Business Plans and Planning for Social Enterprises and Nonprofits

Let’s start with some definitions. “Business plans” traditionally refers to a lengthy, bound, and laminated document, written before a business launches, detailing its every element with charts, research, and projections. Even social-sector business plans are traditionally laden with unnecessary formality and time-consuming minutiae.

Modern social-venture business plans differ in three major areas from their more traditional cousins:

  1. Formality: It is written in a natural, human voice, and shortened and streamlined for easy reading
  2. Flexibility: It leaves room for multiple eventualities and is designed for frequent updating
  3. Focus: It focuses on the rationale behind decision making, rather than on market research
man drawing on dry-erase board
Image Source: Kaleidico

Social Sector Business Plans – The Key Areas They Are Concerned With

At its heart, the business plan is a roadmap for achieving organizational growth. The social-venture business plan must do this but should also address three other areas:

  • A social problem
  • How the programs, products, or services address that problem
  • How the organization plans to measure or prove that it is having a positive impact on the problem

Overview of Our Guide for Simple and Effortless Business Planning

First, we address the idea that the business plan itself is obsolete. Second, we explore how the thinking process and the communication of that process to an investor are more important than the finished product. Third, we launch into the meat of the plan itself, analyzing each element and offering guidance. Finally, we go through a suggested process for getting started, briefly touching on research and then wrapping up with some useful tips and tricks. Throughout the guide, quotes are included from successful social entrepreneurs and thought leaders in the space.

This guide has been written for both for-profit social enterprises and nonprofit organizations. Even though nonprofits are impact- and mission-driven, in order to be successful and sustainable, they need a solid strategy, which is the result of sound business planning. Key principles such as generating revenue, increasing awareness (marketing, communications, and media), differentiation, and impact measurement are important for all organizations, regardless of tax status.

Why Write a Business Plan? What Is the Primary Reason That Entrepreneurs Create Business Plans?

Primarily, of course, we write business plans to get money for our ventures. This is still true for most traditional businesses and is definitely true for new social ventures. Business plans are either required or requested by a wide range of impact investors and foundations such as Draper Richards Kaplan, as well as many entrepreneurial competitions and virtually all mainstream banks.

Yet over the last five years, with the popularity of such books as Business Model Generation by Alexander Osterwalder and Yves Pigneur and The Lean Startup by Eric Ries, the necessity of writing a plan at all has come into question. Daniel Epstein, the Co-Founder of the Unreasonable Institute, exemplifies this skepticism. A social entrepreneur recognized by both Forbes and the Aspen Institute, Epstein has helped dozens of startups get off the ground. “I have never written a business plan myself and I have never encouraged an entrepreneur to write one,” he says. “I believe that in today’s fast-paced world, it is more important to be adaptive than predictive.”

Indeed, the predictive element implied in the popular conception of the business plan may be the most challenging. If the future is unknowable, why even attempt to write about it? The answer: Planning is not the same as predicting. According to Matthew Klein, Executive Director of the Blue Ridge Foundation, a social enterprise incubator based in New York, “Businesses rarely, if ever, unfold the way they are described on paper.” Fortunately, writes Natalia Oberti Noguera, Founder and CEO of the Pipeline Fellowship, “Potential investors don’t expect spot-on predictions in business plans.” Instead, they’re seeking a deeper understanding of your venture and your mind.

It’s difficult to overstate the challenge of communicating the set of complex and interlocking ideas that make up a new venture, especially if the only avenues for communication are pitch decks and conversations. Business plans carry out this crucial task in a logical and thorough way. Even if, as is often the case, these ideas are less than thought through, the very act of business plan writing forces a social entrepreneur to make decisions, and is thus a useful tool for strategic planning. This process, writes Klein, “clarifies gaps in thinking, especially around the logic of how social impact will be created, and how deep it will be. It also forces specificity about the assumptions driving the financial model, which allows others to provide feedback.” Indeed, writes Adam Gromis, Business Development Manager of the impact investment firm Imprint Capital, “Business plans are critical to helping the social entrepreneur form clear ideas, articulate value to investors, and set guideposts for product and service implementation.”

