DEVELOPING A BUSINESS PLAN

DEVELOPING A BUSINESS PLAN

Starting a nonprofit is complex. You cannot simply have a great idea and a community
need and look for funders, customers or clients. You need a plan, a plan in writing. Such
a written plan is called a business plan. If you sat down and started writing answers to
the 27 questions listed above, you have a start to producing your business plan.

Why do you need a business plan? Generally for-profit leaders prepare a business plan to
get ready to open the business and to have a document to give to potential investors or
lenders. Not-for-profit leaders have a responsibility also to get ready to open for
business. The State and the IRS will ask a significant number of questions about the
organization, particularly the IRS. Nonprofits have to find funding. The business plan
becomes an introductory document to give out locally to community leaders, the United
Way, the mayor and town/city council, local trust funds and others, State elected and
appointed officials and partners in the venture. If you will be seeking foundation,
corporate or government funding, the business plan will be helpful to leave with leaders
at the first introductory meeting. Perhaps even more important - it will give you and your
helpers a clear idea what it takes to develop your dreams into reality and to plan for the
future.

Here is an outline about what you should have in your business plan.
• Title Page - The Title Page will have the name of your organization, a list of the
board of trustees or directors, the chief executive officer (I will refer to this person
throughout this paper as the "executive director"), and the office address, telephone and
fax numbers. If there is an e-mail address and a web site, include them as well. Note:
some States call the board "trustees" and some States refer to the board as "directors".
There is no real difference; use the word that is in your State law.

• Executive Summary - Actually you will write this last but it should be placed
right after the Title Page. The reason you will write this last is that it summarizes briefly
all the material following. The Executive Summary will tell the reader how the nonprofit
is organized. It tells who you are and the function of the nonprofit organization. If you
are looking for grants and money or will conduct fundraising activities, it will summarize
your method and purpose for raising money that way. . Key elements of the Executive
Summary include clear identification of the organization, at least one sentence each on
credibility, the problem being addressed, objectives, and methods. Include budget totals
- total project cost, funds already obtained. Be sure it is brief, it is clear, it is interesting
and it is truthful.

• Corporation Description - Here you will give an overview of the function of
your organization. Discuss briefly a history of how the idea of the organization began, its
projected size (building needs, space, employees, equipment and tasks), a description of
the service you will provide and the community or market your organization will be in.
Character is the general impression you make to a prospective supporter, contributor or
funder. Describe the character of your organization and its leadership. Discuss the values
this organization and its leadership will exhibit. Supporters and funders will form a
subjective opinion as to whether or not you are sufficiently trustworthy actually to be able
to perform the service and to handle the funds. The educational background and
experience of the board and staff will be reviewed. The quality of the references and the
background and experience of your leadership and employees will also be taken into
consideration. Discuss those items here.

• Market Analysis, Data - Starting a nonprofit requires doing your homework,
study and research. In this section you will discuss that research and the conditions and
trends in the needs you want to meet. Write about the need for your service and the
demand for it; how is it unique? Describe how many other major competitors you have,
both for-profit and not-for-profit organizations, how much of the need your competitors
meet and control, and your strategy for gaining a place meeting that need or developing a
new niche. You need to be able to explain any barriers that you will have to face at the
beginning, how you will sustain your activities as a nonprofit organization how you plan
to overcome those barriers. You may have discovered a gap in services; describe that gap,
why you believe it exists and how you will close that gap. Are there other organizations
that are willing to help you close that gap (list them and include letters of support in the
Appendix)? How many people or other needs will you serve and what are those needs?
Place the demographics about the need for this service in this section. Detailed surveys,
tables and charts can be placed in the Appendix. You may need statistical information or
data from the US census, for instance. Who will be your collaborators or partnering organizations? Do not name them unless you asked them and they agreed to be included.
Are there community leaders, both public and private, who support this effort? Have they
written supporting letters? Put such letters in the Appendix. Is there anecdotal
information that can support your plan?

