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Business Planning for Nonprofits

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Business Planning for Nonprofits

  1. 1. Business Planning for Non-profit Organizations
  2. 2. Lets Get Focused! <ul><li>Four strategic questions for you: </li></ul><ul><li>Why does your nonprofit exist? </li></ul><ul><li>What is your unique niche in your community? </li></ul><ul><li>What is your elevator pitch? </li></ul><ul><li>What critical challenge/opportunity do you face? </li></ul>
  3. 3. Capacity Building Strategies <ul><ul><li>Increase Revenues </li></ul></ul><ul><ul><li>Recruit More Volunteers </li></ul></ul><ul><ul><li>Attract In Kind Contributions </li></ul></ul><ul><ul><li>Do More Good work </li></ul></ul><ul><ul><li>Improve Productivity </li></ul></ul>
  4. 4. Planning – A Critical Process <ul><li>Planning provides </li></ul><ul><ul><li>A detailed map for where you want your organization to go and how it’s going to get there. </li></ul></ul><ul><ul><li>Tools to measure your progress and success. </li></ul></ul><ul><ul><li>A vehicle to communicate your value. </li></ul></ul>
  5. 5. Strategic and Business Planning <ul><li>Two sides of the same coin – both require: </li></ul><ul><ul><li>A vision of the future. </li></ul></ul><ul><ul><li>A clear mission statement. </li></ul></ul><ul><ul><li>An analytical, honest understanding of the present environment. </li></ul></ul><ul><ul><li>A specific, measurable implementation plan. </li></ul></ul><ul><li>Strategic Plan </li></ul><ul><ul><li>More internal, longer term, aspiration based, strategy focused, often shared with funders </li></ul></ul><ul><li>Business Plan </li></ul><ul><ul><li>More external, shorter term, financials driven, often shared with lenders and investors. </li></ul></ul>
  6. 6. Strategic Planning <ul><li>Strategic Planning – a process that answers the questions: </li></ul><ul><ul><li>Where is our organization now? </li></ul></ul><ul><ul><li>Where do we want to be? </li></ul></ul><ul><ul><li>How are we going to get there? </li></ul></ul><ul><li>It is thoughtful, deliberate, analytical and fact-based. </li></ul>
  7. 7. Strategic Planning <ul><li>Develop a Vision Statement – What the successful organization will look like in the future. </li></ul><ul><li>Establish Organizational Values – What the organization believes in – the principles by which it will base its decisions and actions. </li></ul><ul><li>Create a Mission Statement – Why your organization exists and what it does to meet its vision. </li></ul>
  8. 8. Strategic Planning <ul><li>Identify Long-term Goals – What specifically needs to be done over the long term to achieve the vision (where we want to be)? </li></ul><ul><li>Conduct an analysis of your organization as it exists NOW (Where we are now?): </li></ul><ul><ul><li>Internal weaknesses </li></ul></ul><ul><ul><li>Organizational Strengths </li></ul></ul><ul><ul><li>Opportunities </li></ul></ul><ul><ul><li>External threats </li></ul></ul><ul><li>Develop Strategies – how to achieve the long-term goals (How we are going to get there?). </li></ul>
  9. 9. Business Planning <ul><li>A Tool For Turning Dreams Into Reality </li></ul>
  10. 10. A Sample Strategy <ul><li>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. </li></ul>
  11. 11. Why Do a Business Plan? <ul><li>It provides a detailed guide for success. </li></ul><ul><li>It forces an objective, critical, unemotional view. </li></ul><ul><li>It becomes an effective operating tool. </li></ul><ul><li>It enhances communications to donors and to users. </li></ul><ul><li>It provides a basis for grant proposals. </li></ul><ul><li>It clarifies how you are going to run the non-profit and provides a yardstick for progress. </li></ul><ul><li>It creates action plans for implementing projects and programs. </li></ul><ul><li>It helps keep a focus. </li></ul>
  12. 12. Applicable to Non-profit’s Development <ul><li>Business plans evolve as you grow. </li></ul><ul><li>In pre- start-up phase – helps establish feasibility – Do the numbers work? </li></ul><ul><li>In operating phase – checks execution against the plan. </li></ul><ul><li>In growth or expansion ( capacity building) phase – allows growth with control and increases cash flow management. </li></ul>
  13. 13. Why a Reluctance to Plan ? <ul><li>It appears to be an overwhelming task. </li></ul><ul><li>It’s viewed as a waste of time “others don’t do it. </li></ul><ul><li>Non-profit business is a mystery, etc. – It can’t be explained. </li></ul><ul><li>It will change since ‘you can’t predict the future.” </li></ul><ul><li>Non-profit work is about doing good works not business, money or planning. </li></ul><ul><li>Fear of forecasting. “What if I am wrong?” </li></ul><ul><li>Fear of working with numbers and budgets. </li></ul>
