Make “Big Bets” Better Bets with Business Planning for Grantees

As the importance of bold grantmaking continues to grow, business planning offers a tool for funders and nonprofits to inform decision making and set the stage for success.

The stakes have never been higher for bold grantmaking, nor the potential upside so great. The need is wrenchingly palpable, from the widening wealth gap to ecological tipping points and other intractable problems. At the same time, experiments in “giving while living” philanthropy, social entrepreneurism, and the emergence of millennials and other non-traditional segments of donors pose new opportunities. Increasingly, we are seeing funders turn to nonprofit business planning to inform their decision making and ensure that grantees are poised to make the most of grant funds.

Since we published The Nonprofit Business Plan in 2012, we’ve worked closely with funders and helped dozens of nonprofits develop business plans to articulate not only what they intend to achieve but how they will be successful. Two funders, in particular, have adopted a deliberate strategy of supporting business planning efforts for prospective grantees before making larger investments in implementation. One has been pursuing a limited-life spend-down path, and sought to bolster confidence in some “big bet” grantmaking to multiple grantees totaling over $130 million. The other has more limited resources, so it was equally important to them — albeit for different reasons — that their grant funds be put to best possible use.

But these funders’ support of business planning for nonprofits has been much more than checking a box or clearing a hurdle in their due diligence process. Rather, the experience of business planning has itself been a valuable capacity building and leadership opportunity for these grantees. As a result of business planning, many have examined and realigned their organizational structures for better communication, accountability, and innovative capacity. We have also heard from organizational leaders that the level of thought partnership delivered through the process, on top of the plan itself, has boosted their ability to lead and adapt, even in uncertain times.

It’s important to clarify that business planning is not “the new strategic planning.” In fact, business plans are not always necessary. We find that business planning is most valuable when an organization is embarking on a new venture or partnership, trying to address significant business model challenges, or pursuing a major growth trajectory. In our business planning work with nonprofits, we have also been struck by how effectively the process engages organizations in thinking through how to respond to key trends impacting their operating environment.

Read more about how nonprofits are benefiting from business planning in this post, or contact us to talk through how funders can effectively promote sound strategic thinking and decision making among grantees.