To nurture excellence in nonprofit leadership, management and governance practices through training,

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Health Human Services Institute Nonprofit
Business Planning
Jeff Vengrow March 13, 2009
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What is the difference between a strategic plan
and a business plan . . .
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Strategic Plan

• Leadership Tool
• Sets the future direction for the entire
  organization
• Spells out the organizations mission, vision,
  primary goals, strategies

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Business Plan

• Management Tool
• Sets short-term objectives
• Defines steps necessary to achieve them

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Example

• Strategic plangoal provide state-of-the-art
  technology training
• Business planhow goal will be met
• Number of trainings scheduled
• Estimated expenses
• Estimated revenues
• Staff/facilities requirements

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What is the difference in business planning
between a for-profit and a not-for-profit
corporation . . .
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Difference

• For-profit
• Bottom Linemake money for owners
• Not-for-profit
• Double Bottom Line
• Social (mission delivery)
• Financial (make money to operate organization)

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Types of NP Businesses

• Mission-related service or product delivered AT
  NO COST to the client
• Affirmative Business for a FEE
• Mission-related service or product delivered for
  a FEE
• Service or product UNRELATED to mission for a FEE
  (unrelated business income)

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Social Enterprise--What is it?

• Social Enterprise Alliance
• An organization or venture that advances its
  social mission through entrepreneurial earned
  income strategies.

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Why is it?

• Government / grant funding cuts
• More Nonprofits competing for funds
• More people in need

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Why is it?

• Opportunity to diversify funding sources
• Creates unrestricted, sustainable cash flow
• Pressure from Board to be entrepreneurial

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What it is NOT

• Get rich quick
• Risk-free
• The answer to all our sustainability problems

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Youve got to be very careful if you dont know
where you are going, because you might not get
there. Yogi Berra
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Facts of business planning . . .
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Facts of Business Planning

• Planning is structured decision-making about the
  allocation of resources in order to achieve the
  maximum mission impact.
• The aim is always to enhance the nonprofits
  impact.

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Facts of Business Planning

• Dont have to do formal planning to have it be
  effective
• Planning requires a commitment of time and
  resources

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Facts of Business Planning

• Undertake formal planning when there is a
  possibility of significant benefit
• Start or close a nonprofit
• Start or close a program or venture
• Make investment in current activities
• Expand a program or organization
• Respond to rapid or significant growth

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What are the benefits of nonprofit business
planning . . .
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Benefits

• You have a more accurate understanding of
  community needs
• You provide a higher quality of services by
  focusing on what you do best
• You build your team

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Benefits

• You provide clear targets and can measure
  progress
• You make better use ofyour financial resources
• You have enhanced credibility with funders

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Benefits

• You have a clear picture of where you are going
  and when
• You have a roadmap showing how to meet your goals
• You can get great ideas from the staff

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Benefits

• You can identify possible market opportunities
• You can identify and learn from competitors
• You become less reactive

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By failing to prepare, you are preparing to
fail. Benjamin Franklin
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What . . .
is a Business Plan?

• Formal written document
• Describes the business
• What it does
• How it does it and
• Why

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What . . .
is a Business Plan?

• Provides a profile of clients / customers
  (Answers the Drucker questions)
• Describes how business will be managed 
• Sets forth financial requirements

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Business Plan Questions

• Why do we want to make a difference?
• What do we and others (in our field) do to make a
  difference now?
• What difference would we like to make?

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Business Plan Questions
4. What difference will we make? 5. What will
we do to make the differences happen?
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Business Plan Questions

• Why do we want to make a difference?
• What is the problem or opportunity we want to
  address?
• What are the causes of the problem, or what
  creates the potential?

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Business Plan Questions

• What do we and others do to make a difference
  now?
• What do we currently do in order to bring about
  the changes we want to see?
• What do others do?
• Why dont our combined efforts solve the problem?

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Business Plan Questions

• What difference would we like to make?
• Which people have unmet needs, or in which area
  is there potential?
• What specific changes can we bring about?
• What things can we do to make these differences
  happen?

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Business Plan Questions

• What difference will we make?
• What would we need to do in order to make these
  changes?
• What would these changes cost?

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Business Plan Questions

• What difference will we make?
• What resources are available that would allow us
  to make these changes and sustain them the
  whole organization?
• What will help or hinder us in making these
  changes?

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Business Plan Questions

• What will we do to make the differences happen?
• Identify the critical steps needed to achieve the
  goals
• Determine who is responsible for each step
• Determine how you define success
• Identify resources we will raise spend in each
  area over plan life

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How . . .
long should the planning process take?

• Anywhere from 3 12 months
• Revisit annually
• Revise accordingly

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How . . .
long should the plan be?

• Succinct and to the point
• 25 50 pages (plus supporting documents)

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Who . . .
writes the plan?

• Someone with
• Requisite skills (research / writing / editing /
  knowledge of finances)
• Time available
• Understanding of mission and organization

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Who . . .
writes the plan?

• Staff person who will operate the business
• Team of staff members
• Consultant
• Experienced board member

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If you can talk about your programs and
operations, you can prepare a business plan!
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Where . . .
do you begin?

• Select your opportunity
• Core competencies
• Mission

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Where do you begin . . .

• Ask
• What are we particularly good at?
• What program or service?

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Where do you begin . . .

