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Business planning tools or non-proft organizations
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Business
ornon-proft
SCORECounselors to Americas Small Business
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planning tools
organizations
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ACKNOWLEDGEMENTS
This guide is part o an initiative by SCORE to assist non-proft organizations in buildingtheir capacity to serve their communities. This initiative was unded by a generous grant
rom the W. K. Kellogg Foundationand was made possible by the willingness o several or-
ganizations to let SCORE incorporate their ideas and materials in our resource materials.
The Southern Caliornia Edison Company (SCE) is one o those organizations. In 1996,
the SCE published, A Financial Sel-Sufciency Guide or Non-Proft Organizations. This
copyrighted publication was written by Dina Lane, then a member o SCEs Business and
Economic Development organization. SCE has generously granted SCORE the exclusive right
to reprint all or part o the guide. A signifcant part o their material has been utilized in prepar-
ing this book. Southern Caliornia Edison customers interested in learning more about
the companys Economic and Business Development Programmay call 1-800-3-EDISON.
Customers interested in the companys Community Involvement Programmay call 1-866-
840-6438 or send an email to Edison.gits@sce.com. Inormation about both programs
can be ound at www.sce.com .
Additionally, SCORE oers its special thanks to
Mike Mendezor serving as editor on this booklet and guiding the overall SCORE
Non-Proft Capacity Building Workshop Project.
SCORE NATIONAL OFFICE
1-800-634-0245
www.SCORE.ORG
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Chapter Guide
SCORE and This Guide
Diversity o Non-Profts
Strategic Plans, Business Plans
& Feasibility Studies
Financial Policy
Encouraging the Entrepreneurial Spirit
Financial Options
Organizational Options
Assessing Funding Sources
A Few Basic Tools
Conclusion
The SCORE Foundation 2006
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SCORE is a more than 40 year old non-proft with over
10,500 volunteers who provide ree business counseling
and no or low-cost workshops to new and emerging small
businesses nation wide. In 2005, SCORE counselors
volunteered over 1,000,000 hours in counseling and
workshop services.
While most o SCOREs work has ocused on small
businesses, over the years it has assisted some start-
up and emerging non-proft organizations, particularly
on business issues. As a result o these experiences,
SCORE strongly believes that to be eective, competitive
and sustainable, non-profts must not only be caring and
creative, they must run their operations as businesses.
This guide is about a great American institution and a
powerul agent or change: the non-proft charitable
organization.
In our democratic society, we ask non-proft organizations
to ulfll several important responsibilities, rom providing
public beneft and serving the underprivileged to advancing
education and science and reducing the burden o
government. We also expect non-profts to operate on a
higher, more noble plane than other organizations, and we
insist that they ocus on public good rather than private
gain in accomplishing their goals.
The role o this so-called third sector o our economy
has become a vital part o our national culture. Non-prof
have proven to be eective instruments or addressing
social needs outside o government. To perorm
eectively, however, they must be ree to take risks, try
new approaches and invest in solutions as they see ft.
This means developing the strategies and skills to build t
capacities to serve their communities, to become
sel-sufcient and to compete or resources needed to
achieve their missions.
Without fnancial sel-sufciency, non-proft organizations
cannot choose their direction or concentrate on their missio
Instead, they remain subject to the demands o fnding their
unding sources and in turn meeting donor demands.
As a result, in todays world, fnancial sel-sufciency is
nothing less than a critical requirement or non-proft
organizations and, together with strategic planning and
marketing, their highest priority. To secure ongoing
resources ree rom constraints imposed rom the outsid
non-profts must pursue a long-term planning process.
and use business tools to assist them.
SCORE and this guide
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Society believes non-proft organizations are
important because they provide a public beneft
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Charities, oundations, social welare organizations,
and proessional and trade associations are the major
categories o non-proft organizations.
National non-proft size & scope
Carities (501(c)(3) oranizations): 654,000
Social welfare oranizations (501 (c)(4) oranizations):
140,000
Reliious oranizations: 341,000
Total independent sector oranizations: 1.14 million
Revenues
Total independent sector revenues: $621.4 billion
Percentae of te national economy: 6.2 percent
Employment
Independent sector employees: 10.2 million
Percentae of total U.S. workforce: 6.9 percent
(Source: Givingforum.org)
DIVERSITY OF NON-PROFITS
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Non-proft organizations also receive support in the orm
o cash or in-kind services through grants and contracts
rom government agencies or oundations, contributions
rom individuals and businesses and earned income rom
ee-or-service activity, investments and other ventures.
