Why a business plan may be the tool your nonprofit needs

Nonprofits have an outsized impact on society. They feed the hungry, house the homeless and inspire the next generation to do good in the world. Whatever their mission, the most successful nonprofits often have one thing in common: They plan.

Veteran nonprofit executives know that goals are most reliably met, and the greatest impact is achieved, with careful planning. Without a roadmap, even the most influential organizations can struggle. 

Those in the industry also know there’s more than one type of plan. Perhaps the best known is the strategic plan, that big-picture, goal-setting blueprint that charts the general direction a nonprofit should head in. Strategic plans are instrumental, but they’re not the only type of plan a nonprofit needs to be successful. 

Indeed, an equally important but often overlooked plan is the business plan. Business plans are much more targeted and granular: While a strategic plan is about transformation over several years, a business plan is about financial sustainability over a shorter period, like the decision to open or close a program. 

Strategic plans and business plans complement each other — the business plan is the more tactical of the two, which makes the strategy come to life. While strategic plans tend to focus on the impact an organization intends to have, business plans focus on the financial considerations that make that impact possible. Below, find five tips for crafting your nonprofit’s business plan. 

Business plans should always have a few key components. While business plans can vary depending on your organization’s scope and goals, there are a few components that all business plans should include. First is a feasibility study: a careful look at how any proposed changes would actually happen on the ground. Second is revenue and cost projections: things like staffing numbers, service fees, and other expenses. And third, they should include a value proposition: an explanation of how the plan dovetails with the broader strategic plan.  

Business plans are updated more regularly. While strategic plans are created and updated relatively infrequently (many span around five years), business plans need more regular attention. A typical business plan lasts just a few years. If you create one that runs any longer, it risks becoming unrealistic — business goals, resources, services, and needs can change significantly over three or more years. 

Business plans should be multifaceted. The best business plans consider the organization as a whole, rather than focusing on a single program or physical asset. It’s critical to include the executive team and finance team in the process, two groups who hold significant knowledge of the initiatives across the organization. It’s also important to incorporate program-specific and department-specific leadership teams, like directors and senior managers. These individuals can help make the plan more concrete. And, looping them in also gives them a sense of ownership and accountability.

Business plans aren’t static. Business plans should be living documents — don’t think of them as etched in stone. There should be regular evaluation intervals, where you check progress against revue and other benchmarks. If you learn that you overlooked a key detail, or that the environment you work in has changed, you can and should update and refine the plan. 

Business plans should be realistic. One common mistake that nonprofits make when crafting business plans is being overly optimistic. It’s important to remain clear-eyed about what kind of revenue you can actually attain, and in what amount of time — as well as what your costs will actually be. Don’t simply look at direct costs — also look at overhead and the indirect expenses of building a new program. It’s also vital for departments to communicate when developing a business plan, and not make assumptions that one department will cover certain costs. 

As your nonprofit navigates 2023, consider creating a sound business plan that will set your organization up for financial sustainability. No matter your organization’s size or goals, financial health is always paramount. After all, nonprofits have many of the same financial considerations as businesses. By using the above tips, your organization can develop a business plan that will ensure your financial sustainability is well planned for.