Business Planning for Nonprofits

True or False: “Business planning is for businesses, and strategic planning is for nonprofits." Be honest. When you first heard the phrase "business plans for nonprofits," did you think, "We don't do that"? Many people think that businesses do business planning, and nonprofits do strategic planning. Strategic planning remains a core element of capacity building. State Associations of nonprofits report that strategic planning is perennially one of the most popular educational programs they offer. Funders often want to see a strategic plan along with a grant proposal. But increasingly, we’re hearing executive directors say to one another, “Do you have a business plan?” Are business plans for nonprofits becoming the new hot thing? And are they replacing strategic plans – simply by adding dollar signs? Advertisement Business planning is not the same as strategic planning. Ideally business planning will inform and improve a strategic planning process that keeps evolving. Business planning provides a sound financial context for the planning process and forces us to look at our nonprofit in the context of a competitive environment. It is hard work because it grounds big picture ideas in reality. Understandably given the option we might prefer to paint a canvas with a broad vision and fill in the colors, rather than first determine what it costs to buy the paint and canvas, and how to price our painting. (It’s much more fun to paint the picture and let somebody else figure out whether it will sell and for how much!) The problem for enthusiastic and inspired artists (as with board and staff members) is that the canvas gets bigger and bigger – but when the masterpiece is finished, there might not be a market for it.     For us amateur artists, two recent books approach nonprofit business planning from a strategic planning perspective and explain it in a very accessible way, even for those not familiar with business terminology. The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model , a new book by David La Piana and his distinguished colleagues at La Piana Consulting, may just change your attitude towards using the words “business” and “nonprofit” in the same sentence. Also take a look at Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by the terrific trio Jeanne Bell, Jan Masaoka, and Steve Zimmerman. We think both books are masterful in helping to explain why nonprofits need to pause and take a look at, well…let’s just say it, their “business model.”   Your nonprofit is in the business of something, whether it’s recycling computers, helping veterans rejoin the workforce, or preserving open space from development. And in order to pay for talented employees, that new website you dream of, and the internet connection that makes it work, your nonprofit needs cash. The problem is, assuming your nonprofit is like many others, it’s tempting to continually add new projects or improve existing programs to meet changing needs in the community. Just before a nonprofit launches that new program or makes the necessary adjustments, that’s the time to stop and ask, “How much is this really going to cost? And how will it be paid for?” The question should even be asked for services that clients pay for -- or that are paid by third-parties: “Are all the costs of the program paid for?” What we’re hearing is that many nonprofits have not calculated the full cost of running their operations. Consequently, the revenue received, whether through donations or fees for services (or a combination) might not cover 100% of what it costs to deliver those programs. Private philanthropy is concerned about this funding gap and the strain it puts on charitable nonprofits. The Donors Forum has convened a community of practice on the subject of overhead, bringing together funders and nonprofits to recommend how nonprofits can more easily identify and articulate the true cost of their work, and how grantmakers can become educated about the failure to pay full costs, as well as help nonprofits understand how to calculate the true cost of delivering services.   In today’s challenging economy, the severe consequences of failing to engage in business planning is laid bare when cash stops flowing. The cash flow crunch is a concern for a huge number of charitable nonprofits. The Nonprofit Finance Fund’s 2012 survey found that only 43% of nonprofits surveyed had more than 3 months of cash reserves – and many had less than one month. Nonprofits that continue to focus exclusively on what they do, instead of also what it costs to do it, will find themselves at risk of closing their doors for good. Here is just one example of the need for nonprofits and board members to focus strategically on business models: a 30 year old charitable nonprofit, dependent on donations to pay the rent and stay afloat, is hit hard by the recession when donations dry up. If the nonprofit closes its doors the community’s poor and disabled will be without access to medical equipment, such as wheelchairs, walkers, and oxygen tanks. For 30 years the nonprofit has collected donated equipment, refurbished it, and trained its new owners how to use it. For free. Now at the brink of being forced to shut down, the group’s executive director, reflecting on what happened, explained his mind-shift towards being more business oriented: “We’re not about money, but we have to be right now.”   A solid business plan will take into consideration not only the “vision” and the strategy for how your nonprofit will address needs in the community, but also how everything your nonprofit does fits within a competitive landscape, and how it will fund its activities in a cost-effective way. Done well, business planning is very comprehensive – and requires time. An outside consultant may be helpful to move the process along. The CEO, key program staff, and a few board members are usually tapped for the business planning team so that multiple perspectives inform the analysis of all aspects of the nonprofit’s operations: from mission delivery (programs, services, advocacy) to physical and human resources infrastructure, and marketing, to communications and fundraising activities. A business plan might also include funding projections, and address risk mitigation as well as how outcomes will be evaluated (and the associated costs).   The advantage of having a business plan in place – especially when an attractive new idea presents itself - is that some ventures, partnerships, or projects may strategically fit the mission and perfectly support the vision – but may not be successful financially. With the discipline of a business plan as the “enforcer,” it makes it easier to prioritize the activities that make the most financial sense, and to make hard decisions, such as stopping a program that offers little ROI. As champions for our nonprofits’ missions it is no longer enough to know deep in our bones that “the mission is good.” Instead we need to help boards and staff ask hard questions about money, so that the ability of each charitable nonprofit to deliver its mission into the future is protected. We encourage your nonprofit to take a look at the resources highlighted in this newsletter and on the Council of Nonprofits’ website, and we hope that when your nonprofit engages in this process, business planning will feel much more like painting a masterpiece than counting pennies. Coming soon - a new look for this newsletter and the National Council of Nonprofits   Interested in learning more about business planning for nonprofits? Join us for a free webinar on October 18th with Heather Gowdy and Lester Olmstead-Rose, authors of The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model. This webinar is an exclusive benefit for members of our network of State Associations. Contact your State Association for the registration link. Not a member? Find your State Association and join today!   This webinar is offered free of charge thanks to generous support from Resources on strategic and business planning (National Council of Nonprofits)    The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model , by David La Piana, Heather Gowdy, Lester Olmstead-Rose, and Brent Copen   Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by Jeanne Bell, Jan Masaoka, and Steve Zimmerman   Business Planning for Nonprofits: What It Is and Why It Matters  (Bridgespan)   Sample business plans for nonprofits (Bridgespan)   Tools for business planning, creating a theory of change, a case for support, and building a revenue plan (for purchase from Social Velocity)   Congratulations to Valerie Lies, President & CEO, Donors Forum, and Ann Silverberg Williamson, President & CEO, Louisiana Association of Nonprofit Organizations, as well as Tim Delaney, President & CEO of the National Council of Nonprofits, for being named to the 2012 NonProfit Times Power & Influence Top 50 list.   The National Council of Nonprofits provides information about the failure of government to pay the full costs of services both on our Government-Nonprofit Contracting website and in Nonprofit Advocacy Matters, our bi-weekly newsletter on public policy and advocacy matters affecting charitable nonprofits. An upcoming edition of Nonprofit Advocacy Matters will include an update on federal reforms affecting indirect cost reimbursements. Subscribe today so you won’t miss the latest on this important issue.

