Your Nonprofit Business Model: Is It Really That Healthy? Strong business models bring programmatic and financial success, while weak ones bring irrelevance and even ruin. The idea is not commonly accepted in the nonprofit world, even though some of the strongest and best-recognized brands are built on sturdy nonprofit business models.
How much do we need? Where can we find it? In tough economic times, these types of questions become more frequent and pressing. Unfortunately, the answers are not readily available.
There are consequences to this financial fuzziness.
Too often, the result is that promising programs are cut, curtailed, or never launched. And when dollars become tight, a chaotic fundraising scramble is all the more likely to ensue. This is particularly true when it comes to understanding how different businesses operate, which can be encapsulated in a set of principles known as business models.
The value of such shorthand is that it allows business leaders to articulate quickly and clearly how they will succeed in the marketplace, and it allows investors to quiz executives nonprofit business plan model easily about how they intend to make money.
This back-and-forth increases the odds that businesses will succeed, investors will make money, and everyone will learn more from their experiences. That is because the different types of funding that fuel nonprofits have never been clearly defined.
Through our research, we have identified 10 nonprofit models that are commonly used by the largest nonprofits in the United States. Our intent is not to prescribe a single approach for a given nonprofit to pursue.
Instead, we hope to help nonprofit leaders articulate more clearly the models that they believe could support the growth of their organizations, and use that insight to examine the potential and constraints associated with those models. Beneficiaries Are Not Customers One reason why the nonprofit sector has not developed its own lexicon of funding models is that running a nonprofit is generally more complicated than running a comparable size for-profit business.
When a for-profit business finds a way to create value for a customer, it has generally found its source of revenue; the customer pays for the value.
With rare exceptions, that is not true in the nonprofit sector. When a nonprofit finds a way to create value for a beneficiary for example, integrating a prisoner back into society or saving an endangered speciesit has not identified its economic engine. That is a separate step. Duke University business professor J.
Gregory Dees, in his work on social entrepreneurship, describes the need to understand both the donor value proposition and the recipient value proposition.
It is also why we use the term funding model rather than business model to describe the framework. A business model incorporates choices about the cost structure and value proposition to the beneficiary.
A funding model, however, focuses only on the funding, not on the programs and services offered to the beneficiary. All nonprofit executives can use our 10 funding models to improve their fundraising and management, but the usefulness of these models becomes particularly important as nonprofits get bigger.
Our research of large nonprofi ts confi rms this. Each had also built up highly professional internal fundraising capabilities targeted at those sources. In other words, each of the largest nonprofits had a well-developed funding model. The larger the amount of funding needed, the more important it is to follow preexisting funding markets where there are particular decision makers with established motivations.
Large groups of individual donors, for example, are already joined by common concerns about various issues, such as breast cancer research. And major government funding pools, to cite another example, already have specific objectives, such as foster care.
Although a nonprofit that needs a few million dollars annually may convince a handful of foundations or wealthy individuals to support an issue that they had not previously prioritized, a nonprofit trying to raise tens of millions of dollars per year can rarely do so.
The first Earth Day in coincided with a major expansion in giving to environmental causes; the Ethiopian famine of led to a dramatic increase in support for international relief; and awareness of the U.Ten Nonprofit Funding Models.
of nonprofit funding models need to be understood separately from those of the for-profit world. It is also why we use the term funding model rather than business model to describe the framework. A business model incorporates choices about the cost structure and value proposition to the beneficiary.
The Nonprofit Business Plan: The Leader's Guide to Creating a Successful Business Model - Kindle edition by Brent Copen, Lester Olmstead-Rose, David La Piana, Heather Gowdy. Download it once and read it on your Kindle device, PC, phones or tablets/5(8).
Nonprofit Strategy and Business Planning: A Fresh Look - A brief article outlining the difference between strategic planning and business planning, and when to use each Assessing the Need for a Business Plan - A podcast on why (or why not) nonprofits may need a business plan ( minutes).
Nonprofit organizations have a unique set of needs and requirements. That's why these sample business plans for nonprofit organizations and social enterprise businesses can .
How to write a 1-Page Nonprofit Business Plan. The “Business Model Canvas” Approach. Osterwalder formulated a model consisting of nine core blocks, which once put together give you a high-level view of your strengths, weaknesses and how your business functions. It can be used as the basis for your startup nonprofit business plan, as.
May 23, · Many entrepreneurs automatically structure their startups as for-profit, but if your end goal is impact, a nonprofit model will enable you to achieve your goals in a multitude of unexpected ways.