Charitable giving represents the major unding mechanism
or non-profts outside o government. O all charitable
giving in 2004, approximately 76 percent was contributed
by individuals. Non-proft income rom private oundations,
estates, bequests and corporate donations rank second,
third and ourth respectively, and together amounted to
approximately 24 percent o total charitable giving.
Patterns o charitable giving change over time. Overall
contributions increased in 2004 to $249 billion.
Other statistics help to paint a picture o the giving
population: Those who contribute time to a charity are
three times more likely than non-volunteers to contribute
cash as well, and approximately 75 percent o those who
volunteer as children will go on to do so as adults.
Besides unding rom individual donors, estates, private
oundations and corporations, non-proft organizations also
raise unds through membership ees and ee-or-service
arrangements (which involve charging clients a portion o
the cost o services). These activities can result in earning
excess income and, while the trend towards income-
producing opportunities is increasing, research to quantiy
it is still in its early stages.
8
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1. Develop several planning teams composed o
employees, board members, community leaders, sponsors
and management. Outline the planning process, including
expectations and time lines.
2. Gather pertinent inormation, including theorganizations articles o incorporation (a good reresher on
the organizations stated purpose), historical organizational
perormance, summary o current programs and services,
changes in legislative and regulatory policies, demographic
and industry trends and articles or reports that present
innovations within your industry.
3. Develop or reafrm the organizations vision and
mission. Establish its values and guiding principles.
Defne how it should behave as well as its reason or being
and operational ramework.
4. Objectively assess the organizations competitive
position, strengths, weaknesses and critical assets
(especially its employee skills), potential threats,
technology and market position.
5. Assess and analyze external changes in the industry as
well as the political, economic and community environment
based on an inormation gathering process and planning
group expertise.
6. Usin tese steps, develop various course scenarios,
determine the organizations optimal direction and establish
strategic goals.
7. Identiy any additional needed resources, fnancial
options and fnalize the written strategic plan.
Developing a strategic plan also involves several
levels o organization. The ollowing steps will
help you to begin:
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Traditionally, business plans have been a ocus o the or-
proft sector; however, they are equally valuable as a tool
or non-proft organizations.
For te non-prot, te business plan can be considered a
management tool that will steadily guide your organization
through a changing environment. The business plan
articulates what your organization does and how it will be
managed. It clearly defnes the organizations goals and
objectives and provides a mechanism or monitoring and
evaluating progress.
The business plan should be developed ater the
organization has completed its strategic plan. The business
plan is a management tool or:
Articulatin specic oals and objectives
Promotin efciencies
Identifyin opportunities for improvement
Establisin performance uidelines
Raisin funds
guidin te implementation of capacity
building strategies
Business plans are usually updated annually i not twice a
year, or whenever new program and unding opportunitie
arise. (Typically, an organization should frst determine
whether to proceed with a new venture by conducting
a easibility study.) Once the board and management appro
a new program, it should be included in an updated version
the business plan.
Because the business plan is a detailed account o how th
organization will operate, it becomes the key document o
investors, or donors, when soliciting fnancing, unding or
major contributions. Thereore, the business plan should
promote the organizations capacity and should be viewed
a major communications tool.
Remember, too, that one plan does not ft all. A business
plan should be written to meet the needs o a specifc
audience. I you are using the business plan to solicit
fnancing rom a bank or corporate investor, you must
include material these individuals consider important.
For example, if you want to acquire fundin from a major
corporation to build a acility, you will want to clearly expres
not only the relevance o your mission to the local commun
but to demonstrate how the corporation will beneft in turn.
IMPORTANCE OF ThE BUSINESS PLAN
10
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15One Plan Does Not Fit All.
Tailoring the business plan to the audience does not mean
rewriting it each time; it means writing the initial plan in a modular
style. Key sections (such as those outlining the organizations
vision, values and mission) may remain intact for months or
years. Others, such as the financial section, must be updated on
an ongoing basis. Of course, specific sections written to address
specific target audiences will not need to be included in the
boilerplate version of the plan.
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Executive Summary:
Provide a succinct overview o the entire plan.