  14. 14. Important Keys to Success <ul><li>“ The value of the business plan is in the creation; the value of business planning is in the execution.” </li></ul><ul><li>A business plan is written document: </li></ul><ul><ul><li>Describes the non-profit business in detail. </li></ul></ul><ul><ul><li>Specifies expected results. </li></ul></ul><ul><ul><li>Summarizes action plans to achieve those results. </li></ul></ul>
  15. 15. A NP Business Plan Includes: <ul><li>An executive summary of the plan. </li></ul><ul><li>A description of the organization’s purpose. </li></ul><ul><li>A description of the market & the services provided. </li></ul><ul><li>An organization structure & organizational plan. </li></ul><ul><li>An operating plan. </li></ul><ul><li>Detailed multiple marketing plans. </li></ul><ul><li>A detailed fundraising plan. </li></ul><ul><li>A detailed financial plan. </li></ul><ul><li>A detailed action plan. </li></ul>
  16. 16. Seven Key Statements <ul><li>What the purpose is or will be. </li></ul><ul><li>What needs you intend to serve. </li></ul><ul><li>What services and/or products you will provide. </li></ul><ul><li>How you can service those needs better than your competition. </li></ul>
  17. 17. Seven Key Statements <ul><li>How & where will you provide your services. </li></ul><ul><li>What people are required & available to make the organization work. </li></ul><ul><li>Why will you be able to raise funds and from whom. </li></ul>
  18. 18. Four - Step Process <ul><li>Picture your organization in the future. </li></ul><ul><ul><li>Brainstorm desired future results. </li></ul></ul><ul><ul><li>Clarify, judge and document. </li></ul></ul><ul><ul><li>Define your mission. </li></ul></ul><ul><li>Evaluate the present and gather data. </li></ul><ul><ul><li>Access the present reality. </li></ul></ul><ul><ul><li>Do the research; gather key data. </li></ul></ul><ul><ul><li>Document the present reality. </li></ul></ul>
  19. 19. Four - Step Process <ul><li>Develop strategies. </li></ul><ul><ul><li>Compare reality to future. </li></ul></ul><ul><ul><li>Define exactly how you are going to get there. </li></ul></ul><ul><ul><li>Financial, Marketing, Operations </li></ul></ul><ul><li>Develop implementation plans. </li></ul><ul><ul><li>Develop objectives to achieve strategies. </li></ul></ul><ul><ul><li>Develop a pragmatic 6 month plan. </li></ul></ul><ul><ul><li>Develop a 6 quarter plan. </li></ul></ul><ul><ul><li>Document business plan. </li></ul></ul>
  20. 20. Business Planning Process <ul><li>Picture what success looks like in the future: </li></ul><ul><ul><li>Brainstorm the future </li></ul></ul><ul><ul><li>Build your business model (system that enables sustained revenue) </li></ul></ul><ul><ul><ul><li>Identify opportunities </li></ul></ul></ul><ul><ul><ul><li>List assumptions </li></ul></ul></ul><ul><ul><ul><li>Identify success drivers (determinants) </li></ul></ul></ul>
  21. 21. Business Planning Process <ul><li>Picture what success looks like in the future: </li></ul><ul><ul><li>Model components: </li></ul></ul><ul><ul><li>Clients and donors </li></ul></ul><ul><ul><li>Products and services </li></ul></ul><ul><ul><li>Means of distribution </li></ul></ul><ul><ul><li>Financial Engine </li></ul></ul>
  22. 22. Business Planning Process <ul><li>Gather data: </li></ul><ul><ul><li>Critically analyze current operations. </li></ul></ul><ul><ul><li>Look at the governmental, educational, environmental, business, social and cultural climate of your community. </li></ul></ul><ul><ul><li>Explore non-profit opportunities. </li></ul></ul><ul><ul><li>Research elements and factors. </li></ul></ul><ul><ul><ul><li>Talk to all stakeholders </li></ul></ul></ul><ul><ul><ul><li>Associations and conferences </li></ul></ul></ul><ul><ul><ul><li>Trade journals, publications, newspapers </li></ul></ul></ul><ul><ul><ul><li>The internet </li></ul></ul></ul>
  23. 23. Business Planning Process <ul><li>Action steps/program requirements </li></ul><ul><ul><li>Detailed milestones including timeframe </li></ul></ul><ul><ul><li>Grant requirements </li></ul></ul><ul><ul><li>Fundraising methods/events </li></ul></ul><ul><ul><li>Cash flow requirements </li></ul></ul><ul><li>Document: </li></ul><ul><ul><li>Write your plan down </li></ul></ul><ul><ul><li>Self review (Does this make sense?) </li></ul></ul><ul><ul><li>Expert outside review </li></ul></ul>