Writing a business plan does something else as well: It demonstrates your thought process to people who are considering investing in you. Natalia Oberti Noguera says, “For- and non-profit investors are looking to better understand an entrepreneur’s thought process. Has she done the market research? Does she know who her competitors are and how her product/service differentiates itself from theirs? What pricing strategies is she considering and why?” John Wood, the Founder of Room to Read, a $50-million-a-year nonprofit that has built 15,000 libraries and 1,500 schools in the developing world, puts it even more plainly. “The world changes fast, and your business plan will quickly be obsolete. But you still have to write one to force yourself to get clarity in your own muddled startup mind, and to prove to potential investors and employees that you’re not just one more person winging it.”

The Basic Anatomy of the Social Sector Business Plan

man standing in front of group of men
Image Source: Austin Distel

For both for-profit social ventures and nonprofit organizations, the basic building blocks of a business plan are the same: A narrative written portion followed by financial projections in a set of spreadsheets. In today’s world, assume that no one has time to read anything over 20 pages, so aim for 10-15, with liberal use of bullet-pointed lists. Make it a succinct, interesting, and compelling read. Finally, remember that there’s no “right” way to format or structure a business plan, so long as it covers the following major elements.

What follows is the outline for a typical social venture business plan.

Executive Summary

The purpose of this section is to allow a reader to get the gist of the business idea in a page or two. It should include all the basic facts about the organization: The who, what, when, where, how, and why. You should assume your audience has never heard of you and doesn’t understand your industry or field. Avoid jargon and use basic language whenever possible. Remember that this is not an introduction; it’s a summary. There’s no need for suspenseful or long lead-ins. Highlight the major elements and accomplishments of the venture to date. Finally, end with an ask. In your ask you should explicitly explain how much money you’re looking for, from whom, in what form (loans, grants, investments, etc.) and what you intend to use it for.

“Include a crisply and compelling ask in your business plan. If you do not make an ask, you have lost an opportunity.”

– Maria Springer, Co-Founder and Executive Director of Livelyhoods

Business Overview

Here is where you can convey the basic but important details of the venture:

  • When the organization was founded
  • The number of employees
  • Type of legal entity you are/will be
  • Traction/accomplishments to date
  • Programs completed
  • Dollars raised
  • Items sold
  • Awards won
  • Partners secured
  • Team bios

Remember, leaving anything major out can make you seem evasive, prompting the question, “What else is this person hiding or not telling me?” So if you’re based out of your apartment, say so. Don’t leave the reader wondering where your offices are. If someone’s reading your plan, it’s likely they’re considering doing business with you in some way. Your goal should be to be thorough and transparent and to set the reader’s mind at ease.

The Opportunity

This is where you begin to make your case. You describe the context for your idea: The facts on the ground, in the environment, market, or country you plan to enter that constitute the market opportunity. This is also where you give an overview of the funders, customers, consumers, donors, and/or beneficiaries who will support your idea or consume your service because no one else is doing it, doing it well, or doing it in the way that you’ll do it. Avoid the temptation to describe only the problem (i.e., “Villagers in rural Kenya lack access to clean water.”) Instead, frame the problem as an opportunity: “The current models of providing water access in Kenya have failed, major donors have recently announced a search for a new solution, and the new prevalence of cell phones in rural Kenya means that my mobile well-finding app will be able to quickly gain traction.”

“I can often tell which ‘social enterprise’ is really a nonprofit in disguise when its business plan starts with a ‘needs’ section like a typical grant application might. These are often great social enterprises, but need philanthropic capital. When a business plan starts with a section on the ‘opportunity,’ that’s when I sit up and ask if the team has the DNA for raising investment capital.”

– Brian Trelstad, Partner, Bridges Ventures and former Chief Investment Officer, Acumen Fund

Programs, Activities, and Operations

What you do and how you do it. Describe your programs, products, and/or services in detail. Articulate exactly how your products or services will be delivered and what they’ll look like on the ground. Don’t shy away from detail, but don’t be redundant either. For instance, if you plan to host events, you don’t need to list out every space you know that you might rent. A good rule of thumb is to focus detail on the parts of your venture that will be substantially different from the “generic” version of your venture. So if you’re opening a restaurant, spend time describing your plan for hiring autistic cooks and sourcing your vegetables locally, rather than on which accounting software you’ll buy.

Analogous examples are useful: Case studies of businesses that have done what you’re proposing to do lend credibility to your ideas, whether those businesses are in or out of your sector. “These other sustainability consulting firms have experienced similar growth to what I’m projecting,” or “We plan to be like the Yelp for socially responsible small businesses.”