• Services - Explain your vision, your mission, the goals and objectives, the kind of
services that will be provided and the activities and functions in detail. How will other
people know that you are able to meet these goals and objectives? How are your goals
and objectives measurable? How will anyone know you are meeting your stated goals
and objectives? How do you know the activities you have planned will meet the stated
goals and objectives? You have to answer the question, "So what?" So what if you will
perform these activities? So what if you outline an extremely busy and detailed activity
list? What will be different because you perform these activities in the way you perform
them? What difference will it make? How will people or the problem be better or
resolved? I have met with many community groups that work very hard and I have asked
the question, so what? What have you changed or accomplished? Many are not able to
articulate and prove they accomplished or changed anything. So…what will you change,
how will you change it and how will you know your activities produced the change?
What are the conditions under which your service will work? What is your mission and
what is your mission statement? If your mission statement is brief and you have a logo,
consider placing them on the Title Page as well. Here are some thoughts about a mission
statement. There are those who believe it should encompass the basic reason for
existence and can be several sentences long. There are others who say make it short so
everyone can say it by memory and so it will fit on a T-shirt. Either way put the time in
on creating this. It is not easy. Include others in the discussion and allow refinement as
time goes on.

• Operations - Explain how you will create and how you will deliver your service
and meet the identified need(s). Specify how you will get your service out the door to
customers/clients or supporters and meet the needs you see. Give the location of your
service and state how and why that location was selected. Are there any barriers for your
clients/customers because of this location? Do you have a storage area? Where will your
inventory be warehoused or kept? Create a flow chart that shows the steps you will take
to offer and to provide the service. One of the two most difficult sections in completing
IRS Form 1023 is Part II, Activities and Operational Information, particularly question 1.
The IRS wants "a detailed narrative description of all the activities of the organization -
past, present and future" (emphasis added). Providing this information in this and other
sections of your business plan will go a long way in helping you complete Part II of Form
1023.

• Marketing Plan - Describe how you intend to provide your service and who will
use it. How will people know about the service? Describe your distribution plan and
advertisement plan. Give the details of your marketing plan. Will you use fliers, the
Internet, local newspapers and media, e-or snail-mailings or word of mouth? As with any
other business the new nonprofit has to include in its marketing plan product positioning.
Placing the NPO and its mission in front of its constituents, possible supporters and volunteers is vital to the success of providing the service. How will people know your
address, your telephone number, how to reach you? For many new NPOs the marketing
plan seems to be to have a web page up and running. I am surprised by the development
of a web presence before the group is even incorporated. Do not be confused by this - I
believe in a web presence but it is only one part of the marketing plan that has to be
broader. How will your organization handle public relations? Who can speak for the
organization? Will there be a committee of the board developing and handling marketing
and public relations? If there will be such a committee, discuss its role here. If there is
no experience in the group concerning marketing, how will you overcome this barrier?
How will the organization handle bad publicity and other risks?

• Board of Trustees and Members – It takes a TEAM to raise a nonprofit
organization – to raise it, to maintain and to sustain it. That team begins with the
governing body. Describe the governing body of the organization, the board and state
whether you will have members. Do you have bylaws? If you have bylaws, place them
in the Appendix. What role will the members play? Who is on the board and who are the
officers? Describe how these individuals became members, board members and officers.
What experiences do the board members bring to the organization and its mission? NPOs
should carefully consider paying for board and staff Errors and Omissions (E&O) or
Directors and Officers (D&O) insurance and liability insurance as protection in legal
actions. If you intend to have a significant web site presence on the Internet, consider
insurance to protect the organization with that as well. In my view insurance is a
necessary ingredient to the budget. See my material Insurance Questions for Nonprofits -
http://www.nonprofits.org/npofaq/19/56.html. Attach resumes of at least the officers to
the Appendix although it would be more helpful to have the resumes for all board
members if the board is not too large.

• Management and Personnel - Explain who will direct the day by day operation
of the nonprofit. Who will work with that person? What are the standards that will be
used to hire and train the executive director and other staff? Describe how their
experience will contribute to the success of the mission of the organization. Demonstrate
the use of technology in your plan of service, particularly finances and budgeting, e-mail
strategy and web site development, and availability to employees, volunteers and
constituents. Give an outline of the work plans that will be followed by employees and
volunteers to meet the mission of the organization. A work plan shows what work will
be done, who will do it, how it will be accomplished, where activities will take place, the
date by which it will be done and feedback and analysis of the effectiveness and
efficiency of the tasks accomplished. Outline the employee policies you have or will
have in place such as a personnel manual, anti-sexual harassment policy, equal
employment opportunity and so on. Include employees' job descriptions and personnel
needs. Include copies of resumes for all known key staff people in the Appendix.