Copyright 2012 National Council of Nonprofits. All rights reserved 1200 New York Avenue, NW | Suite 700 | Washington, DC 20005 | www.councilofnonprofits.org

Website aims to help artists space out

 

Nycpaspaces.org launches as a place where artists can find, schedule and rent performance and rehearsal space; and organizations can produce revenues from their underutilized space.

A new website makes it easier for performers to tap into space quickly while offering the organizations leasing it the opportunity to generate some extra cash from an asset that might have sat idle otherwise.

Updated: August 27, 2012 4:32 p.m.

It's hard enough for anyone to find real estate in the city, but for artists, who often have not just limited budgets but odd needs in terms of the timing of the space they need, the search can be all but impossible.
Now a nonprofit is trying to make it easier for them to find, schedule and rent performance and rehearsal space. Last week, Fractured Atlas, an arts service organization, launched NYC Performing Arts Spaces at nycpaspaces.org, which allows artists to search for space using a variety of their own requirements from dates and times, to location and price.
"We are like an Open Table for the arts world," said Adam Huttler, the executive director of Fractured Atlas.
He said there is a chronic shortage of rehearsal and performance space in the city and that it is especially difficult to find on short notice. The website makes it easier for performers to tap into space quickly while offering the organizations leasing it the opportunity to generate some extra cash from an asset that might have sat idle otherwise.
"Now instead of making 50 calls for find space, you can make just one," Mr. Huttler said.
The product was in testing for about six months before its official launch last week. So far, 1,090 organizations in all five boroughs have listed space on the site.
Organizations pay $20 a month to list their space. When an arts' group rents the space, Fractured Atlas keeps 1.5% of the transaction's cost.
Mr. Huttler says Fractured Atlas doesn't view the service as a major revenue generator, but it does need to charge to cover the cost of running and maintaining the site.