  24. 24. Describe the Non-profit <ul><li>Company name, address, etc </li></ul><ul><li>Purpose </li></ul><ul><li>Financial engine </li></ul><ul><li>Location and reason for location </li></ul><ul><li>Summary of product or service </li></ul><ul><li>Target clients </li></ul><ul><li>Target donors and grants </li></ul><ul><li>Business strategy </li></ul><ul><li>Profiles of principals and relevant experience </li></ul>
  25. 25. Describe the Service <ul><li>What service will you be providing? </li></ul><ul><li>What unfulfilled need will be satisfied? </li></ul><ul><li>What makes the service/product unique? </li></ul><ul><li>What is the source of the product or service? </li></ul><ul><ul><li>Supplier </li></ul></ul><ul><ul><li>Subcontractor </li></ul></ul><ul><ul><li>Your value added </li></ul></ul>
  26. 26. Describe the Marketplace <ul><li>Unique unfulfilled need identified </li></ul><ul><li>Characteristics of grants and donors </li></ul><ul><li>Characteristics and needs of potential clients </li></ul><ul><li>Total competitive picture </li></ul><ul><li>Marketing plan including promotion and marketing methods </li></ul>
  27. 27. Implementation <ul><li>Develop action plans with measurable objectives and time tables. </li></ul><ul><li>Create implementation teams. </li></ul><ul><li>Create “buy in” and obtain commitments. </li></ul><ul><li>Measure results against projections. </li></ul><ul><li>Make appropriate modifications. </li></ul><ul><li>Update and revise plans. </li></ul><ul><li>Repeat regularly. </li></ul>
  28. 28. Planning Tools <ul><li>Cash flow projection </li></ul><ul><li>Gap analysis </li></ul><ul><li>Break-even analysis </li></ul><ul><li>Cost – benefit study </li></ul><ul><li>Key planning questions </li></ul>
  29. 29. Cash Flow Projections <ul><li>For the period ( month, quarter, etc.):_____ </li></ul><ul><li>Cash on hand at the beginning. </li></ul><ul><li>Cash receipts in the period. </li></ul><ul><li>Cash available in the period ( 1+2). </li></ul><ul><li>Cash paid out in the period. </li></ul><ul><ul><li>Cash paid out for operations. </li></ul></ul><ul><ul><li>Other cash payments. </li></ul></ul><ul><li>Cash on hand at the of the period (3-4). </li></ul>
  30. 30. Cash Flow Projections For most fledgling nonprofits cash flow is volatile and difficult to predict. Cash flow forecasts with a basic sensitivity analysis are essential.
  31. 31. Gap Analysis – Leadership Talent Skill & Attributes Fundraising Financial Management Adds Diversity Individual Wealth Tom X X Jane X Carlos X X Ana X X
  32. 32. Break Even Analysis <ul><li>Breakeven occurs when: </li></ul><ul><li>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 </li></ul><ul><li>A NP is holding a dinner to raise funds. </li></ul><ul><li>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? </li></ul><ul><li>($50 X Number) = ($25 X Number) + $5000 </li></ul><ul><li>Breakeven = 200 tickets </li></ul>
  33. 33. Cost – Benefit Study <ul><li>Costs </li></ul><ul><ul><li>Salaries, benefits, training, recruiting, etc. </li></ul></ul><ul><ul><li>Rent, travel, utilities, insurance, expenses, etc. </li></ul></ul><ul><ul><li>Marketing, advertising, printing, etc. </li></ul></ul><ul><ul><li>Management, supervision, admin support, etc. </li></ul></ul><ul><ul><li>Organization focus, mission drift, etc. </li></ul></ul><ul><li>Benefits </li></ul><ul><ul><li>Revenue, clients, customers, donors, contracts </li></ul></ul><ul><ul><li>Brand awareness, name recognition </li></ul></ul><ul><ul><li>Opinion leader support, friends, networks </li></ul></ul>
  34. 34. Key Questions <ul><li>What is the real issue? </li></ul><ul><li>How does this strategy fit with our mission and vision? </li></ul><ul><li>Will our message enhance or detract from our brand? </li></ul><ul><li>What will our stakeholders think? </li></ul><ul><li>Is there an opportunity in this? </li></ul><ul><li>What is the greatest obstacle to our strategy’s success? </li></ul><ul><li>Is there some one we can partner with to increase our chances of success? </li></ul><ul><li>What is the cost-benefit ratio of our plan? </li></ul><ul><li>What will be the impact on the rest of our organization? </li></ul><ul><li>What’s the worst that can happen? </li></ul>
  35. 35. Where To Get Help SCORE Greater Cincinnati: www.scoreworks.org (513) 684-2812
  36. 36. Chapter 34 serves nineteen counties in the Tri-State area; they are: Greater Cincinnati SCORE Service Area Ohio Indiana Kentucky Adams Dearborn Boone Brown Franklin Campbell Butler Ohio Carroll Clermont Union Gallatin Clinton Grant Hamilton Kenton Highland Pendleton Warren