How Can Business Planning Help Nonprofits?

Now more than ever nonprofits need sound, evidence-based decision making. Donors are beginning to behave more like investors and demand greater assurance that the causes and organizations they support are economically sustainable. Meanwhile, nonprofits are constantly being urged to innovate — to develop new structures, ventures, programs, and partnerships — or to scale up existing efforts, all of which has the potential to increase or decrease stress on an organization’s business model.

Business planning can help decision makers both better understand their current business model and anticipate the consequences of making a major change.

Consider two examples:

• The developer of youth education programs anticipates making national sales of its most popular curriculum a profit center. Business planning challenges them to test their assumptions and reveals that, far from becoming a revenue source, curriculum development would always need to be subsidized.
• A large nonprofit seeks to consolidate and centralize their broad chapter/affiliate network. The rigor of a business planning process combines the economic and operational analysis necessary to determine what financial and human resources they will have to put in place to succeed.

Throughout the sector, nonprofits are making these kinds of decisions every day. We would argue that nonprofits need business planning just as much as businesses do, and perhaps even more so, given the narrower room for experimentation and the high consequences of failure – both of which can be traced back to often thin operating margins and lack of adequate capital.

A good business planning process can help nonprofits negotiate these risks by identifying the drivers of economic success as well as the operational factors necessary to achieve their goals. We explore this and much more in our book, The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model. Or visit our website to learn how business planning can help your nonprofit accelerate its impact.