Read more: http://www.crainsnewyork.com/article/20120827/REAL_ESTATE/120829912#ixzz24oELK04F

Potsdam arts incubator project aims for new businesses

Village officials hope vacant downtown storefronts soon will fill up with arts-themed businesses.

The village is set to launch its arts microenterprise and incubator project. Potsdam received $100,000 to launch the program several months ago as part of Gov. Andrew M. Cuomo’s first award to the North Country Regional Economic Council.

Planning and Development Director Frederick J. Hanss said the funding hopefully will help launch up to eight to 10 arts-themed businesses.

“Potsdam has the reputation of being the arts and cultural capital of the north country,” Mr. Hanss said. “I hope it cements our reputation. ... I would hope it would make downtown Potsdam a more interesting place for visiting.”

The funding would be used as “seed money” for arts entrepreneurs to set up their business, Mr. Hanss said. An informational session will be held at 7 p.m. Thursday in the Potsdam Civic Center Community Room. Those who cannot attend that meeting will have another chance at 7 p.m. April 24.

“We’ll walk them through the application process and the eligibility process,” Mr. Hanss said. “We’re being pretty open for eligible use of funds.”

The program will accept a wide variety of applicants, from an artist seeking to open a gallery, a potter who intends to sell products or a musician who repairs instruments, Mr. Hanss said.

“They have to present a body of work that’s original and innovative,” Mr. Hanss said. “We’re focused on new businesses. They’re the ones that typically need a leg up.”

A panel from the arts community will determine who can be admitted to the program, Mr. Hanss said. Applicants will have to complete a 10-week course to develop a business and marketing plan for their proposal before receiving any funding, which the village will distribute.

Discounted space in Clarkson University’s Old Snell Hall will serve as an “incubator” for successful applicants.

After a period of time, the businesses hopefully would move into downtown storefronts, Mr. Hanss said.

“Nobody has really applied it to this particular segment of the economy,” Mr. Hanss said. “I don’t think anyone has done this in rural parts of New York state.”

Mr. Hanss and Hillary Oak, executive director of the St. Lawrence County Arts Council, each have received five or six inquiries into the program over the last several months.

The program is co-sponsored by the village and the arts council.

Ms. Oak said the funding could be used to help reduce the business rent or pay for marketing expenses.

“If they have an interest in starting or expanding an arts-related business, these funds might help them,” Ms. Oak said. “We want to make sure businesses that use these funds are sustainable. As far as we know, this is the first microenterprise grant program geared specifically to the arts. Hopefully by next year, we’ll have some new businesses that have been given a boost by this program.”

Read article here.

How National and Local Government Can Promote Entrepreneurship

David Teten, ff Venture Capital
David Teten is a Partner with ff Venture Capital and Chairman of Harvard Business School Angels New York.

I’ve recently met with several universities, nonprofits, and government employees who’ve all asked the same question: how can we promote entrepreneurship? Just like me, they’re distressed about the poor economy and jobs situation, which contrasts dramatically with the growth and tight labor market in the technology ecosystem. They’re concerned with this issue at both the local and national levels.



The first and primary role of a government is to provide basic public goods competently. Like many Americans, I’m disappointed that our government sometimes fails to do this. Above all, I’d like our friends in government and the policy world to figure out how the US government can deliver what it’s supposed to but sometimes doesn’t: sound money; an affordable budget; effective education; functioning infrastructure (e.g. airports, less-intrusive airport security); functional legal system (tort reform); logical immigration reform; and a functional tax system (tax simplification). To Mayor Bloomberg’s credit, he is using his bully pulpit for exactly this purpose, e.g., decrying US immigration policy as ‘national suicide’. Sadly, he doesn’t control our immigration policy.



There are a range of organizations that help address issues in the technology ecosystem, including: Women in Technology, Technology Policy Institute, New York Technology Council and various other state technology councils, Center for Policy on Emerging Technologies, Information Technology Industry Council, Silicon Valley Leadership Group, and Tech Policy Central. I support their goals of making entrepreneurship accessible to those who have the ingredients to become a successful self-starter. Like virtually the entire tech industry, I am particularly in favor of Startup Visa, which has the goal of stimulating our domestic startup community through acts to keep our foreign-born entrepreneurs in the United States.



