Charities usually face the challenge of having to raise income through donations, contracts, grants or loans. Frequently, the charity will need to provide a business plan in order to demonstrate that they have considered how the organisation will operate and how it is able, over time, to fully recover its costs.
Many funders specify exactly what they would like to see in a business plan, but it is important that your business plan is suitable for the size and complexity of your charity. If you get the format right, all of your stakeholders – your staff team, board, volunteers and potential donors – will find it useful.
Whatever template you choose there will be similar elements to complete:
The Planning Process
There are some useful tools that will ensure your organisation is clear about its purpose. Take a look at the Organisational Purpose in the Charity Governance Code.
The Executive Summary is the most important part of your business plan. Often, it’s the only part that a stakeholder reads before deciding whether or not to read the rest of your plan. It should convey your passion for your cause and enthusiasm for your project or operational idea.
You should write your Executive Summary LAST, after you have completed the rest of the business plan. That way, you’ll have thought through all the elements of your service and you’ll find it easier to summarize them.
The Executive Summary should briefly contain the following:
- An overview of your charity idea (one or two sentences).
- A description of your service. What problems are you solving for your target customers?
- Your goals for the business. Where do you expect the business to be in one year, three years, five years?
- Your proposed target market. Who are the people that your organisation serves?
- Your competition or other people working with the same beneficiaries and what differentiates your organisation are you sure your organisation is required?
- Your board and management team and their experience. What do they bring to the table that will give your business a competitive edge?
- Financial forecast for your service. If you’re using the business plan for funding purposes, explain exactly how much money you want, how you will use it, and how that will make your business more profitable.
Limit your Executive Summary to one or two pages in total.
After reading the Executive Summary, readers should have a basic understanding of your organisation, should be excited about its potential, and should understand the difference it will make.
This section explains the basic elements of your service. Include each of the below:
Organisation mission statement
A mission statement is a brief explanation of your company’s reason for being. In general, it’s best to keep your mission statement to one or two sentences.
What values does your business live by? ‘Honesty’, ‘integrity’, ‘fun’, ‘innovation’ and ‘community’ are values that might be important to your organisation’s philosophy.
Specify your long- and short-term goals, as well as any milestones or benchmarks you will use to measure your progress. Do you plan to extend or develop your service? Use the measures you generated in your evaluation framework. For more help with this, look at the Impact Page
Explain who your target beneficiaries are. You may want to undertake a stakeholder analysis like this example by Mind Tools (It’s worth downloading the Mind Tools app in any case; it’s got some great exercises and tools). Or adapt the Stakeholder Analysis document.
Describe your view of the third sector and the area that you specifically work in. Is it mature, emerging or stable? What are the priorities long-term and short-term? How will your organisation support strategic priorities? You should reference any relevant States of Guernsey strategies or plans, and reference relevant local research.
Is your charity registered? Is it an LBG, a partnership or a foundation? If appropriate, say why you chose this particular form of business.
After reading the Company Description, the reader should have a basic understanding of your business’s mission and vision, its goals, its legal structure, its target market, and the wider competitive landscape.
You may find it helpful to use the Governance page to check your NPO and/or your LBG registration; ensure you provide the correct charity reference number.
This section expands on the basic information about your services included in the Executive Summary and Company Description. Here are some items to consider:
- Your organisation’s services: What do you do and how do you do it? Include details of relationships with suppliers, manufacturers and/or partners that are essential to delivering your product or service.
- The problem the service helps solve: Explain what the problem your service is designed to address. What are its benefits and features?
- Any features that give your charity an advantage: Do you have any evidence to support your claim that your service is effective? Do your staff/volunteers have any unique skills?
After reading the Services section, the reader should have a clear understanding of what your charity does; what problem it solves for its beneficiaries; and the unique features that makes it essential to local people.
This section provides details on the local context, the competitive landscape and your target market.
There are two kinds of research: primary and secondary.
Primary market research is information you gather yourself by going online or finding out about similar local services, or by interviewing/surveying people – either your service users or the people who have commissioned or might commissioner your service.
Secondary market research is information from sources such as Strategic Plans and academic publications, local press and newspapers, census data and demographic profiles.
This section of your plan should explain:
- The total size of your part of the provider market
- Trends in the provision of service in your area: is it growing or shrinking?