• Funds Required and Expected Use of the Funds - If you are going to raise
money, seek grants, hold fund raisers, collect dues, explain how you intend to raise the
money, why you need the funds and how you will use the money. Show how you will
account for the money and what records you will keep. Describe your accounting system and the policies you have or will have in place concerning salaries and fringe benefits,
travel expenses, bank reconciliation, separation of functions and so on. State a specific
amount of money you will need for the first year and for the next two years. If you have
letters of support and persons who are willing to provide funds once you are approved by
the IRS as a nonprofit organization, consider whether to include them in the Appendix.
You may not want to publicize them at this stage of your progress; they may want to
remain anonymous. Describe your plan to secure funding and give a contingency plan in
case your initial plan fails. One of the two most difficult sections of IRS Form 1023 is
Part IV, the Financial Data. The time spend in preparing fiscal information here and in
the next section below in the business plan will reduce the time and effort answering the
questions in Form 1023, Part IV. Demonstrate the role of the board in funding and
accounting in this section. Indicate how the organization will be maintained and
sustained during the first three years. See internal controls suggested by the New York
State Attorney General - http://www.oag.state.ny.us/charities/internal_controls.pdf

• Financial Statements and Projections - Include projections and budgets for the
expected performance of your nonprofit for the upcoming three years. You will need to
demonstrate your understanding of basic accounting and the financial concepts that are
crucial to the success of your organization. Detail the budget for three years covering
personnel, fringe benefits, employee taxes, telephones, computers, insurance, space costs,
travel, training, supplies and so on. By using complete and accurate projected financial
statements, you will be able to communicate to a prospective contributor or funder how
these concepts will be successfully applied in your organization. The narrative about the
finances will be in this section and the documents are to be attached to the Appendix.

• Appendices/Exhibits - This section will document any issues you cannot address
in other sections. An example is an agreement you have with other nonprofits or
individuals, contracts for the lease or purchase of your property, equipment, job
descriptions, professional, operating or health licenses and so on. Other sections above
list other documents to include in the Appendix.

Are you finished? Then you can prepare the Executive Summary.

The Nolo Press has an excellent brief article answering the question, Why you need to
write a Business Plan located at
http://www.nolo.com/encyclopedia/articles/sb/why_bp.html?e=b20b0000206032001.
The article addresses the reasons to create a business plan, the importance of financial
forecasts and the need to raise money. There are temptations to skip financial
projections; they are hard. There is an old bromide that says the devil is in the detail.
That is true for the business plan and will be in every grant application you prepare. Do
not skip the financial projections. Program precedes money. Planning precedes program.

SCORE has a useful 32-page business plan template at
http://www.score.org/template_gallery.html. While it is aimed at small businesses, it can
serve the purpose for a nonprofit as well. SCORE is a nonprofit association that provides
entrepreneurs with free, confidential face-to-face and e-mail business counseling. Sample business and marketing plans are also available at
http://www.morebusiness.com/templates_worksheets/bplans/.

Developing your business plan early in the process will save you headaches and
heartaches later, particularly when you are seeking grants. Depending on the instructions
in a Request for Proposal (RFP), you may want to include your business plan or an
executive summary. Some RFPs limit the number of pages and attachments. If you seek
a grant and it is not approved, politely ask why. Seek an appointment to talk briefly
about the application so that you can learn what can be improved. Each governmental
and private foundation has different standards for providing grants, so there may be
reasons stated that would help you understand why they did not give you a grant this
time. That can help you assess future grant applications. Remember that this is part of
the public relations process as well and alienation of a funder will certainly hurt the
organization in the future. Such pursuit for assistance and understanding can help you
assess future grant applications and develop a relationship with the funder. Perhaps your
business plan has to be strengthened or amended.