We got a great email from a reader that we thought we’d share:
“Dear Suzanne, we are working with a ‘big-fish’ entrepreneur and instead of a grant, she is asking us for a prospectus. We have researched this term and don’t see how to apply it to our nonprofit. Can you help?”
This is a great question. In the world of for-profit entrepreneurship, a prospectus is an easy way for investors to size up a company and decide whether they want to invest. As the social sector shifts from a donor model to an investor model, prospectuses are a handy tool to have in your back pocket. They can be your lucky charm and help financial and business leaders understand nonprofits in a language that is easier to understand.
Just like you don’t want to read a whole book to decide if you want to buy it, investors generally can’t spend hours gathering basic facts about your organization to make investment decisions. Enter the prospectus, a powerful fundraising and program tool that serves as the abridged version of your organization’s story for investors.
The prospectus is a short, highly visual document that provides a summary of the most relevant aspects of your organization or venture – whether a program or a social enterprise. A prospectus sends a message of credibility by outlining what your organization does, your vision for the future and the resources you need to achieve that vision. It is the next logical step once you have refined your business model. The prospectus can be used as an introduction to your organization and a leave-behind at investor meetings and presentations.
The good news is that if you can write a grant, you can easily write a prospectus. We suggest including six components in a social sector version of a prospectus, which can be created for an organization or just one program or social enterprise.
This section showcases the who behind the project. In a few sentences, tell your organization’s story and vision for future growth. You could include your mission statement, target audience, and programs or services offered. You can also include your history of service, especially if it shows impressive change over time (e.g., evolution as needs shifted in the community). As a reminder, this may be the first element that your reader reviews, and it can determine whether they continue reading. Use this section to prime your audience and ensure they keep reading until the very end.
Need for Change
This section describes your why. Answer the question: what problem are you trying to solve? Set up why there is a problem using facts that clearly illustrate the need in the community or marketplace. Then, demonstrate why this issue is important not only for the clients you serve, but also for society at large. For example, take a look at the prospectus Social Impact Architects helped Rainbow Days craft for its training division, Rainbow Days Training. This section of the prospectus illustrates the need for services by showing the increasing number of at-risk children and the struggle other service providers face in meeting that need. (Can’t find the statistics you need? Check out this tool!)
Opportunity for Social Impact
This section defines your how – make the case for how your organization can solve the problem. We also love using maps, client flow charts and a condensed logic model to help illustrate these points. Don’t forget to show how your approach is different or more effective through your unique value proposition. Show your accomplishments in both quantitative and qualitative ways, such as awards, a client success story that features return on investment and other evidence of your social impact.
This section delineates your what – what kind of financial support is needed and what your vision of sustainability is. It is important to identify how investors can support your need. For example, “The Trans4m Center’s goal is to train 3,800 individuals a year and become self-sustaining.” This section should also include information on the financial position of the organization, which establishes the organization’s efficiency and sustainability and demonstrates strong financial management.
Program/Organization Goals & Evaluation
This section outlines when and how you will measure your success. This shows how investors will know when you are successful. Describe the metrics you use to assess both program performance and social impact, and, share a timeline for achieving that impact. For performance metrics, examples could include current and projected attendance, hours of service provided, number of additional volunteers or increase of in-kind donations. For social impact metrics, an example could be: “95% of participants will be highly satisfied with The Trans4m Center’s trainings.”
This section concretely shares your needs (e.g., growth capital – $X will enable us to reach Y more [target group] or capacity-building – $X will allow us to develop capacity in-house to Z). You can also list your needs (cash and in-kind) to support your vision, which gives the interested investors ways they can help support your effort. This can include in-kind needs, such as warehouse space or graphic design, or cash needs, such as $X for software. While the investor may not be able to help with all the needs, they have a network that could support you in many ways.
Prospectuses are a very effective tool to sell to entrepreneurs and business professionals because they are in a format and language they understand. The key to a great prospectus is “thinking like an investor” and selling them on both social and financial results. You don’t even need to start from scratch – you probably have a lot of previous material to work from (e.g., annual/impact reports, business plans). If you decide to use a prospectus to land your next “big fish,” keep us posted on your success – we cannot wait to hear about it! We also have a handy assessment tool as you evaluate your prospectus as well. If you have a question for us, please let us know. We welcome your ideas, questions and feedback.