Social Impact and Impact Measurement

“When writing business plans for a social impact business, it is really important to attempt to quantify the social impact that you are aiming for as opposed to just return on investment. Will you be alleviating diabetes by reducing obesity? How many people will you impact and what will be the overall benefit to the society at large?”

– Jahanara Ali, Vice President, New York City Investment Fund

This is the main section that is truly unique to a social venture business plan. You’ve already made the case that you’ve identified an opportunity to create social impact. This section articulates how you’re going to do that and how you plan to prove it.

First, you need to explain your theory of change, or how whatever you’re doing is going to actually benefit society. You need to be as explicit as possible and, wherever possible, include numbers. This is also where you’ll include your logic model, in which you spell out exactly how your resources will lead to your programs, which will lead to outputs (i.e., apps downloaded, bednets delivered, classes held, etc.), outcomes (i.e., graduation rates will increase, employment rate will increase, etc.) for your target market/beneficiaries and the overall impact on society.

“In a social enterprise, for-profit or nonprofit, the founders should be clear at least on their theory of change, their impact model, and how they’ll gauge their progress. Writing a plan that includes at least these components is critical.”

– Matthew Klein, Former Executive Director, Blue Ridge Foundation

Finally, you should plan to measure your impact. Funders like to see that an entrepreneur has put serious thought into this element of their venture. This section should include a list of the metrics you plan to use to measure all of the above, and how you plan to capture the data for those metrics (surveys, tests, observation, user feedback, etc.).

To learn more about how to measure impact and what metrics to use, the Foundation Center has great online resources.

Business Model

“Business plans should show that the founders are thoughtful about their financial projections, their ability to scale, their social impact, and their traction to date in order to attract the type of investors that will help the company grow and achieve their goals. Business plans that integrate growth and impact comprehensively present the greatest opportunities in social entrepreneurship and impact investing.”

– Bonny Moellenbrock, Executive Director, Investors’ Circle

This is the section in which you describe how your organization will generate income. This includes absolutely all forms of financing, including equity investments, grants, donations, loans, lines of credit, credit cards, personal savings, as well as earned revenue from sales, fees, advertising, or commissions. You should distinguish between funds you need to get off the ground (“startup financing”) and funds you intend to generate once you’re up and running (“revenues”). The more complex the business model, the more important it is that the business plan explains it. You want to show that you’ve thought this part through in as much detail as possible. For instance, if you’re planning to apply for grants, you should know the availability of the grants that support your type of venture and which institutions supply those grants.

Marketing and Sales Plan

In this section, you will articulate how you plan to communicate and market your venture. For many businesses, this is a make-or-break element. How will you promote your venture? What channels will you use to market or sell? Etsy? Twitter? Newspaper advertising? How will people know about your business? If you plan to use your own social network, hire interns, or partner with local nonprofits to spread the word, then say so.

Market Analysis

This is where you give an in-depth description of the market for your products or services. What does the overall market look like? Are there a lot of other organizations doing what you’re doing? Is it a crowded market? Are there high barriers to entry? (Examples of high barriers to entry: Working an expensive industry or one that requires a lot of specialized knowledge, such as launching a new airline). What’s changed that makes your idea so timely? Basic demographic information is a nice thing to add here, but make sure that whatever you put in the plan relates directly to your idea. If you’re planning to launch a diabetes prevention initiative in a low-income neighborhood in Chicago, the overall breakdown of age in the city is less useful to your reader than data on the neighborhood’s obesity rates. This is an area that bogs many entrepreneurs down, so keep the section to half a page.


This is the section where you discuss the competition. Which companies are already doing what you plan to do? Who else is addressing the particular societal problems you plan to target? Who’s doing something similar in a different market, country or city? If there aren’t a lot of organizations doing what you plan to do, there may be a good reason. Nonprofits should pay special attention to the fact that other organizations, including nonprofits, governments, and for-profits, may be your direct competitors for charitable donations, grants, and customers.

A useful tool here is a competitor matrix. In this matrix, you use a grid to compare your organization with three to five major competitors along a range of factors that helps the reader understand both how you’re different and why you’re better. You can use this matrix in your pitch deck, as it’s useful for communicating the uniqueness of your idea. The main question to answer is: Why are you better? Always structure this section to give as much relevant information as possible about your competitors, but also present this information in a way that highlights your advantages. If you can’t think of any advantages, then you’ve got a problem. You could be better, cheaper, bigger, smaller, more nimble, malleable, more modern, more efficient, more holistic, etc. This is even more important in the social sector, since we have a responsibility to the people we want to serve not to dilute the funding pool with redundant interventions or make promises to vulnerable communities that we can’t keep.

