Earlier this week, one of my favorite management gurus, former CEO of GE Jack Welch, passed away. On my bookshelf is my well-worn copy of “Winning.” I bought this book before business school, and it gave me many gems that I used there and during my time at the American Heart Association. My favorite quote: “Business is a game, and as with all games, the team that puts the best people on the field and gets them playing together wins.” “No company, small or large [or for-profit or nonprofit], can win over the long run without energized employees who believe in the mission and understand how to achieve it.”
It inspired me during and after business school to properly translate (not just transfer) business concepts to the social sector and create DIY tools that anyone could add to their toolbox. One of the first things I tackled was making the business plan more accessible to the social sector. One of the most frequent comments I encounter during training sessions is, “I’ve never written a business plan; how do I start?” In fact, just last week, while working with longtime partner, the Foundation for a Healthy Kentucky, that question came up. And, my response was this: “Have you written a grant?” The answer was a confident “Yes.” “Then,” I explained, “if you have written a grant, you are halfway to writing a business plan.” With this statement alone, I could feel the tension dissipate.
As more nonprofits consider starting for-profit business ventures or breakthrough yet sustainable programs in a community, many are being asked by funders to write feasibility studies, business plans, prospectuses or business pitches that build the case for support and force discipline around venture creation. While business planning may seem foreign and corporate, we believe that business plans and grant proposals are not that different from each other. Whether you are writing a grant or business plan, your main objective is to create clarity around your vision, build confidence in your strategy and showcase your competency at execution.
Grant proposals and business plans share many similarities. Grant proposals outline a nonprofit organization’s case to funders about why their program and staff best meet the needs (or solve the problem) of their clients. Likewise, business plans (or those plans in the same family, such as pitches, prospectuses, or feasibility studies; for ease, we are using business plan as an interchangeable concept in this piece) suggest a product or service that fulfills customer needs and why market conditions and organizational capabilities make the plan viable and attractive. When nonprofit organizations embark on a business plan, here are key similarities that can make the process seem less daunting:
- Grant Proposal’s Need Statement vs. Business Plan’s Research & Analysis
In grant proposals, nonprofit organizations typically start with a statement of need that highlights challenges facing clients and/or the community, the extent of barriers and the scope of the issue. Similarly, business plans cover the needs of customers in the market research sections, which include an analysis of the customer, industry (also called the environment in the social sector) and competition. In this phase of business planning, ventures will illustrate the estimated need for their proposed product or service (e.g., market size) and show the industry and competitive conditions that will affect the success (e.g., favorable or unfavorable conditions) of the venture.
- Grant Proposal’s Project Description vs. Business Plan’s Strategy and Venture Description & Goals
In grant proposals, organizations provide an overview of the project’s design and demonstrate how the intervention uniquely meets the client’s needs and reduces barriers to their receipt of assistance. (See our Lean Startup for Nonprofits for some tips on how to do this effectively.) Similarly, business plans contain a venture description, guiding principles and strategy that show how the proposed product or service will uniquely fulfill customer needs or desires. However, it’s important to note that there is one big difference between a social sector business plan and a for-profit business plan. While for-profit business plans need only take into account how to generate revenue, social sector business plans often include multiple goals (i.e., how to create revenue AND fulfill their mission by hiring hard-to-employ clients and/or providing a service that otherwise would not be available in the marketplace).
- Grant Proposal’s Organizational Background and Personnel & Project Plan vs. Business Plan’s Organization & Management and Operations and Risk Mitigation
In addition to showing that your nonprofit organization is implementing a best practice or promising program in a grant proposal, you also must demonstrate to funders that the organization and key staff are qualified and have the right experience to execute the proposed activities, even if the worst-case scenario happens (e.g., buildings get delayed, clients do not come as fast as expected). Organizations typically highlight how long they have been serving their clients and the professional expertise of their staff. Likewise, in a business plan, the organization should highlight the specific qualifications, expertise and previous successes of key staff to demonstrate competency to investors.
- Grant Proposal’s Budget vs. Business Plan’s Financials
In a grant proposal, you show various categories in the budget – total cost of project, total request for the specific funder, and, if there is a difference, how you plan to raise the rest of the money. This inspires confidence by the funder that the organization’s financials are well-understood and the project will be sustainable over the long-term (if that is the goal). In a business plan, you show financials differently – it typically includes a 3-5 year budget (or P&L) as well as cash flow. It also often includes a tool called sensitivity analysis to demonstrate the relative impact of various changes on the financials.
We are excited to see the growth in nonprofit organizations and government agencies considering entrepreneurial ventures as well as more sustainable projects. We urge you to use the framework behind business planning to create a winnable strategy (be it a business plan, a feasibility study, a pitch or a prospectus) with the confidence of years of grantwriting experience in your pocket. To make it even easier, check out the latest version of our business planning template, which includes a handy checklist of questions to answer in each section. With transferable skills, professionals in the social sector are highly equipped for this challenge. We also want to thank our clients and TrendSpotters over the past decade for helping us to refine this template. It has guided more than 128 business plans, pitches and studies over our 11-year history and countless others who have downloaded it as their template. If you have more suggestions or questions, we’d love to hear them.
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