengthen, and solidify their plan as well as prepare to approach various audiences, the same is true for nonprofits.

Whereas traditional businesses tend to measure success in profits, nonprofits typically measure success in social change. Regardless if your goal is profit or social change, a business plan is vital. In fact, they are not only useful for nonprofits, but in some cases may even be required. Here are the primary reasons for a nonprofit to have a professional, complete business plan.

Internal Roadmap – There are several studies that have found that businesses who write business plans are more successful than those that do not. This is not surprising, as the business planning process forces you to systematically research and address the most fundamental aspects of your organization. Leigh Richards for Chron explains, in the context of nonprofits, “business planning involves the identification of measurable goals and objectives to provide direction to the organization and to provide a framework for identifying needed resources–staff, funding and supplies–to achieve these objectives.”

Ultimately, creating a business plan for your nonprofit, even if it will never be seen externally, serves two important roles. First, the planning process forces you to think through all the vital parts of your nonprofit that will need to be aligned to work effectively in pursuit of your goals. Second, by setting goals, and ideally smaller milestones, you create benchmarks by which to measure your success. This gives you a clear path to follow to keep your organization focused and on track.

Winning Grants – Many nonprofits rely on — and devote significant time applying for – Grants. Regardless of the format of the grant application, if you have a business plan, you will be in a perfect position to quickly and succinctly reply to nearly any question they could ask or provide any financial information they may request.

In today’s competitive grant landscape, the grant application process is usually two steps. First, you express interest through an application that requires basic, top-line information. Then, applicants are narrowed down to a select few who are asked to submit in-depth applications supported by detailed financial information. In some cases, you will be able to submit your business plan at this stage. In cases where that’s not practical given the format of the application, you can still provide the full plan as a backup. Having a formal business plan gives more validity to your organization, which is paramount for grant maker’s who need to ensure their funds will go to good use.

Attracting Board Members – Board members are an integral part of the nonprofit. The National Council of Nonprofits describes the role of board members as “…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.”

Board members’ guidance, decisions, and personal/professional networks could make or break the nonprofit, so you need to attract quality people. The way to do this is with a strong business plan. The more professional, concrete, and viable the business plan, the better chance you have at recruiting top-notch board members.

Applying for a Bank Loan – Nonprofits pursue bank loans more often than expected. Sometimes they are used for start-up funds, other times they may be sought when looking to launch a separate enterprise with the purpose of funding the nonprofit. Whatever the reason for applying for a bank loan, loan officers will expect to see a professional business plan. Your business plan will weigh heavily in the decision to issue a loan and may also impact the interest rate of approved loans.

In the end, a nonprofit business plan is not just about showing that you have a viable model to sustainably run the organization but, also convincing people that your cause is worthwhile. At Joorney we believe social pursuits are just as important as economic ones. We always offer our business plan writing services for nonprofit plans but, we appreciate that funds are often scarce. That is why we produce one free nonprofit business plan every 30 days. Applicants are accepted on a rolling basis with one lucky nonprofit selected every month.

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