You will want to include the following information:

  • Products/Service
  • Price
  • Sales Method
  • Expertise
  • Reputation
  • Location
  • Demographic
  • Marketing Reach
  • Social Impact

Information About the Team

“We value social entrepreneurs who have a business track record, whose strategy has continued to evolve with demonstrated market needs, and who have talked to as many of their stakeholders as possible.”

– Adam Gromis, Business Development Manager, Imprint Capital

Any investor, foundation program officer, or donor will tell you that they fund the entrepreneur, not the idea. You can have the best possible idea, but if you don’t convey the necessary experience, vision, professionalism, and charisma, you won’t convince your audience that you’re the right one to execute it. Full professional biographies should be included for you and your entire team. If their biographies look a little weak in comparison to your vision, then get some advisors to sign on and feature their biographies prominently. Also be sure to include the roles that each team member plays or will play.

Financial Narrative

black and silver laptop computer
Image Source: Markus Winkler

The financial narrative section is where you lead your reader through your financial projections. Explain upfront anything that feels outlandish or might scare someone away. Lead your reader through your financials so that everything makes sense. For instance, if your average meal price is going to be three times the industry average, explain your rationale behind that decision and explain how it will go back down. Sample sentences might read: “While we plan to charge $10 per popsicle, we are confident that we can achieve our monthly sales targets by marketing exclusively to extremely affluent consumers and popsicle aficionados,” or “While foundations will be the majority of our revenue for the first two years, we plan to get that percentage down to 50% by year three as we ramp up our individual donor outreach and earned income streams.”

Detailed Financials

Financials are the most important part of the entire business plan, but many social entrepreneurs leave them for last, often because they have a difficult time putting them together. Creating the financials first and using them to generate the business plan tends to be the most efficient method of business plan creation. Indeed, even the strongest advocates of “lean” business planning advise entrepreneurs to create solid financials. Numbers root the ideas in reality and force the entrepreneur to validate actual assumptions with a rationale. Remember, you should be prepared to defend every number you put on paper.

The financials should detail every dollar that you plan to have coming in or going out of the organization, as well as the assumptions underlying the projections: The average fee you’ll charge a client, how many meals will be served in the first year, how many families will receive services, how many kilowatts will be produced, the average donation you’ll receive from funders, the average number of students per class, etc.

Traditional business plans include at least the following financial documents: Baseline assumptions, sources and uses, break-even analysis, cash-flow projection, a profit and loss statement, and a balance sheet. For the majority of cases, you can get away with just a projected profit and loss statement (i.e., pro forma, P&Ls, income statement, or financial projections), which is basically an organizational budget with the sources for your money detailed as well. A good idea is to do the first year month by month and then two more years just by year.

Before You Begin: Do Your Research

Pick up a sample business plan. You can download dozens of examples for free online at Find the table of contents. You’ll see chapters with titles such as “Operations,” “Competition,” and “Market Summary.” These topics represent subject areas that you should be able to speak articulately about as they apply to your venture. If someone asks about your marketing strategy, you should have an answer beyond: “I’m going to tweet a lot.” If someone asks when you estimate you’ll be operationally profitable, you should be able to confidently say, “Ideally, by the end of our second year.” If someone asks you who your major competitors are, you should be able to list them, and articulate how your organization is different from your competition. And if someone asks you about the largest foundations that fund organizations in your field, then you should be able to speak knowledgeably about them. Unless you’ve been doing whatever you’re planning to do for several years and can speak with confidence to every line item in the business plan’s table of contents, then you’ve got some research to do.

“Investors and stakeholders will push hard on what you place inside the plan so one needs to have all the answers to potential questions before presenting it to anyone.”