In the summary, you must grab the readers attention,
describe the organizations purpose, history, unique
strengths and advantages, menu o products and services
and market or need, as well as its operational plan and
fnancial plan.
Body o the Plan and Organizational Structure:
Generally describe the organization and its corporate
structure, including subsidiaries (i any), stage o
organizational maturity, objectives, expansion plans and
industry trends.
Products, Programs or Services:
Describe the products, programs and services your
organization provides, as well as any special eatures o
delivery, benefts and uture development plans. Include
inormation on any copyrighted, trademarked, service
marked or patented items your organization has protected.
Also include new products and services you plan to launch.
Marketing Plan:
Defne the market and sub-sectors o the market (the
constituency you serve), trends and importance o the
market, need or your organizations services, competitiv
orces, distribution channels and promotional eorts,
projected number o clients, costs and projected excess
or earned income. In an appendix, include samples o
promotional material.
Operational Plan:
Explain your organizations plans, location o your acility
including satellite operations, capital equipment, inventor
program and service development and distribution
approach, maintenance and evaluation o program servic
process.
Management and Organizational Team:
Describe your management team, principals, key
management employees and their expertise. Also includ
board member and advisory board expertise and active
fnancial sponsors. The or-proft sector oten considers
the management team one o the most important actors
deciding to invest in a company. Include an organization
chart and explain lines o authority and responsibility as
well as an assessment o stafng needs.
Many business plan ormats exist; however,
the ollowing presents the most typical
categories and what they should include:
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Major Milestones:
Describe major program, service or organizational
milestones, and detail how your organization plans to
accomplish its goals. Include a time line and schedule o
planned major events.
Capitalization:
Describe the organizations capital structure, outstanding
loans, debts, holdings, bonds and endowments. Explain
subsidiary relationships relative to the flow o capital to and
rom the organization.
Financial Plan:
Illustrate your organizations current and projected fnancial
status. Include an income statement, balance sheet, cashflow statement, fnancial ratio analysis (i possible) and
three-year fnancial projections, as well as an explanation o
projections.
Considerations:
Articulate the organizations request or needs or fnancing,
grant awards, major contributions, in-kind support and so on.
Appendix:
Depending on the organization, you might wish to include
some or all o the ollowing: rsums o key management,
board member lists and pertinent charts, graphs and
illustrations.
Your business plan is the road map o your
organizations operational methodology,
marketing and fnancing process and general
management philosophy. The more accurate,
detailed and compelling you make it, the more
successul it will be.
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The easibility study is a process designed to research the
practicality o engaging in a new venture, whether a new
business venture or program or an expansion o existing
services or markets. Whatever the project, the process
ollows a similar pattern. In essence, the easibility study is the
organizations primary tool or assessing the practicality o a
project and its capacity to operate the new or expanded venture.
A easibility study should include a thorough review
completed within a short time period, say 30-45 days. The
organization needs to research the market to determine the
extent o the need, potential pitalls and controversies, as
well as possibilities or expansion and completion.
By means o the study process, data is gathered to
determine resource needs, potential benefts and probabl
liabilities. The easibility study is not a sales pitch. It is
not designed to promote a venture but research and asse
the advantages and disadvantages o proceeding with on
When properly executed, the easibility study providesmanagement and the board with a convincing analysis o
the new ventures potential risks and awards.
With the completed study in hand, the board, management
and sta can decide whether to proceed. I they do, they
should commission a more detailed plan to be completed an
incorporated into the organizations broader business plan
IMPORTANCE OF
A FEASIBILITY STUDY
The easibility study provides managemen
and the board with a convincing analysis o
the new ventures potential risks and awards
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As with the business plan, a easibility study can
take a number o ormats. The ollowing is typical:
Type o Venture.
Describe the new venture, program or expansion idea:
where it fts organizationally, who will beneft, how
the organization benefts, how the venture fts into the
organizations mission and rationale or implementation.
Industry Inormation.Provide inormation on the broader industry o which the
proposed venture is a part, including trends, changes,
anticipated milestones, controversies and special qualities
your organization is prepared to bring to the table.
Resource Needs.
Describe in detail the amount o fnancial and other
resources (such as stafng, equipment, acilities) required
to properly implement the venture. Include any specialized
equipment or employee skills you will require.
Target and Niche Markets.
Describe the intended target and niche markets, their
current needs, how your organization will address those
needs by reaching the target market and why the market
might preer your organization.
