Business Planning Tools for Non-Profits 2009

8/14/2019 Business Planning Tools for Non-Profits 2009

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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 [email protected]. 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.

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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

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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

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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.

Documents

Business Planning Tools for Non-Profits 2009