– Rob Holzer, Founder and CEO, Matter Unlimited

Beginning the Plan

  1. Open a blank spreadsheet. Create one sheet for the educated assumptions that you will base on the following types of information:
    • How many units do you think will sell in your first year?
    • How much will they cost and how much will you charge?
    • How many people will you serve in your first month?
    • How much will it cost to serve them?
  2. On the next sheet figure out your startup costs:
    • What will you need to get your business off the ground?
    • What will your operations cost?
    • How much will you need to budget for initial marketing costs (which tend to be significantly higher at the beginning)?
    • How much money will you need to cover costs until you begin to generate enough revenue to survive?
  3. On another sheet, create your “profit and loss statement.” Write Month 1, 2, 3, etc. for the first year along the top, and then title the rows with your income sources and then your expenses, all detailed in separate line items. Be as detailed as you can. You can categorize everything later.
  4. Fill in the cells for the revenue projections and startup costs with formulas based on the numbers in the assumptions documents, so that when your subsequent research or experience make you change your numbers, you can easily adjust them and they will change the entire document. Every cell in your projection should contain a formula that links back to your assumptions – this will help in the future, as your assumptions will change with time.
  5. When you’re done, you should have a big, ugly budget-like spreadsheet, and a list of things you need to research and figure out. These are the base of the financial model you’ll use to create your final budgets and projections, and a document that will eventually become your business plan.

The Top Two Things to Remember

One: The business plan is essentially a well-researched argument that defends a basic thesis: First, that the venture it describes will be able to sustain itself, and second, that you’re the one to execute it. Traditionally, the business plan is the entrepreneur’s proof that the proposed venture will create profit for her backers. Social entrepreneurs must instead (and sometimes also) show that their ventures will create social impact.

Two: The business plan should be explicit, transparent, and comprehensive. The amount of respect an investor has for the entrepreneur when presented with a business plan is equal to the scorn he or she will feel if it is poorly executed. If readers are left with the impression that the author plays fast and loose with the truth, is willing to omit key points, or has failed to conduct basic research or put in basic thought, they will feel disrespected and be disinclined to believe anything else in the plan. Red flags include, but are not limited to:

  • Badly researched, incomplete, or superfluous and irrelevant data
  • Bad spelling and grammar
  • Wildly overly-optimistic projections
  • Absence of financial projections
  • Plainly incorrect assertions to support arguments
  • Absence of major potential obstacles or competitors

Definitions You Should Know

Here is a list of terms you should understand clearly, and their definitions.


Key components of your plan and model that are projected and not yet proven. These anticipated inputs should be modeled, researched, and thought through as much as possible prior to creating your plan. Assumptions may be related to market demand, sourcing, competitors, sales targets, cash flow, and impact.

Balance Sheet

A summary of a company’s financial position over a given time period (usually a calendar year). Balance sheets are comprised of assets, liabilities, and ownership equity.

Break-Even Analysis

A method for determining whether a business will be able cover its expenses and be profitable. By identifying fixed and variable costs, a break-even point for the amount of sales needed can be calculated, and pricing structures can be adjusted accordingly.

Business Model

An operating strategy that outlines what and how a business or organization will do to generate revenue, create social impact, and be sustainable. Business models include an outline of the organization’s place within the larger value chain as well as information about where it will get its resources.

Cash-Flow Projection

A tool for cash-flow management that shows how anticipated revenue would be generated and spent. It can help identify how much capital investment is needed for a business idea and when adjustments to investments might be needed.

Competitor Matrix

A method used to analyze a company’s competitive advantages in the market, by graphing its features and benefits vertically and its competitors horizontally, with comparative columns.

Elevator Pitch

A summary of your business model and strategy that’s short enough to be communicated during a brief elevator ride. Elevator pitches are usually condensed to one to two sentences.

Financial Model

A tool that is used to forecast and analyze financial performance.

Logic Model

A method for outlining the relationships between operating resources, the activities of your business, and the desired outcome/impact. Logic models are built upon five key components: Inputs, activities, outputs, social impacts, and assumptions.

Pitch Deck

An initial presentation deck for potential investors to determine whether to further evaluate your business opportunity. Pitch decks summarize the problem you’ve identified and the solution your business offers, your business model, the technology or resources needed, marketing and sales, a competitive analysis, and information on the management team, financial projections, and background information, along with the timeline and funds needed.

Pro Forma

Calculations for financial results in a hypothetical or pending situation, often used to estimate the effect that a particular business decision or opportunity may have on current/actual financials.

Profit and Loss Statement (P&L)

A summary of financials over a specific period of time (usually a fiscal quarter or year) that includes revenues, costs, and expenses.

Theory of Change

An outline showing the pathways of how a business or organization will achieve the goals and results it needs to create change and impact.

An Interview Between Social Good Guides and Mischa Byruck

gray laptop computer
Image Source: Maranda Vandergriff

Social Good Guides (SGG): What is a business plan? 