Following is a list of some of the ideas I’ve working on (to various extents). If you see something that piques your interest and want to get involved, please contact me. I have ranked this list in ascending order of cost (defined as combined time and money).



- Educating the VC/angel community on the city/state resources available to them to build companies. I’ll likely organize a Harvard Business School Angels of NY event on this topic in 2012.



- Studying best practices of VCs in supporting portfolio company operational improvement. I am now leading a Columbia MBA team (ex-Mckinsey and BCG) on a study regarding best practices of VCs in supporting portfolio company operational improvement. This is effectively a sequel to my study of best practices in deal origination, published in the Journal of Private Equity, Harvard Business Review, Institutional Investor, and Business Insider. You can see preliminary results of this value creation study here.



- Encouraging non-US companies to set up operations in the US.As the former CEO of an Israeli startup with a (modest) US and UK presence, this is an obvious way to create more jobs here.



- Creating angel groups with other alumni organizations, using HBS Angels as a model, e.g., alumni of major NY schools (Columbia, NYU) and institutions (McKinsey, Goldman Sachs). I’ve talked informally with some universities about doing exactly this. -



Creating a for-profit business with the goal of helping students conduct research projects for businesses, so that they’re more connected with potential employers. I wrote a blog poston this.



- Organizing events for local mid- to large-company CIOs / CEOs to meet technology startups, in order to help startups get traction and keep their momentum going. HBS Angels will likely execute this in 2012.



- Publishing notes on local tech events. New York has an extremely active Meet-up culture; almost every night there are 3-10 tech-focused events. However, no one systematically provides notes/videos of these events. Here’s a win-win way to address this: recruit a team of students who would attend these events and publish their transcripts/videos, so that everyone learns more and faster and can network more easily. I’m already doing this on an experimental basis on my blog.



- Publishing joint research. See ffvc.com/topicsfor a full list of topics we want to research. Part of our strategy as a VC is to do in-depth research on the questions that interest us, in order to make us smarter and to help improve industry best practices. We typically do this by partnering with graduate student teams. In particular, we think it would be helpful to the ecosystem if someone were to publish research on who are the most active and most successful New York-area angels, superangels, and early-stage VCs, in order to identify the leaders with whom entrepreneurs should most want to work. (it is likely that ‘active’ and ‘successful’ are not synonymous.)



- Creating a master operating checklist for New York entrepreneurs. Visualize a grid, with the standard entrepreneurial steps down the y-axis (ideation, market research, incorporation, etc.), and the major New York industries across the X-axis (internet, food, retail, fashion, etc.). It would be valuable to have checklists for all of the intersections in this grid. We’ve created some but not all of these checklists for the tech industry; see our presentation notes and links on our resources page. Other useful checklists we’ve identified include Biztree, Wickedstart, Goodwin Founders Workbench, American Express Open Forum Crash Courses, StartupToDo , Entrepreneurcountry, and StartupPlays.



- Organizing angel pitch nights focused on special-interest communities, including industries (healthcare, retail, fashion) and affinity groups(Women, Asian-American, Latino, LGBT, African-American). I am now talking with some affinity groups in these domains about co-organizing such pitch nights under the umbrella of HBS Angels. Our goal is to source and fund great entrepreneurs, regardless of personal or industry background. We are planning a healthcare-focused evening on February 29, and are working on an evening focused on African-American entrepreneurs and on the mobility sector. Details to come.



Here are some much more ambitious and expensive ideas:



- Setting up a ‘virtual seastead’, perhaps on UN headquarters territory, for high-quality entrepreneurs who do not have US visas. A team in California is already creating a offshore seastead for non-US citizens who want to build companies in the US. The UN headquarters in New York is technically located on ‘international territory’. I’m sure there are already some for-profit businesses there, e.g., restaurants. I wonder if it is possible to set up an apartment building near UN HQ as a virtual seastead? I’m unclear whether this legal arbitrage is possible. Is anyone else looking into this?



- Launching a seastead acceleratoroffshore from New York.



Read more: http://www.teten.com/blog/2012/02/02/how-national-and-local-government-can-promote-entrepreneurship/#ixzz1lKvpNxR4