My Fair Nonprofit... why can't a nonprofit act more like a business?
Much like the phonetics professor Henry Higgins in My Fair Lady worked with Eliza Dolittle to enunciate the shared English language in order to be better understood and succeed, there is a shared language of business that applies to corporations whether they are for profit or nonprofit.
Strategic Plan vs. Business Plan
The purpose of a strategic plan is to ensure the Organization is doing the right things in the right order with the right resources while staying in integrity with its mission, vision and values. This type of Plan addresses issues such as: The continuing value of the Organization's mission; the potential of the ongoing community need in the future; the value of the current programs; need for expansion, change or contraction; alternative or changing funding sources; changing constituencies, etc.
A strategic plan is usually developed through the faithful and arduous investment of time by the Board, subcommittees and professional advisors. Benchmarks are established and assignments are made. At least annually this Plan is brought into the light of day to update, examine progress and discuss the need to roll forward some of the items not yet accomplished.
What's missing that precludes a Strategic Plan from being further integrated with the operations of many nonprofit organizations?
While the for profit sector acknowledges the value of the strategic plan, it is only seen as a component of developing a traditional full-blown business plan. A business plan differs from a strategic plan primarily in that it goes on to describe measurements of how to be successful in completing the objectives of the strategic plan. It is supported by reference to historical data, research, benchmarks, projections and demographics.
The traditional business plan is generally divided into four parts:
1) Description of the business
2) Marketing plan
3) Financial management plan
4) Business management plan
The first part focuses on the business as a whole, the next two support how the marketing and finance components will be developed and administered and the management plan describes the key players leading the Organization and the methods to be used.
Although the purpose of a nonprofit often appears at odds with that of a for profit business, the fact remains: in order to remain viable and continue delivering charitable services, the organization must run "profitably." In this way the "business" of running a nonprofit is most similar to a for profit organization. Use of the business plan as a tool for managing the "business" of our nonprofits may be essential to not only thriving but also survival in our turbulent economy.
How does the business plan translate for the nonprofit organization?
1) Description of the business: Articulate the reasons for your Organization's success and continued necessity. Define what it is about your Organization that makes it unique -- why will it succeed where others have failed? What are you changing to meet current needs? Describe collaborative opportunities being utilized.
2) Marketing plan: Describe the segment of the community (marketplace) that needs your services, how it is changing, how it is impacted by the services you provide and how the donors and other stakeholders are affected. Define your competition and what distinguishes your Organization. Define your focus and how your programs support this focus. Address how to reach clients/customers/recipients, how to raise money and the how to attract and retain dedicated staff, board members and volunteers.
3) Financial plan: It is here that the fiscal sustainability is evidenced. The Organization explains the anticipated volume and timing of funding from grants, public donations, program fees, etc. as well as the costs necessary to deliver the services and support the administration as well as ongoing fundraising efforts (in other words -- the budget). This section also presents a description of the assumptions used to establish these projections of revenues and costs for the coming year, the validity of the pricing of services and the strategies to be implemented to most effectively leverage anticipated resources while serving the maximum population (outsourcing, greater use of technology, equipment purchases, etc.).
4) Management plan: Describe what makes this management team (staff, board and volunteers) qualified to lead this Organization. Define how this process will be monitored and reported upon; what benchmarks will be used to measure success as well as opportunities to redirect activities. Identify the areas where additional resources or talent may be required and the plan and resources necessary to meet these needs.
This process can provide a stronger sense of ownership of the mission and operations of the Organization by all who were involved. A further enhancement is to trace articulated financial goals and measures to the financial statements. Why not try excerpting these portions from the "plan" and provide them as part of the financial reports at each Board meeting? The same can be done with the marketing plan and reports on programs and communications of the Organization.
Several resources exist that can help you through the process of expanding to a business plan. Consider accessing the financial, communication and marketing experts on your board, your professional advisors, local colleges, various websites and books. Here's one resource you may not have considered, the Small Business Administration. Their site has guides and shareware galore on this subject http://www.sba.gov/starting/indexsteps.html.
Not unlike a for profit organization, a goal of the nonprofit organization must be to provide an adequate return by building reserves into budgets, pricing programs knowledgably, being well informed about the market served and knowing when to "shift." It is even more critical that the third sector of our economy (non profit organizations) maintain viability so those in need will continue to be supported. Isn't that why exemption from tax was provided to these (businesses) Organizations to begin with?