Mischa Byruck (MB): “Business plan” has two definitions. The first and most common definition is the following: A thorough, researched document describing in great detail a business idea (typically, though not exclusively, before it launches) and including cited sources and appendices. I’ve read 200-page business plans, which I thought were a little excessive, but anything shorter than ten pages would have a hard time being taken really seriously as a plan.

The second definition is simply an entrepreneur’s plan for launching his or her business: Strategy, operations, marketing, price points, etc. Technically, the entire thing could be in someone’s head, but that would make it an incredibly difficult body of work to share.

SGG: Why do changemakers need to write business plans?

MB: They don’t need to, but I think they should. Everyone has an idea for a business, and though many sound good at first, few end up working out. So most people enter into conversations with aspiring entrepreneurs carrying an assumption of failure. Every entrepreneur starts out facing incredulity. The business plan is just one way of overcoming people’s natural tendency to think you’re crazy.

At best, business plans are hedges against failure, redundancy, and wasted time. We in the social sector should care twice as much about minimizing our chances of failure because of the importance of our missions and the people they aim to serve.

Of course, plenty of entrepreneurs don’t end up writing a business plan. The need for one increases with the complexity of your business model. Your business model is how your company creates, delivers, and captures value. It is the big-picture plan of what your venture will look like, providing an organizational backdrop for how your venture will provide value to society. In terms of your business plan, let’s say, for instance, that you’re an experienced web designer and you’re quitting your job to start your own design consultancy focused on helping nonprofits visually express themselves. You’re going to network, get clients, charge them fees, and do design work – a pretty straightforward model. You could definitely benefit from doing a competitive analysis, but you’ll probably be able to get the business off the ground without a full plan because you know your industry. On the other hand, if your idea is really complex and innovative, then a plan can help you refine it enough to communicate it effectively. I’ve seen dozens of entrepreneurs fail. It wasn’t always for lack of a plan, but there have been plenty of times when a plan would have saved both time and money, and maybe even the organization.

SGG: Everyone’s telling me my idea is great – shouldn’t I just go ahead and move forward with it?

MB: A couple of things: First, I don’t recommend writing a business plan at the expense of “doing.” The two aren’t mutually exclusive. A business plan is just a plan, and planning can be a pretty good idea. Once you’ve accepted that, it’s just a matter of how much planning you intend to do. Second, it’s likely that the audience you initially speak to about your idea will be comprised mostly of family and friends. Despite their incredulity, they will almost universally encourage you. Brutally honest feedback is a rare commodity in general and especially in entrepreneurship. People naturally don’t want to discourage someone, especially someone they know, from pursuing their dreams. Also, most people simply won’t know enough relevant information to feel comfortable offering a critique. This is especially true for social ventures, which put additional social pressure on friends and family to be encouraging. Encouragement is nice, but if you show someone a business plan, you can watch the person go from “Cool idea, good for you” to “How can I get involved?”

SGG: When in the first twelve months should a startup changemaker begin to think about writing a business plan?

MB: As soon as possible. Even at the earliest stages, the plan helps clarify and cut through the noise to articulate the essence of the organization and how it will succeed. That doesn’t mean that the entrepreneur should write the plan immediately. I advocate starting to do research and write the plan, and, if you realize that you haven’t fleshed out the idea enough to answer the questions it poses, then set it aside and come back to it. As for the model, it may take even longer to figure that part out. Again, the main thing is to spend time thinking about it. Stubbornly ignoring the inevitability of spreadsheets is a scarily common problem among social entrepreneurs.

SGG: Where does the business plan fit in to the general suite of tools that a social entrepreneur should have at her or his disposal?

Every social entrepreneur should, at the minimum, have the following four tools for communicating her or his idea:

  • Business plan
  • Executive summary
  • Pitch deck
  • Website

Write the business plan so that you can present the most important information in the executive summary. Then, distill the essence of your idea and the most compelling points into the pitch deck and your elevator pitch. When you meet a potential investors/supporters/advisors/contacts/clients/partners, present these materials to them in the reverse order. First, give them the pitch. They’ll go home and visit your website. If they’re interested, shoot them the pitch deck you’ll have put together. Another bite? Send the one-pager. If they really want the details, send the business plan with the financials.

SGG: Who should write a business plan?

