Monday, April 22, 2019

Should A Non-Profit Organization Have A Business Plan?

Yes: A non-profit organization should have a business plan.

And, hand-in-hand with that statement, a non-profit organization should have a marketing plan to go with their business plan.

My role as a SCORE mentor is to provide help entrepreneurs become successful. And yes, non-profits can benefit from my support.

First, "non-profit" organizations have many things in common with a for-profit organization.
  • They both have expenses. They spend money.
  • They both have income.
What happens with the difference between expenses and income defines?
  • Excess is a good word to describe when there is more income than expenses!
  • In a for-profit organization, the excess leaves. It's called profit, and it goes to the owners. The owners may put the excess back, but that's a different discussion. 
  • In a non-profit organization, the excess stays. It can only be paid out as an expense approved by the board of directors. (BTW: salary is a legitimate expense.)
A for-profit organization can have one of several business organizations, including sole proprietorship. (The lack of a profit does not qualify it for non-profit status.) The non-profit status is actually an IRS designation. It's neither instantaneous nor automatic.

A non-profit organization must have a corporate structure that clearly defines how it is organized and structured. It doesn't have shareholders, but it does have a Board of Directors.

In both for-profit and non-profit corporations, the Board of Directors hires the officers, and the officers run the day-to-day operations.

At the end of the year, the officers (President, treasurer) report back to the Board of Directors to establish goals direction for the upcoming year.

From that perspective, a non-profit organization operates as a business.

So, yes, a Non-Profit Organization should have a Business Plan. And, just like a For-Profit organization, it should also have:

  • A Marketing plan.
  • A budget.
  • An employee manual.
  • A mission statement
  • A 1-year and 5-year plan
  • An attorney and CPA
  • Accounts payable procedure
  • Vendor resources
  • Disaster and recovery plan

Hmmm.... Do you see a pattern here? 

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