- The total size of your target market, e.g. the number of older people and what share is realistic for you to obtain the % seeking support. How are customer needs or preferences changing?
- Barriers to entry or service growth and development
What barriers to entry does your organisation face, and how do you plan to overcome them? Barriers to entry might include:
- High startup costs
- Lack of marketing data
- Brand recognition challenges
- Finding qualified staff
- Need for specialised technology or training
- Threats and opportunities
Once your organisation can overcome the barriers to entry or growth you mentioned, what additional threats might it face? Consider the following:
- Changes in government and or legislation or regulation
- Changes in technology
- Changes in the economy
- Changes in your provider market
You can use the SWOT Analysis Worksheet on the Innovation Page to identify your organisation’s weaknesses and potential threats, as well as its strengths and the potential opportunities you plan to exploit.
- Service features and benefits
Describe all of your services, being sure to focus on the user’s point of view. For each service:
- Describe the most important features. What is special about it?
- Describe the most important benefits. What does it do for the user?
- Target customer
Describe your target user. You may have more than one target customer group for each service e.g. older people and their carers.
Identify your target customer groups and create a demographic profile for each group that includes:
- Ability / Disability
- Occupation/ Education status
- Previous experience, ex offender, care leaver etc
- Other protected characteristics
Key Partner / Competitor
One of the biggest mistakes you can make in a business plan is to claim you have “no competition”. While your service may be unique in Guernsey, your plan must show that you understand how to differentiate your organisation from similar services, either statutory or voluntary. This section should:
Name the key charities or services that support the same users as you. Do they compete across the board, or just for specific deliverables, for certain users or in certain areas?
Now that you’ve assessed your part of the sector, service, users and competition, you should have a clear understanding of your organisation’s niche (i.e. your unique segment of the market) as well as your positioning (how you want to present your charity to users). Explain these in a short paragraph.
How you will market your service? Think about how you will work with the media
In this section, explain the marketing tactics you plan to use.
Advertising may include:
- Business website
- Social media marketing
- Email marketing
- Search engine optimization
- Print marketing materials (brochures, flyers, business cards)
What image do you want to project for your charity’s brand?
What design elements will you use to market your business? (This includes your logo, signage, web and printed materials). Consider how they’ll support your brand.
You explained costs briefly in the Services section; now it’s time to go into more detail. How do you manage your service costs? Keep in mind that this is not always about providing low cost solutions; the emphasis should be on delivering an appropriate, good quality service.
- Explain how you work out your projected costs
- How important is price to your reader? It may not be a deciding factor, but you will need to demonstrate your understanding between targets and staff ratios, for example, or building capacity, or amount of training delivered.
Download the service forecast spreadsheet and use it to create a month-by-month service projection.
If you have a history of delivering the service, you can use past trends as a basis for your projections. If not, you’ll need to create estimates based on your outcome model, market research, proposed marketing strategies and comparative service data. Keep notes on the research and assumptions that go into developing these service forecasts: funders will want to know what you’ve based the numbers on.
After reading the Marketing Plan section, the reader should understand who your target users are; how you plan to market your service to them; what channels you’ll use; and how you’ll position your service relative to similar providers in the market.
This section explains the daily operation of your business, including its location, equipment, personnel and processes.
How will you deliver your service? Describe your methods and the resources you’ll use.
How will you maintain consistency? Describe the quality control procedures you’ll use. These may include meeting structures and frequency, supervision etc
- Where is your business located?
- The size of your location
- Accessibility for customers, employees, suppliers and transportation if necessary
- Costs including rent, maintenance, utilities, insurance etc
What (if any) type of legal environment will your charity operate in? How are you prepared to manage regulatory requirements? Include details such as:
- Any licenses and/or permits that are needed and whether you’ve obtained them
- Any copyrights or programme rights that you have or are in the process of applying for
- The insurance coverage your business requires and how much it costs
- Any environmental, health or workplace regulations affecting your business
- Any special regulations and or inspections affecting your services
What type of staff will your business need? Explain details such as:
- What types of employees? Are there any qualification or professional requirements?
- How many employees will you need?
- Will you ever hire freelancers or independent contractors?
- What is the pay structure (hourly, salaried, base plus commission etc)?
- How do you plan on finding suitably qualified employees?