Assessment o Benefts.
Describe how the new venture will provide value added
services to the organization and community at large.
Analyze growth and near-term potential.
Assessment o Disadvantages.
Describe the obstacles, potential negative impact andproblems associated with implementing the new venture.
Discuss potential investment risks as well as potential
political and legal complications. Additionally, consider
potential risk to the organizations tax-exempt status.
Financial Review.
Complete a pro-orma fnancial statement including a break
even point and return-on-investment evaluation.
Recommendation.
Based on the above, develop a recommendation to
implement, postpone or not implement the new venture.
Consider all possibilities, including developing strategic
partnerships and recommending the new venture
opportunity to another organization.
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The strategic plan
articulates the organizations goal o fnancial
sel-sufciency and interest in developing a
sustainable flow o income unencumbered by
unding source conditions.
The business plan
gives the organization the means to consider all
relevant aspects o good management principles,
details the organizations operation, and helps to
assure successul implementation, growth and
prosperity.
The easibility study
enables the organization to consider new
venture opportunities in relationship to its
own capabilities and provides a reasonable
assessment o risks and rewards.
SCORE Counselors to Americas Small
Business believes that developing the art and sk
o entrepreneurship is the engine or driving yo
non-proft organization toward fnancial capacity
building and sel-sufciency.
SCORE volunteers are ready and willing to
assist your organization in implementing the
entrepreneurial business practices to move you
organization to the next step.
Additional resources can be ound at
www.score.orgor at800-634-0245.
In summary, the strategic plan, business plan and
easibility study are each critical to developing
fnancial sel-sufciency:
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Together, these processes orm theoundation upon which the organizationcan identiy its strategic opportunities,maximize its resources and move towardan environment o fnancial sel-sufciency.
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In this country, the individual dream o gettingahead, o building an economic base and realizing
your potential, remains a powerul driving
orce. Entrepreneurs have fred the economy,
inspired innovation and transormed the nation.
Most would agree, the entrepreneurial spirit is
something our society holds dear.
An entrepreneur is a catalyst o change, aninnovative capitalist, a risk taker and inventor.
Economist. Joseph Schumpeter defnes an
entrepreneur as someone who changes the
existing economic order by introducing new
products and services, creating new orms
o organization, introducing new markets
and production methods, and exploiting new
raw materials. Others put an economic spin
on entrepreneurialism and describe it as the
pursuit o an idea or approach without regard
to resources. Still others look at the process oentrepreneurialism as an opportunity to create
and, an organization to pursue.
ENCOURAgINg ThE ENTREPRENEURIAL SPIRIT
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Determinin te areas witin te non-prot
organization that are weak and in need o
improvement
Identifyin te expertise needed to sore tose
weak areas and enlisting key players within the
community, business and political arena who
have that expertise and are willing to share it
Makin sure te oranizations culture and
operations encourage an entrepreneurial spirit
Seekin out manaement and staff wit
creativity, vision and drive - Include these skill
sets in job descriptions and build incentives toreward entrepreneurship
Desinin model prorams or services tat can
be replicated and implemented in more than one
marketplace
Treatin employees, volunteers and clients alike
as customers who have a choice o who they
want to serve them
Creatin transferable systems and efciencies
user-riendly to both internal and external
customers
Institutin a process for continuous two-way
communication between your organization and
the community
Establishing theentrepreneurial spiritalso involves:
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FINANCIAL OPTIONS
When you conduct a easibility study or a new
venture, your organization should frst determine the
most appropriate organizational structure or the new
venture. Several organizational options exist, including
operating the venture within the non-profts existing
organizational structure as well as operating the new
venture out o another non-proft subsidiary, a or-
proft subsidiary or, a general or limited partnership.
Each option has its ownadvantages and disadvantages.
Up to this point, our discussion has centered onorganizational planning, fscal ftness and entre-
preneurial development. Now its time to look at
the various fnancial options available to non-proft
organizations.
Several options incorporate traditional unding
sources rom government, oundations, corpora-
tions and individuals, all with amiliar methods o
approach. Others include lesser known and possibly
more complicated processes or acquiring unding
such as bonds, endowments and joint ventures. Each
o these dierent fnancial options requires a dierent
investment o time, money and expertise. You must
careully analyze the cost o each option against itsanticipated yield beore making a decision.
