Nonprofit Business Plan Template

A nonprofit business plan is not a strategic plan with the word business in front of it. It answers a narrower and harder question: how does this organization pay for itself, and for how long.

Write section eight, the money, first. If the numbers do not work, everything else in the document is a description of something that is not going to happen, and it is better to discover that in a spreadsheet than in month fourteen.

Who this is actually for

Business plans get written in general and read by someone specific. Identify the reader before you start, because it changes the document substantially.

That last one is underrated. A business plan written honestly for yourself is the cheapest way to discover that three organizations within twenty miles already do the work, which is a good reason to join one rather than found a fourth.

The money section

Three years, conservative on income and generous on costs. The universal failure is the reverse, and it is why organizations run out of money in year two while still believing the plan was sound.

Two rules that do most of the work.

Count only committed income. Grants you have applied for and not won do not belong in the budget. They go in a separate pipeline table with an expected decision date, and they move across when the award letter arrives, not when you feel optimistic. Budgets that include hoped-for grants balance on paper and fail in practice, and this is the single most common way small organizations become over-committed.

Include the lines people forget. Payroll taxes and benefits, which are substantial and routinely omitted entirely. Insurance, including directors and officers cover. Accounting, for bookkeeping and preparing the annual return. Bank and card processing fees, which run around three per cent of everything raised by card. And a reserve contribution, budgeted as an expense line, because an organization that plans to save whatever is left at year end never saves anything.

Checking the money section against reality

The weakness in almost every nonprofit business plan is that the financial projections are internally consistent and externally untested. The spreadsheet adds up, and nothing in it has been compared to what organizations of that size actually do. A funder who reads a lot of these will notice within a minute.

Four checks, using figures from the tax returns of a quarter of a million charities. Run them before anyone else does.

Is your staff share plausible for your size? The median organization spending $250,000 to $1m puts 32.3% of expenses into people, rising to 47.3% between $1m and $5m and 53.0% between $5m and $25m. A plan at 20% for a service delivery organization is either describing volunteers it has not recruited yet, or has left something out.

Is your surplus honest? The median operating margin across the sector is 3.0%, and 41% of organizations spent more than they received in the year measured. A plan projecting a steady 15% surplus from year two is not ambitious, it is unfamiliar with the sector. A plan projecting exactly break even every year is not credible either, because nothing behaves that way.

Have you costed the back office at all? Rent, technology, office costs, legal, accounting and insurance run to a median of 9.2% of spending, and the 75th percentile for organizations under $1m is between 18% and 24%. Plans written by founders routinely show 3%, because the founder is currently working from home and has not yet paid for an audit, a payroll service or a database.

Does the plan build any cash? The sector median is five months of spending held in cash, and a third of organizations hold less than three. If your projections end year three with two weeks of operating cash, the plan has a hole in it that no amount of narrative fixes. The distribution is in how much cash nonprofits actually hold.

None of these are targets to hit. They are the ranges a reader will have in their head, and a number outside one of them needs a sentence in the plan explaining why. That sentence, written on purpose, is usually the most convincing paragraph in the document.

When you create the financial pages themselves, build them in the same structure you will report against later, not in whatever shape the spreadsheet fell into. The nonprofit budget template uses the categories that map to Form 990, which means your plan, your budget and your eventual tax return all say the same thing in the same order.

Cash flow, which is a different question from the budget

A three-year plan can balance in every year and still leave you unable to pay a bill in March. The budget answers whether the year works. Cash flow answers whether each month does.

The mismatch is almost always timing. Grants arrive in instalments, sometimes in arrears against spending you have already made. Event income lands in one month against costs incurred across three. Payroll, rent and insurance are indifferent to all of it.

For year one, add a monthly view with a running cash balance carried forward. Any month where that balance goes negative is a month to plan for now, by moving a payment, holding a reserve, or asking a funder to pay earlier, which they will often do if asked in advance and rarely do if asked in crisis.

This is the section a lender reads first, and the section most first-time plans omit entirely.

Competition, which nonprofits dislike discussing

Section five asks who else does this work. Plans that claim no comparable organizations exist are read by experienced funders as plans whose author did not look, and it is the fastest way to lose a reader’s confidence.

Name the others, including the ones you would rather not mention, and be specific about how you differ or complement them. There is no shame in operating alongside similar organizations; nearly every nonprofit does. There is a problem in appearing unaware of them.

The exercise also produces the most useful strategic insight most founders get: whether the gap they perceived is a gap in provision, or a gap in their knowledge of what already exists.

Outcomes you can actually measure

Choose measures you can gather with the staff you will actually have. An outcome framework requiring a full-time evaluator, at an organization with one part-time coordinator, will not be collected, and a funder who was promised the data will notice.

Two or three outcomes tracked properly beats nine tracked aspirationally, and it is what distinguishes an organization that learns from one that reports.

Risks, which are evidence of experience

Name the five that would actually stop you. Sophisticated funders read an absent risks section as inexperience rather than confidence, because they know the risks exist whether or not you listed them.

For most small organizations the largest risk by a distance is funding concentration. If one grant is more than a third of your income, its non-renewal is an existential event, and the plan should say so and say what you would do. Also worth naming: dependence on one founder, the absence of reserves, and any regulatory or licensing requirement your work depends on.

How to write it, in the order that works

The outline below is the reading order. It is not the writing order, and working straight down it is the most common reason a first plan stalls somewhere in section two and never restarts. Write it in the order that answers the fatal questions first, so that if the answer is no you find out in week one rather than week five.

Allow four to six weeks of elapsed time for a first plan, and expect most of that to be waiting rather than writing. Quotes for insurance and accounting, three years of a peer organization’s filings, a conversation with a programme officer about whether they would even consider you, a board meeting that happens monthly. The writing is a few days. The inputs are the schedule.

