Wednesday, February 25, 2009

Nonprofits: Business Plans Versus Grant Proposals

This post by Patrick O'Heffernan, Are you a business plan or grant proposal social entrepreneur?, on the Social Edge blog comes at a handy time when I've been wrestling with writing a business plan for my nonprofit.

When it was first suggested to me that I write a business plan (about 2 years before I would actually set-up the organisation), it seemed that its purpose would primarily be to determine the feasibility of the world-be organisation. Fair enough. My friends sent me templates and I picked the simplest looking one and started work. Only it was much harder than I had hoped. Along the way, I dropped it meaning to continue with it at some point.

Anyway, fast-forward a couple of years and the nonprofit had started operations. Again I was advised to develop a plan, which which both help map-out the organisation's plan of action, and serve as a fund-raising tool. Fair enough, I thought again.

However, working on it has not been easy, however I have a semblance of a sort-of -ish plan. But, this was not the NGO school I came from. In my previous work experience, our source of funding came primarily from grants, which we got after slaving over proposals or completing often complex and multi-layered application processes. This is what I am used to and was expecting. The notion of asking companies to invest in your idea is a novel one; though perhaps one can think of grants as a form of investment in an approach or person who is going to address a social need.

I have experienced life in the nonprofit during an economic downturn before and it definitely wasn't fun to wake-up each day not knowing if this was the day your position would be axed as part of cost-reduction tactics. I remember feeling that it was crazy that our ability to do our work (not to mention our livelihood!) was dependent on whether we were given money or not, and I vowed that if I remained in the nonprofit world, I would find a better way of doing things.

Maybe that is the opportunity presented by this option to go a more business and bottomline-oriented route.

Patrick O' Heffernan highlights some advantages to starting a business to accomplish social goals:
  • Quicker and sometimes easier to get investment capital
  • As long as there's a market need for your products and you're well-priced, your revenues and profits will keep you in business regardless of the latest fads among donors
  • You are responsible for your income and you decide what needs to be done to keep it flowing, i.e. no being at a donor's mercy
  • Flexibility, because market changes and competition (and not grant agreements nor program officers' requests) drives your business decisions

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