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ORGANIZATIONAL OPTIONS
generally greater overall reedom o operation.
O course, proft is also a strong motivator or success.
On the down side, your or-proft organization will have ta
liabilities. Proft motivations can also sometimes override
community interests, and shareholder and investor interes
can override employee needs and the creation o new jobs
As a rule, or-proft organizations cannot apply or oundator government unds.
By contrast, a non-proft organization has access to gran
tax-exempt status (i income is related to the organization
mission) and eligibility or such benefts as postage
discounts and volunteer help. Some non-profts are
prohibited rom engaging in political activity, however. Th
majority are also disqualifed rom most types o tradition
fnancing and are closely scrutinized by unding sources.
In the absence o proft as a motivator, non-profts tend t
have a harder time quantiying their success.
Beyond the or-proft organization, the investment partnersh
may be another organizational structure worth considering.
This type o partnership shares elements o the non-proft
and elements o the investor: It allows the non-proft and
investor to establish dierent categories o ownership an
liability. Subcategories o investment partnership include
general partners, limited partners and the sharing o
income (a category oten used in conjunction with housin
development prorams). For any of tese options, leal
assistance is highly recommended. Several organization
provide no or low-cost legal assistance.
Beore every new venture, the non-proft organization
should determine which organizational structure is most
appropriate. Operating the new activity or venture within
your organizations existing structure is oten the most
apparent option.
In any event, you must consider the advantages and
disadvantaes associated wit eac structure. For
example, i you were thinking o establishing a subsidiary
organization, you might want to ask yoursel:
how muc control will my oranization impose over te
subsidiary?
Will te majority of te subsidiarys board members also
sit on the board o my existing nonproft?
Will te subsidiarys vision, mission and oals be similar
to or dierent rom those o the existing organization?
how will te existin non-prot nance establisment of
the subsidiary?
how will te two oranizations andle teir year end
fnancial statements?
Wat impact will te newly-establised subsidiary ave
on the existing non-profts image within the community it
serves?
You might also ask yoursel whether you should develop
the subsidiary as a non-proft or or-proft organization.
For-prot oranizations enjoy access to capital not available
to non-profts as well as the ability to write o losses and
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25Since income and expenditures are a part o your organi-
zations fnancial statement, you should have no difculty
reportin income and expenditures on te IRS Form 990
so long as you meet the fnancial minimum. (Special rules
apply to some religious organizations.)
For te most part, tese nancial reports are not desined
to give your organization a clear picture o its reliance on
any one type o unding especially i you have developed
diversifed unding sources and set policy regarding your
organizations level o dependency on any one source.
Thereore, another assessment tool might prove helpul.
Begin by evaluating your organizations ability to increase
unding options in any o the unding areas indicated in theollowing chart. The strategic planning process will help
you to make this evaluation by highlighting your organiza-
tions strengths and weaknesses relative to the community
and the competition.
Increasing your unding requires a more detailed evaluation
o how well your organization ranks at any given time in
any unding category. This quick assessment tool can also
be used to determine your organizations perormance
relative to Annual Giving and Planned Giving Categories.
The ollowing chart will help you to assess your
organizations readiness to influence und raising relative to
unding options.
ASSESSINg FUNDINg SOURCES
The time has come to assess where yourorganization stands with respect to unding
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Government
local
state
federal
Sub Total $ %Foundations
private
public
Sub Total $ %
Corporations
grants
contracts
in-kind
Sub Total $ %
Annual Giving (Individuals) direct mail telemarketing
membership
special events
donor clubs
capital campaigns
Sub Total $ %
Planned Giving (Individuals)
endowments
bequests
Sub Total $ %
Bonds pooled issue
pooled pension
private offerings
Sub Total $ %
Social Lenders
community loan
banks
insurance co.
Sub Total $ %
Enterprise
fee-for-services
pilots
unrelated
joint ventures
investments
Sub Total $ %
GRAND TOTAL $
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Funding Source Funding Level ($) Percent of Grand Total (%)
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2To complete the assessment, ask yoursel these key
questions regarding your organizations planning process
and its relationship to und development:
Is tere a sared commitment by te board,
management and sta to support und development
activities?
has your oranization establised clear and measurable
und development goals? Are these goals reasonable
and cost eective?
Is your non-prot youn or a well establised, mature
organization?
Does your oranization ave name reconition?