Fifteen to twenty five pages is the working range, with attachments separate and the executive summary one page that stands alone when detached, because it frequently will be. Longer plans are not read more thoroughly, they are skimmed less carefully.

Have one author. A plan written by a committee reads like one, and the sections that matter most are exactly the ones where a group will settle on the least specific wording available. Circulate for comment by all means, but one person holds the pen and the document keeps a version number and a date, because it will be in circulation for months and someone will quote the wrong draft back at you.

Then find three readers before it goes to the board. Someone who knows the field, to catch what you have overstated. Someone who reads financial statements, to catch what the money section is quietly assuming. And someone who knows nothing about either, who will find every sentence written in the internal language of the organization, which is the failure the first two readers cannot see because they share it.

You are finished when the money section survives a hostile read. Not when every section is written, and not when it looks like a business plan. If nobody has yet tried to take the funding model apart in front of you, the plan has not been tested, it has only been drafted.

The outline in full

The business plan and the strategic plan answer different questions and are often confused: one is for outsiders, one is for the board. The line at the top of both is your mission, and mission statement examples is a set of real ones worth reading before writing your own.

Before you write any of it

One question worth answering first, because it can save you the whole exercise. Do you need your own organization?

Fiscal sponsorship lets you operate a charitable project under an existing organization’s exemption, with their back office handling the compliance, while you find out whether the work has legs. It costs a percentage of what you raise and saves you incorporation, exemption, annual filings, insurance and a board.

For a project that might not survive its second year, that is often the better structure, and it is entirely reversible. Founding an entity is not.

Download this template

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• Nonprofit business plan template Eleven sections including three-year budget and pipeline tables DOCX · 38 KB

Questions people ask

Does a nonprofit need a business plan?

Not legally. No filing requires one, and plenty of organizations operate without.

You need one when someone is deciding whether to commit something on the strength of it. A founding board deciding whether to incorporate, a funder considering a substantial grant, a lender, or a landlord.

You also need one, privately, when deciding whether to start at all. The section asking who else does this work is the cheapest possible way to discover that the need you identified is already being met by three organizations nearby, and that is worth knowing before you file anything.

What is the difference between a business plan and a strategic plan?

A business plan asks how the organization pays for itself. A strategic plan asks what it will prioritise.

The business plan is usually written at the start, or before a major change such as a new site or a first employee, and is aimed at an external reader deciding whether to back you. It is heavy on the funding model, cash flow and risk.

The strategic plan is written by an operating organization for itself, covers three to five years, and is about choices between things you could do. It assumes the money question is broadly settled.

Organizations frequently need both, and writing them as one document produces something that does neither job well.

How long should a nonprofit business plan be?

Fifteen to twenty-five pages including the financial tables, for most organizations. Shorter if the reader is your own board.

The executive summary carries most of the weight and should stand alone on one page, because some readers will read only that. Write it last.

Length past about thirty pages usually means the plan is describing activity in detail that belongs in a programme design document. A reader deciding whether to fund you needs the model, the numbers and the risks, not a curriculum.

How many years should the financial projections cover?

Three. Five is sometimes requested and years four and five are rarely meaningful for a small organization.

Year one should be close to a real budget, month by month if you can, because that is the year you will actually be held to. Years two and three can be annual and directional.

Include a cash flow view for year one alongside the budget. A plan that balances over twelve months can still leave you unable to pay a bill in March, and that mismatch is what actually kills organizations rather than an annual deficit.

Should we include grants we have not been awarded yet?

Not in the budget. In a separate pipeline table, with the amount, the purpose and the expected decision date.

Including unconfirmed grants as income produces a plan that balances on paper and fails in reality, and it is the most common way small organizations become over-committed. It also damages your credibility with any funder who reads carefully.

The pipeline table is genuinely useful information for a reader, because it shows you are actively fundraising and shows what your income would look like if it lands. Presenting it as separate from committed income is what makes it credible.

What should the executive summary say?

One page, written last, that stands alone if nothing else is read.

What the organization does and for whom, in a sentence. The need, with one piece of evidence. What it costs to run for a year. Where the money comes from, split between committed and sought. What you are asking the reader for. And the one risk you would name if asked.

Resist the temptation to make it exciting. A reader who has seen many of these is scanning for whether the numbers are plausible and whether you know what could go wrong, and adjectives do not help with either.

Do we need a business plan to apply for 501(c)(3) status?

No. Form 1023 asks you to describe your past, present and planned activities in detail, and Form 1023-EZ asks considerably less.

Having written a business plan makes the application easier, because the narrative sections are asking for material you have already thought through: what you do, who you serve, how you are funded, and who governs it.

The financial section of Form 1023 asks for projected revenue and expenses for the current and next two years, which is exactly the three-year projection this template produces. Doing the work once serves both.

Should we use a fiscal sponsor instead of starting an organization?

Often, and it is worth deciding deliberately rather than by default.

Fiscal sponsorship lets you run a charitable project under an existing 501(c)(3), using their exemption, so donations are deductible immediately and the sponsor handles the annual return, the insurance and much of the compliance. You pay a percentage of what you raise, commonly in the range of five to fifteen per cent.

It suits a project that might not survive two years, a founder without time for governance, or work you want to test before committing. Founding your own entity means incorporation, exemption, a board, annual filings and insurance, none of which is reversible cheaply.

The usual answer is to start sponsored and incorporate once the work has proved durable and outgrown the arrangement.

This is reference information, not legal or tax advice. Rules vary by state and change over time. For a decision that carries real consequences, check the current text at irs.gov or your state registry, and talk to a nonprofit attorney or CPA.