MB: Nine times out of ten, founders should write their own business plans, and if they get someone else to do it, they should make sure to engage that person pretty consistently. I advise clients to stay away from the bulk business plan creation companies because the document they’ll end up with is often too generic. As I’ve discussed, a big part of the value of the plan is the process of writing it. If you don’t engage in that process, the document itself is next to useless. Case in point: A professional prepares the business plan for you, but then your projections change. All of a sudden, you’re stuck with an unfamiliar document that is no longer a reflection of your business and that you can’t show to anyone without looking unprofessional and inconsistent.

SGG: How does a business plan differ from a grant application?

MB: Business plans differ from grant applications in a few major ways. Business plans are arguments for the viability (overall health and growth) of the entity itself. They take a wide view. Grant applications are arguments for the relevance of a specific program to the foundation’s stated issue areas or target demographic. For example, a grant application may ask about the intended impact of the program in question, while a business plan for a social enterprise or nonprofit would be concerned with the long-term impacts of all the organization’s programs and with the financial viability of the organization itself.

The other major element of a grant application is that the writing must, by necessity, conform to the expectations of the application, whereas a business plan should strive to be as true to the essence of the organization and its founders as possible. For instance, if the grant is for a foundation primarily interested in education, then the language the organization uses to describe its programs will inevitably be weighted to favor education-related phrases and use examples of programs and operations that highlight education and learning. Another example: Grant applications often ask questions about how other organizations might use your work as a model, emphasizing knowledge sharing amongst the foundation’s grantees. This wouldn’t typically be within the purview of a business plan. This is what’s great about business plans. With grant applications, you’re forced to jump through hoops and write things simply in order to appeal to prospective donors. With business plans, if it’s unnecessary, then it doesn’t belong. Every single sentence in the business plan should contribute to its thesis, which is always the same: “We will succeed.”

SGG: Who is a business plan written for? 

MB: A business plan is written for everyone. It’s what you give people after you’ve already hooked them on your idea with your pitch, your pitch deck, and your one-pager. The business plan is what makes it all real. Here are some examples of when one will come in handy:

  • You meet a friend whose mother or father is a potential donor or investor, but wants to see that you’re serious.
  • You realize that you need advice on fundraising and you happen to have taken a class with an adjunct professor who would be a great advisor, but it’s been a while since you’ve spoken.
  • You met a leader in your field at a conference and would love him or her to become a mentor.
  • You meet a foundation program officer and want to impress that person.
  • You’ve just brought on some summer interns and you want them to fully understand your idea and where the organization is headed.
  • You’re interested in a bank loan to get your business off the ground.

A business plan is also written for your own use. Here’s some examples of when you’ll find it useful:

  • During the writing process, you realize that a specific element of your idea needs to drastically change.
  • Your market research brings you in touch with an industry expert, who reveals that there are too many competitors in your chosen field, and you have to pivot your idea to change the focus, provide a new iteration on the idea, and differentiate yourself. You can learn more about pivoting via the Lean Startup principles here.
  • You’ve had a hard time articulating how the whole impact measurement piece will work using only PowerPoint and your imagination.
  • You’re writing a grant application and need to remember all the challenges you may face. They’re in your SWOT analysis (a summary of your business Strengths, Weaknesses, Opportunities, and Threats) and you’ve done the thinking already.

SGG: Are there different types of business plans that are written for different scenarios?

MB: Not really. I don’t advise changing your document based on who you’re pitching to. Most people will accept a plan as long as it covers the standard sections well. Many funders will have you write a specialized grant application anyway, though you should definitely feel comfortable pulling language from one for the other.

SGG: Is there any connection between a business plan and a legal structure? 

MB: I tend to advise entrepreneurs to first figure out how their business will work, and then pick the legal structure that best accommodates it, rather than the other way around. Figure out what the business looks like specifically. Ask yourself, how it will make money (grants, earned income, sales, fees, advertising, etc.), what the ownership structure and financing will look like, if the entity will take on investors and be able to offer them a return, or if it’s more likely to grow through foundation grants. These are all important elements of a business plan and will help guide the discussion and decision about the legal structure.

SGG: How does a business plan relate to a business model? 

