How Business Planning Can Guide Change and Bolster Funder Confidence
Increasingly, nonprofits and funders are turning to business planning to help them turn their strategies into action. This post, the first in a series, explores how organizations can use business planning to adapt to sector trends, engage funder partners, and achieve success.
More nonprofits and funders are turning to business planning for adapting to sector trends, leading change, and putting strategies into action.
Over the past five years, we’ve helped dozens of nonprofits develop business plans to increase the impact of their work. For example, using business planning, one small community-based organization launched a pilot program with a major hospital chain to explore the effectiveness of increased support for seniors upon hospital discharge. The hospital is now generating groundbreaking data around how supports can reduce expensive re-admissions. Business planning also helped a major national environmental group create a coherent strategy for its many disparate local, urban-based programs. The plan is guiding a three-year effort that, supported by a new $12 million grant, has already significantly increased the organization’s impact and established it as the leader in its field.
As we argued in The Nonprofit Business Plan, business plans are much more than “strategic plans with numbers.” This work goes well beyond putting numbers to a nonprofit’s strategy, or even detailed operational planning. Rather, it requires a real appetite for teasing out and testing assumptions, and for refining and even redesigning approaches based on what is learned — whether from financial modeling, market assessment, or analysis of the organization’s management and operational structure.
For some nonprofits, this has meant a deep dive and corrective measures on financial or business model challenges. For a majority, the focus has been building on past success to guide new ventures or growth initiatives. In both cases, the business planning process has been a way for nonprofits to develop and test responses to changes in their operating environment, and the resulting plan has provided funders with evidence that these organizations have thoroughly considered what they need — and what they need to do — to be successful.
To date, the majority of our business planning projects have been with nonprofits in four subsectors: youth development and education, health, environment, and social justice. Many have been large national organizations, with budgets over $100 million, but several have been modest-sized regional nonprofits. Among this cross-section of organizations, we’ve observed some themes that are resonant within subsectors and some that are more universally shared.
- Youth Development/Education — Many nonprofits working in this area are exploring how to best serve an increasingly diverse youth population, how to make effective use of technology, how to ensure program quality with a high-turnover young workforce, and how to know that programs truly result in positive outcomes for youth served. For a number of these organizations, managing national federated structures has also been central to their planning.
- Health — Dynamic shifts in health care policy have led many nonprofit providers to seek out new strategic opportunities, such as enhanced programs, expanded services, and partnerships between and among traditional health care providers and other community-based organizations — all of which can benefit from focused business planning. Often, we see the process itself (not just the resulting plans) prepare these organizations to adapt more quickly, creatively, and with greater confidence in an unpredictable and rapidly-changing environment.
- Environment — Environmental organizations are using business planning to address such issues as how to expand access for all. This includes not only access to the outdoors and wildlands, but also to critical information and advocacy resources. Here, too, many organizations seek to align their national networks of chapters or regional offices behind a common vision or campaign, often with an emphasis on how that vision will attract young and diverse audiences to the movement.
- Social Justice — Buffeted by federal policy shifts, sweeping rollbacks of progress from the past several decades, and social and political polarization, social justice organizations are navigating crucial issues in their mission-driven work. At the same time, many are grappling with structural challenges like leadership change, stale membership models, and what it takes to sustain a movement in the 21st Century. For these nonprofits, business planning offers the depth of self-examination and rigorous analysis required to both set a bold course and sustain the work of social change.
- Cross-cutting Themes — The most striking commonality in how nonprofits are approaching business planning is in building a strong foundation for new and creative responses to trends like demographic shifts and political and economic changes. Another common element of these engagements is examining and aligning organizational structures for effective reporting relationships, accountability, innovation, and use of data to prove program effectiveness. Many organizations are also building into their business plans ways of more effectively engaging with constituents to address shifts in communications technology and behaviors and civic participation.
Several of these business planning efforts were supported by funders, highlighting the efficacy of business planning in contributing to grantmakers’ understanding of an organization’s needs, assets, and likelihood of success. For some funders, this information directed some “big bet” grantmaking. (For example, these business plans helped pave the way for over $100 million in recent grants to youth development organizations alone.) For others, business plans were equally important to instill confidence that more modest grants would be put to effective use.
Find more information, including a detailed decision tree to help you evaluate the need for a business plan, here.