Business Planning

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Business Planning

• What it is, why it matters, how to achieve
  strategic clarity
• Bermuda Third Sector Conference 2007

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The Bridgespan Group

• Nonprofit 501(c)(3) organization founded in 2000
  to bring world-leading business strategy and
  organizational development concepts to nonprofit
  organizations and foundations to increase their
  effectiveness and impact
• Offices in Boston, New York, and San Francisco
  110 employees
• Substantial seed funding and infrastructure
  support from Bain Company funding from
  foundations and individuals in support of
  programs and consulting engagements
• Highly collaborative working relationships with a
  wide range of nonprofits, research and media
  organizations, colleges and universities, and
  others

www.bridgespan.org www.bridgestar.org
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Bridgespans mission
We work to build a better world by strengthening
the ability of nonprofit organizations to achieve
breakthrough results in addressing societys most
important challenges and opportunities
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Business planning demystified

• Skepticism exists about usefulness of much
  strategic planning
• Fundamental planning dilemma is that the future
  cannot be controlled or predicted
• However, resources must be allocated strategy
  is an organizations approach to such allocation
• Effective strategies require
• Clear goals
• Explicit rationale for resource allocation
• Metrics to measure progress
• Ownership by key participants
• Appropriate support for capacity building
• Goal is for strategy, not strategic plan, to be
  living

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Nonprofit performance challenge
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Four stages of business planning

• Gaining strategic clarity
• Determining strategic priorities
• Understanding resource implications
• Measuring results and using the plan

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Intended Impact Harlem Childrens Zone example

• Improve the lives of poor children in Americas
  most devastated communities

Original statement
Resulting questions

• Which children?
• All residents of target community vs. service
  participants
• What kind of improvement?
• Successful transition to adulthood vs. transition
  to next stage
• Objective achievement vs. relative improvement
• Causalitybetween children and community, what is
  the end and what is the means?

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Harlem Childrens Zones intended impact
Over the next decade, Harlem Childrens Zones
(HCZ) primary focus will be on children aged 0-18
living in the HCZ making a successful transition
to an independent, healthy adulthood, reflected
in demographic and achievement profiles
consistent with those in an average middle-class
community.
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Harlem Childrens Zones theory of change
In the next ten years, HCZ will reach the great
majority of families in the HCZ with a range of
programs carefully calibrated to the needs of
different age groups, placing greatest emphasis
on families with the youngest children, age 0-5.
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Difficult decisions can result
Many HCZ services were outside the zone
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Zero in on an anchor
Intended Impact
Theory of Change

Beneficiaries(Who)
Benefits(What)
Methods(How)

• Who you want to serve
• Which beneficiaries
• Age, geographic area, demographic considerations

• The social benefits youre trying to create
• Measurable
• Achievable

• How change happens
• Assumptions for current services
• Assumptions for proposed services
• Logical cause and effect
• Proof?

• Choosing one of these as a starting point will
  help define the other two
• Eventually you must have clarity on each of these
  categories

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Priorities questions

• How well does each of our current
  programs/activities align with our mission and
  intended impact?
• What are our full costs and associated revenue
  for operating each program?
• What is our cost/outcome or positive result?
• Do all activities complement our core
  capabilities and expertise?
• How well do we perform compared to peers?
• Are there services we should modify or add to
  maximize impact?

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Both impact and financial contribution must be
taken into account
High
Requires clarity of intended impact and accurate
financial information
Intended Impact contribution
Low
Positive
Negative
Financial contribution (Revenue Cost)
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Strategic priorities are most effective when
they

• Further the intended impact and theory of change
  in a compelling way
• Are limited in number
• Are supported by analysis
• Have been vetted within the organization and
  selected against alternatives
• Are agreed upon by key decision makers

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Resource implications questions

• Human resources
• Does our staff have the skills and expertise
  required?
• Do we have the right org structure?
• How much capacity do we have to take on new work?
  Should we add people, scale back goals, scale
  back timing?
• Infrastructure
• How much growth can our current office/staff
  accommodate?
• What new/improved systems do we need (e.g., IT,
  measurement, other financial)?
• What HR systems should we put in place (e.g.,
  recruiting, training, evaluation)?

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Resource implications questions

• Financial
• What will it cost to do all of this?
• Do we know who will likely support this plan
  (program specific and unrestricted funds)?
• Can we raise the money we need?
• How will the increased budget affect our culture?
• How will the new costs affect our cost/outcome?

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Youth-serving organization high-level five-year
charitable resources required
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Promising funding sources will depend on a
nonprofits mission and size
Environmental
Youth service
Note I Individual F Foundation G
Government C Corporate E Earned
Revenue Source Data requests Annual Reports,
Public Interest Profiles
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Staying on track questions

• Program/service milestones
• What are our desired outputsthe direct and
  immediate results of our activities?
• What are our desired outcomesthe benefits or
  other results delivered to the constituents?
• What metrics will be most useful for us to use
  internally?
• What should we plan to gather for external
  reporting purposes?
• Who owns what milestones, and when should we
  check in?

• Operational/financial milestones
• What human resource and infrastructure-related
  activities should we undertake, and in what
  timeframes?
• What are the annual budget and revenue
  projections?
• Who owns what milestones, and when should we
  check in?

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Geographic expansion objectives key targets
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Concluding thoughts

• Identify the handful of key questions up front
• Carefully define the process
• Participants
• Level of engagement
• Decision rights
• Role of data
• Limit the number of major initiatives
• Tailor the implementation planning to your
  organizations strengths and needs
• The strategy, not necessarily the plan, should
  live
• Measure progress and be honest about implications
• Is what you hypothesized happening
• Do you need to re-visit part of the plan

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Bridgespan resources from the KNOWLEDGE section
of Bridgespan.org

• Articles
• Business Planning for Nonprofits
• Zeroing In On Impact
• Costs Are Cool
• Business Planning theme page
• Articles
• Cases
• Sample business plans

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Discussion
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Thank you!
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The process
Understanding resource implications
Measuring results and using the plan
Gaining strategic clarity
Determining strategic priorities
Develop current organizational overview
Determine implications for operational model
Launch key initiatives
Conduct internal/ program analysis
Clarify intended impact and theory ofchange
Define strategic initiatives and growth targets
Finalize business plan
Generate financial pro-formas
Conduct external/ market analysis
Define milestones and metrics
Begin measuring results
Refine strategic initiatives and growth targets
Frame strategic questions and workplan
Other implementation planning