- What type of training is needed and how will you deliver it?
List your key suppliers, including:
- Names, addresses, websites
- History and reliability, specifying how critical this is to your service, e.g. meals for Meals on Wheels vs web designer for a children’s charity
- Do you expect the cost of supplies to hold steady or fluctuate? If the latter, how will you deal with changing costs?
After reading the Operational Plan section, the reader should understand how your business will operate on a day-to-day basis.
Management & Organisation
This section should give readers an understanding of the people behind your business, their roles and responsibilities, and their prior experience. If you’re using your business plan to get financing, know that investors and lenders carefully assess whether you have a qualified management team.
Include brief biographies of the owner/s and key employees. Include resumes in the Appendix. Summarize your experience and those of your key employees in a few paragraphs per person. Focus on the prior experience and the skills that have prepared your team to succeed in this business. If anyone on the team has previous experience starting and growing a business, explain this in detail.
Explain how you plan to fill in any gaps in management and/or experience. For instance, if you lack financial know-how, will you hire a CFO or retain an accountant?
List the members of your professional/advisory support team, including:
- Board of directors
- Advisory board
- Insurance agent
- Mentors and other advisors
If they have experience or specialisations that will increase your chances of success, point this out. For instance, does your board have experience growing a similar charity?
Include an organization chart. This should include both roles that you’ve already filled and roles you plan to fill in the future. You may wish to include both a board and staff structure chart.
After reading the Management & Organization section, the reader should feel confident that you have a qualified team leading your business.
Your financial plan is perhaps the most important element of your business plan. Developing your financial plan helps you set financial goals for your new organisation and assess its finance needs. Include the following:
12-month profit & loss projection
Also known as an income statement or P&L, the 12-month profit and loss projection is the centrepiece of your business plan. Be sure to explain the assumptions behind the numbers in your P&L. Keep detailed notes about how you came up with these figures; you may need this information to answer questions from potential financing sources.
Optional: 3-year profit & loss projection
A three-year profit and loss projection is not essential to a business plan, however you may want to create one if you expect your organisation’s financial situation to change substantially after the first year, or if grant funders, investors or lenders require it.
Cash flow projection
The cash flow statement tracks how much cash your charity has on hand at any given time. Once your charity is up and running, you’ll want to keep close tabs on your cash flow statement. For now, however, you’re creating a cash flow projection. Think of the cash flow projection as a forecast for your business checking account. It details when you need to spend money on things and when you expect to receive payments. The cash flow projection takes these factors into account, helping you budget for upcoming
After reading the Financial Plan section, the reader should understand the assumptions behind your financial projections and be able to judge whether these projections are realistic.
Risk management is the process of identifying, evaluating and controlling risks.
The aim is not to eliminate all risks entirely (this would be very difficult and not cost effective), but rather to reduce the risk to a level that the charity is comfortable with (“the risk appetite”). NCVO describe the seven-step process to managing risk
We have created a template Risk Log to help you record your organisation risks. You can edit the drop-down options on the admin tab:
- Column B, what is the general area of risk (this will help you to sort your risks by type)
- Column C, which part of your service it affects
- Column D, free text to describe the risk in more detail
- Column E, how likely is it that the risk will happen?
- Column F, how severe will the impact be if it does?
- Column G, Red, Amber, Green – by adding E and F we calculate how serious the risk is, with Red being the most severe
- Column H, is there anything you can do to manage or reduce the risk?
- Column I, which member of staff is responsible for managing the risk?
Case Study – The Princes Trust
The Princes Trust have produced a great pack of tools and guidance to get any new project started:
- The Princes Trust Business Plan Pack
- The Princes Trust Business Plan Template
- The Princes Trust Business Plan Word Template
Know your Audience
The States of Guernsey - Business Case
The States might ask for a ‘business case justification’ if you’ve approached them for funding, or in the context of commissioning. A Business case is different from a business plan. Here is an example of the Business Justification toolkit used by States Departments. You may want to tailor your information to support States colleagues when the two of you are developing a joint proposal.
Getting a Loan
If you are approaching a commercial lender or a bank you may wish to look at some “how to” guides produced for small businesses.
- Barclays Guide to writing a business plan
- HSCB Business Planning Tool
- Business resource center at Lloyds Bank