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Whether you’ve decided or not, starting to write a business plan will help you narrow the details and start to assess the viability of your idea.A business plan will help you to understand costs, outline potential risks, as well as how you’ll manage cash flow for your non-profit.But what warms the hearts and minds of potential donors are the “outcomes.” If the nonprofit is a medical clinic, examples of outcomes would be how many lives were saved, how many families were kept intact, and how many days were not lost at work.
In the previous three installments, we looked at “4 Sections Every Business Plan Must Have (and Why They’re Important),” “Why You Need a Business Plan (and the Best Style for You),” and “When Is a Good Time to Review and Renew Your Business Plan?
” This month, we discuss creating a business plan for a nonprofit.
wiki How is a “wiki,” similar to Wikipedia, which means that many of our articles are co-written by multiple authors. A business plan is a document that is typically drafted before starting a business that sets forth in detail the way the business will run.
To create this article, volunteer authors worked to edit and improve it over time. A nonprofit is a business just as a for-profit business is and should prepare a comprehensive business plan.
Do you have a “pure” nonprofit or one that is a mix of for-profit and nonprofit activities?
If you have a mix, then you probably need two business plans: one for each part of the business.You need a business plan for the start-up or expansion of a nonprofit for the same reasons you do for a for-profit enterprise.It’s often said that nonprofits should be run like for-profit businesses.Do you recognize a need in your community not being met?Are you inspired to make a difference and create social change?First, what we refer to as the for-profit balance sheet becomes the nonprofit statement of financial position.Since a nonprofit has no stockholders or investors, the stockholders’ equity section becomes the net assets section.AARP, for example, has both a for-profit business where it sells insurance and products, and a nonprofit business to advocate for people over 50.In a nonprofit business plan, the marketing section is expanded to a marketing and development section.The net assets section has three components capturing the nature of any donations classified as “unrestricted” (nonprofit can use funds for any purpose) “temporarily restricted” (funds are for a specific project, activity or time period) or “permanently restricted” (donated funds cannot be utilized by the nonprofit).Here is a visual comparison of a for-profit balance sheet and a nonprofit statement of financial position: Second, since the purpose of a nonprofit is mission and not income, the for-profit income statement becomes the nonprofit statement of activities, and its bottom line is net assets rather than net profit or net income.