Business Planning for Non-profit Organizations

Lets Get Focused!

Four strategic questions for you:

• Why does your nonprofit exist?

• What is your unique niche in your community?

• What is your elevator pitch?

• What critical challenge/opportunity do you face?

Capacity Building Strategies

1. Increase Revenues2. Recruit More Volunteers3. Attract In Kind Contributions4. Do More Good work5. Improve Productivity

Planning – A Critical Process

• Planning provides – A detailed map for where you want your

organization to go and how it’s going to get there.

– Tools to measure your progress and success.

– A vehicle to communicate your value.

Strategic and Business Planning• Two sides of the same coin – both require:

– A vision of the future.– A clear mission statement.– An analytical, honest understanding of the present

environment.– A specific, measurable implementation plan.

• Strategic Plan– More internal, longer term, aspiration based, strategy

focused, often shared with funders • Business Plan

More external, shorter term, financials driven, often shared with lenders and investors.

Strategic Planning

• Strategic Planning – a process that answers the questions:

1. Where is our organization now?

2. Where do we want to be?

3. How are we going to get there?

• It is thoughtful, deliberate, analytical and fact-based.

Strategic Planning

• Develop a Vision Statement – What the successful organization will look like in the future.

• Establish Organizational Values – What the organization believes in – the principles by which it will base its decisions and actions.

• Create a Mission Statement – Why your organization exists and what it does to meet its vision.

Strategic Planning

• Identify Long-term Goals – What specifically needs to be done over the long term to achieve the vision (where we want to be)?

• Conduct an analysis of your organization as it exists NOW (Where we are now?):– Internal weaknesses– Organizational Strengths– Opportunities– External threats

• Develop Strategies – how to achieve the long-term goals (How we are going to get there?).

Business Planning

A Tool For Turning Dreams Into Reality

A Sample Strategy

• We will expand our service to the community and increase our organization’s revenue by developing and implementing a self-sufficient, after-school children’s program in Pendleton County by 2008.

Why Do a Business Plan?• It provides a detailed guide for success.• It forces an objective, critical, unemotional

view.• It becomes an effective operating tool.• It enhances communications to donors and to

users.• It provides a basis for grant proposals.• It clarifies how you are going to run the non-

profit and provides a yardstick for progress.• It creates action plans for implementing

projects and programs.• It helps keep a focus.

Applicable to Non-profit’s Development

• Business plans evolve as you grow.• In pre- start-up phase – helps establish

feasibility – Do the numbers work?• In operating phase – checks execution

against the plan.• In growth or expansion ( capacity building)

phase – allows growth with control and increases cash flow management.

Why a Reluctance to Plan ?

• It appears to be an overwhelming task.• It’s viewed as a waste of time “others don’t do it.• Non-profit business is a mystery, etc. – It can’t

be explained.• It will change since ‘you can’t predict the future.”• Non-profit work is about doing good works not

business, money or planning.• Fear of forecasting. “What if I am wrong?”• Fear of working with numbers and budgets.

Important Keys to Success

“The value of the business plan is in the creation; the value of business planning is in the execution.”

A business plan is written document:– Describes the non-profit business in detail.– Specifies expected results.– Summarizes action plans to achieve those

results.

A NP Business Plan Includes:

• An executive summary of the plan.• A description of the organization’s purpose.• A description of the market & the services

provided.• An organization structure & organizational

plan.• An operating plan.• Detailed multiple marketing plans.• A detailed fundraising plan.• A detailed financial plan.• A detailed action plan.

Seven Key Statements

1. What the purpose is or will be.

2. What needs you intend to serve.

3. What services and/or products you will provide.

4. How you can service those needs better than your competition.

Seven Key Statements

5. How & where will you provide your services.

6. What people are required & available to make the organization work.

7. Why will you be able to raise funds and from whom.

Four - Step Process

1. Picture your organization in the future.• Brainstorm desired future results.• Clarify, judge and document.• Define your mission.

2. Evaluate the present and gather data.• Access the present reality.• Do the research; gather key data.• Document the present reality.

Four - Step Process

3. Develop strategies.• Compare reality to future.• Define exactly how you are going to get there.• Financial, Marketing, Operations

4. Develop implementation plans.• Develop objectives to achieve strategies.• Develop a pragmatic 6 month plan.• Develop a 6 quarter plan.• Document business plan.

Business Planning Process

Picture what success looks like in the future:– Brainstorm the future– Build your business model (system that

enables sustained revenue)• Identify opportunities• List assumptions• Identify success drivers (determinants)

Business Planning Process

Picture what success looks like in the future:Model components:– Clients and donors– Products and services– Means of distribution– Financial Engine

Business Planning Process

Gather data:– Critically analyze current operations.– Look at the governmental, educational,

environmental, business, social and cultural climate of your community.

