Business Planning and Managing Resources in Non-Profit Organizations

Social Innovation
20.10.2019
Scaling Social Impact
20.10.2019

Introduction

Non-profit enterprises are a type of business. Although there are significant differences between a for-profit organization and a non-profit, many of the same rules apply. Non-profits need comprehensive planning just as much as a business.  One of the most important tasks for any start-up non-profit has to be the development of a business plan. This training session aims to teach participants how to make a business plan of a non-profit organisation. During the training session participants will be able to create the business plan for non-profit organisations and understand how they should manage their resources.

Content

  1. Key question
  2. Key words
  3. Substantive part/information
  4. Activities for the reader(s)
  5. Multiple-choice self-assessment test
  6. Links to self-study resources
  7. Conclusion
  8. Reference

Key question (for the chapter)

  • What is  Business plan?
  • How we manage resources in Non Profit Organizations?

Key words (of the chapter)

  • Business plan
  • Managing Resources

Substantive part/information

There are a variety of styles and formats used for business plans. The content of the plan is much more important than rigid adherence to a specific format. Useful questions to ask when developing the business plan are:

  • What problem(s) are we trying to solve?
  • What are we trying to achieve?
  • Who will get us there, when, and how much money and other resources will it take?

The new entrepreneurs should also outline:

  • Non-profit’s mission and vision,
  • The role of the board, and
  • External environmental factors

Finally, in the process of business planning the risks of unfavourable changes in the operating environment should be addressed. For example, many non-profits rely on government contracts or grants, so they should think what will happen, if the particular sources of income does not exist in the future.

Narrative of a business plan

There are a variety of styles and formats used for business plans. The content of the plan is much more important than rigid adherence to a specific format. Although the Business Planning for Nonprofits is mostly a way of answering,

You can think of a business plan as a narrative or story which is explaining how the non-profit will thrive given its activities, its sources of revenue, its expenses, and the inevitable changes in its internal and external environments over time. According to Propel Non-profits[1], business plan should have 4 components that identify:


[1] https://www.propelnonprofits.org/resources/transforming-nonprofit-business-models/

There are a variety of styles and formats used for business plans. The content of the plan is much more important than rigid adherence to a specific format. Although the Business Planning for Nonprofits is mostly a way of answering,

  • “What problem(s) are we trying to solve?”
  • “What are we trying to achieve?”
  • “Who will get us there, by when, and how much money and other resources, will it take?”.

These questions and their answers, will give pillar of the business plan. The new entrepreneurs should think also while planning  

  • nonprofit’s mission and vision,
  • the role of the board, and
  • external environmental factors, such as the climate for fundraising.

After this procedure, they should consider the potential for changes in basic assumptions about the non-profit’s operating environment. For example, many non-profits rely on government contracts or grants, so they should think what will happen, if the particular sources of income will not exist in the future. Though that way the planning of business plan is helping the non-profit and its board be prepared for future risks

Narrative of a business plan

You can think of a business plan as a narrative or story which is explaining how the non-profit will thrive given its activities, its sources of revenue, its expenses, and the inevitable changes in its internal and external environments over time. According to Propel Non-profits, business plan should have 4 components that identify:

  • revenue sources/mix
  • operations costs
  • program costs and
  • capital structure

A business plan of a non-profit organization must explain which will be the income sources to support the charitable non-profit’s activities.

A business plan of a non-profit organization must explain which will be the income sources to support the charitable non-profit’s activities. The plan should address both the everyday costs needed to operate the organization as an entity, as well as costs that are specific to the unique programs and activities of the non-profit. The plan may include details about the need for the organization’s services (a needs assessment) and about the likelihood that certain funding will be available (a feasibility study) or about changes to the organization’s technology or staffing that will be needed in order to successfully advance its mission. Non-profit organization should contain also in their business plan a “competitive analysis” describing what other entities may be providing similar services. Finally, the business plan should list important assumptions, such as that the organization’s reserve policy to have at least six months’ worth of operating cash on hand at all times.

Activities for the reader(s)

Discussion:

Discuss in group the following questions:

  • Why Business Planning is important in Non-Profit Organizations?
  • Why Managing Resources is important in Non-Profit Organizations?

Activity: Business plan development

During this activity the youth worker will distribute to participants the attached form SE-HUB_BusinessPlan_Template. Participants can work in groups or individually and starts completing the template with the assistance of the youth worker. Below is a list of possible questions that could be written on the flipchart or distributed as handouts to help participants formulate better their goal and to assist the planning process:

  • What problem(s) are we trying to solve?
  • What are we trying to achieve?
  • Who will get us there, when, and how much money and other resources, will it take?
  • What is the likelihood that the planned activities will continue as envisaged?
  • What will happen if the current sources of revenue will continue to provide this level of income?
  • Which is Plan B

Multiple-choice self-assessment test

Q1. Which of the following is not an explanation for why non-profit organizations tend not to write formal business plans?

a. A lack of understanding of the process or benefits of business planning
b. Pressure on doing, rather than thinking, or gathering information
c. No data being available
d. The belief that strategic planning is for larger organisations

Q2. Which of the following is not a good reason for writing a business plan?

a. Assessing the feasibility of a business or project
b. Setting objectives and budgets
c. Though this knowledge is important, writing a business plan involves much more than this
d. Calculating how much money is needed

Q3. A good business plan will answer 3 straightforward questions. Indicate which of the following not one of these is.

a. Where have we been?
b. Where are we now?
c. Where do we intend going?
d. How do we get there?

Q4. The following statement refers to which plan?  “A formal statement of a set of business goals, the reasons why they are believed attainable, and the plan for reaching those goals. It may also contain background information about the organization or team attempting to reach those goals.”

a. Marketing plan
b. Operational plan
c. Business plan
d. Strategic plan

Q5. Usually business plan should have some components that identify (more than one answer is possible):

a. Revenue sources/mix
b. Operations costs
c. Staff costs
d. Capital structure

Links to self-study resources

https:// https://www.youtube.com/watch?v=v-5w8iGsrx8www.youtube.com/watch?v=w_F72yxxlwo

Conclusion

Writing a business plan is one of the main pillars to create a business. It is a hard procedure but worth when you have the final outcome in front of you. As soon as someone will finally finish with his/her business plan must not let the business plan turn to mush just sitting on a shelf. It is really important to revisit and revise it frequently, according to the changes and the needs. New entrepreneur should be glad that will start a non-profit organization with a well-thought out plan and they should keep it up to date.

References

https://www.thebalancesmb.com/why-do-i-need-a-business-plan-for-nonprofit-2502272
https://www.councilofnonprofits.org/tools-resources/business-planning-nonprofits
https://www.propelnonprofits.org/resources/transforming-nonprofit-business-models/ https://grantspace.org/resources/knowledge-base/business-plans/
https://grantspace.org/resources/knowledge-base/business-plans/