MB: If the business is the body, the business plan is the skeleton, supporting the whole thing, and the business model is the heart, pumping money through the body. Business models are about the essence of the organization’s value proposition and, specifically, about growth. Business plans are all the boring but important operational details about how to achieve the model. Let’s use the example of Room to Read, one of my favorite organizations. It provides books, libraries, and schools to low-income communities across the world. Its business model is based on efficiency, accountability, and transparency: It leverages relationships with construction supply companies to obtain materials at cost, insists that the members of the communities it serves contribute their own labor to every construction project, and it aggressively and creatively markets these efficiencies to high net worth and regular donors through a network of chapters throughout the developed world. Room to Read’s business plan would be an explanation for how all these things will actually come about.

SGG: What are the most significant errors you’ve seen your clients make in the business plans they’ve shared with you? How did those errors affect the venture development stage of building their businesses?

MB: So many! Omitting the marketing section, overgeneralizing the market summary, including useless information just to fill space, wildly overoptimistic and unsubstantiated revenue projections, bio sections that only include resumes, having no profitable business model, or basing the success of the business on a single, unnamed, and unsecured angel investor.

The biggest one is probably writing the whole thing without opening up a spreadsheet. I can’t tell you how many clients have approached me with a business plan that’s done “except the numbers.” The numbers should be tied into the heart of the business plan. Here are a few more:

  1. Writing a series of documents and thought pieces about your organization without putting it down into the format of a plan. This ends up producing lots of words, but still nothing to thoroughly explain your business to an investor, a supporter, or potential advisory board member.

    Another: People not practicing their pitch! Spending a lot of time articulating the background, how they came up with the idea, but leaving out crucial information and looking scatterbrained.
  2. Getting feedback from friends only – they tend to give you kudos on a great idea, while people you don’t know as well may be more likely to critique you. Also, many people ask for feedback on their idea itself, but what they could really use is feedback on the plan for achieving it. That’s much harder to get people to think about.
  3. Trying to get out of writing a business plan by creating a PowerPoint deck. People come to me with decks that are far too long, or slides that are far too filled with words to be effective communication tools. It’s a lazy play – and ultimately ineffective. Write down your ideas in a Word document. Get them all down. It’s infinitely easier to distill words from a Word document into a PowerPoint deck than to try to compose on a PowerPoint deck from scratch. You’ll keep on oversimplifying your point or mixing too many ideas onto a single slide.

SGG: What about using Lean Startup methodology and creating a minimum viable product before a full-blown company?

MB: The Lean business methodology, at its heart, is about figuring out an idea. I see it as a more involved, iterative method of conducting market research. Once that’s done, having a business plan is still a lot more useful and impressive than not having one. But I’ve seen lots of entrepreneurs using the Lean philosophy as an excuse not to engage in the hard work of researching their market and competitors and planning out their revenue. They end up compounding their mistake by asking key potential contributors to help when their ideas are really bad. A lot of good ideas come out of bad ones – but first impressions tend to stick.

You write the business plans to communicate a complex idea, to show how all the pieces come together, to help yourself figure out what you don’t already know, and to remind yourself about where you’re going. The point is really not to conform to a specific template. The point is not even to have a plan. The point is to go through the planning process so that you avoid at least the most basic pitfalls.

SGG: What do you think about successful entrepreneurs who in interviews say, “I never wrote a business plan” or “I don’t believe in business plans”?

MB: For each of those successful entrepreneurs, there are literally dozens who failed, and in many cases, might have either succeeded with a plan, or, more likely, realized they were going to fail and saved themselves (and their families) money. Of course, some people look back on failure and realize it was important and even helpful. And then there are people who really just want to have the entrepreneurial experience and don’t care.

I know plenty of people who have gotten their businesses off the ground without a plan. These people typically fall into a few categories: People who have the money to start their businesses and don’t need to convince anyone else of the validity of their idea, people with a really common business model like a restaurant or a sole proprietorship consulting firm, people who know their industries backward and forward, and people with tech startups that can easily shift and pivot. In these cases, I suggest at the minimum figuring out the financials and drafting a one to two-page summary and a marketing strategy to refer to internally and to figure out what you don’t already know.

SGG: Should people sign an NDA before looking at the business plan?

MB: NDAs, or non-disclosure agreements, like patents, trademarks, and copyrights, are important for protecting information that is both difficult to come by and easy to steal. The information in business plans tends to be neither. NDAs are also great for protecting the privacy of a company’s actual numbers. Few entrepreneurs want the world to know what their real margins are. Still, in practice, they slow down the flow of information. My advice: Include an NDA if you’ve got seriously sensitive information in your plan, but don’t waste too much time on one.

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