• Rate each program/service area
• Physical service environment
• Knowledge
• Skills and technical capacity
• Relationships
• Service / program process

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The OrganizedAbandonment Grid
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Highest Difficulty Highest Risk
From Venture Forth!Rolfe Larson
New customerNew product / service
New customerExisting product / service
New productsExisting customer segments
Expand sales / improve profitsExisting customer
segments
Lowest Difficulty Lowest Risk
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Where . . .
do you begin?

• Determine if it will work
• Is business concept solid?
• Would it be possible?
• Feasibility Study

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Feasibility Study

• Definition of the product or service
• Be specific
• No jargon
• No generalities

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Feasibility Study

• Who is Your Target Market?
• Do they want
• What you provide?
• When you provide it?
• Where you provide it?
• How you provide it?
• At the price you provide it?
• ASK

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Feasibility Study

• Explore the industry
• What are the trends?
• How will they affect you?
• Is it growing? declining?
• What characterizes success?
• Are there laws or rules that affect you?

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Feasibility Study

• Determine if you have the Core Competencies to do
  the job well

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Feasibility Study

• Final Feasibility Study
• Market research
• Information on competition
• Financial resources
• Risks / Feasibility

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The Business Plan

• Cover Page
• Organization name
• Title
• Mission / Vision
• Confidentiality Statement

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The Business Plan

• Organization Information
• Board of Directors
• Board of Advisors
• Organization contact information

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The Business Plan

• Table of Contents
• Executive Summary
• Usually written last
• Summarizes plan (2 3 pgs)
• Briefly describes organization

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The Business Plan

• Definition / Description
• History / Background
• Organization description
• Business activities
• Products / Services
• Customers
• Relation to mission

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The Business Plan

• Services / Products
• What they are
• Goals and objectives

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The Business Plan
Market Analysis / Data

• Industry information
• Market information
• General market
• Target market
• Growth potential
• Niche?

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The Business Plan
Market Analysis / Data

• What makes product / service unique?
• Needs assessment / likely customers
• Pricing
• Competition

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I think there is a world market for about five
computers.
Thomas J. Watson of IBM
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The Business Plan

• Technical Operations
• Space requirements
• Staffing needs
• Equipment
• How product / service will be delivered to market

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The Business Plan

• Marketing Plan
• How will customer know about service?
• Advertising plan

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The Business Plan

• Management / Personnel
• Skills / expertisehave and need
• Number of staff / number needed
• Gaps / how filled

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The Business Plan

• Financial
• How funds will be used
• Budgetsexpenses and revenues
• Projections
• Break even analysis
• Cash flowworking capital needed

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The Business Plan

• Sustainability predictions
• Contingency Plans
• Plan B

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The Business Plan

• Supplemental Information / Appendices
• Resumes
• Organizational documents
• Intellectual property
• Time line
• Charts / graphs

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Three Tips . . .
for business planning

• Focus
• You cannot be all things to all people
• Stick to your knitting
• More you focus on a small number of things (and
  do well) better the chance for success

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Three Tips . . .
for business planning

• Do Your Homework
• Market researchwho, what, where, how
• Competitionwho, how

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Three Tips . . .
for business planning

• Marketing NEVER ends
• Increases awareness of organization, products,
  services, programs
• Variety and repetition

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Three Tips . . .
for business planning

• Marketing NEVER ends
• Emphasize uniqueness / benefits to customers
• At core of marketing success
• Quality
• Service
• Price

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Theory of Change

• 4 things that need to be addressed during a major
  change (Mauer Associates.)
• Making a strong case for change is a critical
  component
• Leaders need to kick off the change by getting
  people involved and setting a clear vision
• Leaders need to take certain actions put
  systems in place to help sustain commitment to
  the change
• When problems did occur, the leaders of the
  change use effective methods to get back on track

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Theory of Change

• Making a Case
• Is the most important element
• Stakeholders understand
• Current financial situation of the organization
• Economic or market forces facing the organization
  
• Economic or market forces facing their industry
• Why this change was critical
• How the challenges facing the organization will
  affect them directly

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Theory of Change

• To lead a successful changes almost all
  stakeholders were represented in the planning
  process
• In successful changes, the following were in
  place
• Strong leadership
• Everyone understood his/her role in the change
• Sufficient resources were made available to
  support planning and implementation
• Clear metrics (measures of success) used
  throughout
• People felt ownership in the process
• People felt ownership in the outcome
• People were recognized for meeting goals at every
  major milestone.

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Theory of Change

• When there was a threat of derailment, leaders
  need to
• Bring people together to explore the real reasons
  why the change was faltering
• Listen to people who were resisting and tried to
  incorporate their concerns
• Treated those who opposed this change with
  respect
• Use contingency plans developed during the
  planning stages

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Theory of Change

• There is a big gap between what leaders know and
  what they actually do.
• What gets in the way of putting that knowledge
  into practice
• people disregard their own wisdom
• Believe that there is always a better and faster
  way to get things done.
• Having a way to think about change a theory of
  change can help leaders attend to those things
  that are most likely to lead to success.

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Information

• Websitewww.cfnpe.org
• Resources and links
• Articles
• Business Planning Tools
• CNE 330.762.9670
• Resources handout

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703 South Main Street, Suite 200Akron, Ohio
44311330-762-9670center_at_cfnpe.orgwww.cfnpe.org