– Explore non-profit opportunities.– Research elements and factors.

• Talk to all stakeholders• Associations and conferences• Trade journals, publications, newspapers• The internet

Business Planning Process

Action steps/program requirements– Detailed milestones including timeframe– Grant requirements– Fundraising methods/events– Cash flow requirements

Document:– Write your plan down– Self review (Does this make sense?)– Expert outside review

Describe the Non-profit

• Company name, address, etc• Purpose• Financial engine• Location and reason for location• Summary of product or service• Target clients• Target donors and grants• Business strategy• Profiles of principals and relevant experience

Describe the Service

• What service will you be providing?• What unfulfilled need will be satisfied?• What makes the service/product

unique?• What is the source of the product or

service?– Supplier– Subcontractor– Your value added

Describe the Marketplace

• Unique unfulfilled need identified

• Characteristics of grants and donors

• Characteristics and needs of potential clients

• Total competitive picture

• Marketing plan including promotion and marketing methods

Implementation

• Develop action plans with measurable objectives and time tables.

• Create implementation teams.• Create “buy in” and obtain commitments.• Measure results against projections.• Make appropriate modifications.• Update and revise plans.• Repeat regularly.

Planning Tools

Cash flow projection

Gap analysis

Break-even analysis

Cost – benefit study

Key planning questions

Cash Flow Projections

For the period ( month, quarter, etc.):_____

1. Cash on hand at the beginning.

2. Cash receipts in the period.

3. Cash available in the period ( 1+2).

4. Cash paid out in the period.a) Cash paid out for operations.

b) Other cash payments.

5. Cash on hand at the of the period (3-4).

Cash Flow Projections

cash 1/1/04 1 Qtr 2 Qtr 3 Qtr 4 Qtr ConfidenceRevenue

Special Event 1 25,000$ 80%Individual Donations 12,500$ 12,500$ 12,500$ 12,500$ 85%

Corporate Donations 12,500$ 12,500$ 12,500$ 12,500$ 60%Foundation Grant 5,000$ 25,000$ 40%

Total 50,000$ 25,000$ 30,000$ 50,000$ Expense

labor 25,000$ 25,000$ 25,000$ 25,000$ Other 25,000$ 12,500$ 40,000$ 5,000$ Total 50,000$ 37,500$ 65,000$ 30,000$

Net -$ (12,500)$ (35,000)$ 20,000$ Cash on hand 50,000$ 50,000$ 37,500$ 2,500$ 22,500$

For most fledgling nonprofits cash flow is volatile and difficult to predict. Cash flow forecasts with a basic sensitivity analysis are essential.

Gap Analysis – Leadership Talent

Skill & Attributes

Fundraising Financial Management

Adds Diversity

Individual Wealth

Tom X X

Jane X

Carlos X X

Ana X X

Break Even Analysis

Breakeven occurs when:The per unit revenue obtained from a specific service,

product or event equals the per unit cost of the service, product or event plus the fixed costs allocated to that activity

A NP is holding a dinner to raise funds.Tickets will sell for $50. Each dinner will cost $25. Project fixed cost will be $5000. How many tickets need to be sold to break even?

($50 X Number) = ($25 X Number) + $5000Breakeven = 200 tickets

Cost – Benefit Study

• Costs– Salaries, benefits, training, recruiting, etc.– Rent, travel, utilities, insurance, expenses, etc.– Marketing, advertising, printing, etc.– Management, supervision, admin support, etc.– Organization focus, mission drift, etc.

• Benefits– Revenue, clients, customers, donors, contracts – Brand awareness, name recognition– Opinion leader support, friends, networks

Key Questions

• What is the real issue?• How does this strategy fit with our mission and vision?• Will our message enhance or detract from our brand?• What will our stakeholders think?• Is there an opportunity in this?• What is the greatest obstacle to our strategy’s success?• Is there some one we can partner with to increase our

chances of success?• What is the cost-benefit ratio of our plan?• What will be the impact on the rest of our organization?• What’s the worst that can happen?

Where To Get Help

SCORE Greater Cincinnati:

www.scoreworks.org

(513) 684-2812

Chapter 34 serves nineteen counties in the Tri-State area; they are:

Ohio Indiana Kentucky

Adams Dearborn Boone

Brown Franklin Campbell

Butler Ohio Carroll

Clermont Union Gallatin

Clinton Grant

Hamilton Kenton

Highland Pendleton

Warren

Greater Cincinnati SCORE Service Area