Are you known in te community, visible to your
constituencies and respected as an organization that
delivers?
Is your oranization buildin on its donor capacity?
An important act underlies this last question: Donors
who contributed during a previous year are more likely
to contribute again the ollowing year. Additionally,
donors with a history o contributing to your organization
especially major donors are more apt to consider anendowment arrangement with you.
Critical to targeting assistance and assessing needs is
your ability to recognize the communitys impact on und
development. Contributions by board members are one
way to gauge the communitys level o commitment. The
boards degree o involvement will also be reflected in the
expertise it shares and in its ability to influence others in
the community to provide in-kind and fnancial assis-
tance.
You might also ask:
has your oranization developed volunteer roups or
auxiliaries to build community exposure?
Can oter strateic partnersips assist in leveraging
resources to maximize eorts while minimizing costs?
Does your oranization ave te stafn to manae
und development activities?
With this assessment, you can begin to address your
organizations ability to leverage its capabilities and
develop its opportunities or growth. Benchmarking your
organization against itsel, or against similar organiza-
tions, is yet one more step towards achieving fnancial
sel-sufciency.
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A FEW BASIC TOOLS
In this last section we oer a ew basic analytical tools tohelp with the planning and easibility study process.
First is te cash flow projection. It is used to orecast an
organizations cash position at specifc points in the uture.
The ormula is straightorward. Identiy the period or the
orecast i.e. month, quarter or year. Record the actual cash
on hand at the beginning o the period. Add to that amount,
the orecast o cash to be received during that period.
Subtract rom that total, the orecast o cash to be paid out
during that period. The result is the orecast o cash on
hand at the end o the period.
This process is valuable because or most young
organizations their potential revenue is so volatile and
unpredictable. In addition, in the early stages o develop-
ment there is a tendency to be overly optimistic about
revenue. Consider the ollowing example below.
One additional element has been added to this projection
the last column expresses the organizations confdence
that the revenue will be realized. In this example, the
organization needs to increase its und raising to make th
projection realistic.
Cash 1/1/05 1 Qtr 2 Qtr 3 Qtr 4 Qtr Confde
Revenue
Special Event 1
Individual Donations
Corporate Donations
Foundation grant
Total
Expenses
Labor
OtherTotal
Net
Cash on hand $ 50,000
$ 25,000
$ 12,500
$ 12,500
$ 50,000
$ 25,000
$ 25,000
$ 50,000
$ 50,000
$ 12,500
$ 12,500
$ 25,000
$ 25,000
$ 12,500
$ 37,500
( $ 12,500 )
$ 37,500
$ 12,500
$ 12,500
$ 5,000
$30,000
$ 25,000
$ 40,000
$ 65,000
( $ 35,000 )
$ 2,500
$ 12,500
$ 12,500
$ 25,000
$50,000
$ 25,000
$ 5,000
$ 30,000
$ 20,000
$ 22,500
80%
85%
60%
40%
Cash Flow Projection
26
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The value o developing cash flow projections comes rom
conducting the analysis required to make the orecast,
identiying expected costs and revenues and rom the
planning resulting rom the orecast. In this example, the
third quarter looks problematic. What could be done? The
organization could attempt to: secure additional revenue or
the quarter; move the grant rom the ourth quarter to the
third; obtain a line o credit and or cut expenses in anticipa-
tion o the problem.
The second tool is the gap analysis. The gap analysis is a
matrix oten used to identiy the gap between the skills or
assets it possesses.
The tool is simple; it is the thought process and analysis
tat is valuable. For example, a torou discussion by a
board o directors o the types o skills and individuals the
board needs to propel the organization to a higher level o per-
ormance can be critical. The assessment o the boards attri-
butes and skills can be revealing and a plan can be developed
to address the needs identifed. In this example, the board
would want to add some und raising skills to its portolio.
X
X
X
X
Skill and
Attributes Fund raisin
Financial
Management
Adds
Diversity
Individual
Wealth
Tom
Jane
Carlos
Ana
X
Gap Analysis
X
X
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31
CONCLUSION
Much has been written on how the or-proft sector can
maximize its profts and develop long-term fnancial plans
for rowt and prosperity. Unfortunately, te literature for
non-proft organizations is scant by comparison an
absence caused by and reflective o the classic problems
non-profts ace:
1. The ability to make proft and generate unrelated
business income.
Since the 1950s, when non-proft tax-exempt organizations
were required to declare and pay corporate taxes on unre-
lated business income, numerous court battles and pieces
o legislation have challenged non-proft motives. Since tax
law is vague on the issue o unrelated business income,
non-proft organizations are constantly at risk o losing
their tax-exempt status and having to pay unexpected taxeson income (declared by the IRS or courts to be considered
unrelated business income). This dilemma also presents
political problems or non-proft organizations earing
negative publicity rom challenges or claims o impropriety
rom the or-proft sector.
2. The absence o a bottom line as a key
perormance indicator.
Well-managed non-proft organizations are numerous;
however, the people who manage them tend to be zealous
leaders within their felds whose experience is based on the
organizations mission rather than on management.
As a result, non-proft organizations oten lack a undamen-
tal knowledge o management, planning, accounting and
fnance. Without proper leadership and management, the
organization flounders, aces constant fnancial struggle,
and risks becoming a community liability rather than an
agent or social change.
3. The importance o a shared value system in sync with
societys needs.
In the or-proft sector, products and services are sold in
an environment that tells companies in clear-cut terms how
competitive they are. Customer survey tools, marketing
techniques and other media mechanisms provide eedback
and indicate when change is needed. Nonproft organiza-
tions operate in an adversarial world, constantly touting theimportance o their mission, hoping to create change. Too
oten ocused exclusively on preaching to the community,
they sometimes lack the ability to see or hear signs o the
communitys changing needs.
4. The need to seek unding coupled with survival
instincts.
As discussed elsewere, te old adae, he wo as te
gold makes the rules, applies to all sectors in our
economy including the non-proft sector. Conditions,
restrictions and guidelines attached to unding are a
commonly accepted reality in the non-proft area.
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30
5. Reliance on ee-or-service programs.
This dilemma more than any other has the greatest
potential or unraveling the non-proft organization. As
non-profts eel the pinch o government downsizing and
shrinking contributions, many will inevitably attempt to
grow ee-or-service type programs. In this, non-proft
organizations become most vulnerable to criticism the
classic competitive squeeze described earlier.
To summarize in brieest terms the discussion in
this guide, these are the steps available to you to combat
these problems and develop fnancial sel-sufciency:
Manage your organization well.
Maintain a diversified funding plan.
Build additional corporate structures and perpetual
funding opportunities.
Operate with an entrepreneurial philosophy.
By implementing these measures, you strengthen your
prospects o long-term survival. With that, you can more
readily ocus once again on changing society and serving
the public good.
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SCORE volunteers canassist your organization.
SCORE resources can be ound atwww.score.org or at 800-634-0245.
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Te Ofce Depot FoundationHelping Non-Proft Organizations Become More Proessional and Productive
The Ofce Depot Foundation is proud to support the publication o Business Planning Tools or Non-Profts in partnership with t
SCORE Foundation. One o the key strategic priorities in the Ofce Depot Foundations 5 X 5 Program is to help non-proft (civ
society) organizations become more proessional and productive. SCORE brings exceptional knowledge and insight to this proces
as a result o its long history o helping businesses to grow and succeed. Through our partnership with SCORE, we hope to make
possible or non-proft organizations to beneft rom these valuable resources enhancing their ability to serve their communities.
Also in support o these priorities, the Ofce Depot Foundation sponsors an annual symposium in Boca Raton, Florida, or business
government and civil society leaders. Known as the Weekend in Boca, the high-level retreat resulted in the publication o a white
paper, Preparing Civil Society Organizations or Leadership, in 2008. The report can be viewed on the Ofce Depot Foundation
website at www.ofcedepotoundation.org. You can also join the conversation about the challenges and opportunities acing civil
society organizations at any time at www.ofcedepotoundation.org/civil_society.asp.
The Ofce Depot Foundation is an independent oundation that serves as the primary charitable giving arm o Ofce Depot.In keeping with its mission, Listen Learn Care, the Foundation strives to make a positive impact on many lives in many communiti
around the world. The Foundation supports a variety o programs that enhance the quality o lie or children, strengthen communitie
encourage local and global economic growth, and empower schools and non-proft (civil society) organizations. It also provides
support when disasters strike doing what it can not only to speed the process o rebuilding, but also to mitigate the impact
o uture disasters. For more inormation, visit www.ofcedepotoundation.org.
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