Streetsmart Financial Basics for Nonprofit Managers

Chapter 27Business Models and Business Plans

Most nonprofit founders spend considerable time discussing why they try to do the things they do. In all likelihood, they will talk eloquently in terms of consumers' needs, how their program achieves its goals, and so forth, but they'll rarely talk about their “business model.”

Ironically, talking about program goals and methods is a pretty good start on a business model. For many nonprofits that contract with state or federal governments, the business model is often effectively determined by their funders. But for many others, the business model is at the heart of their programming.

A rarely acknowledged aspect of business models is that they serve a function similar to internal controls. But whereas internal controls help day-to-day operations prevent mistakes and dissuade bad guys, business models operate at a higher intellectual level. The validity and the integrity of your business model create the organizational skeleton that entrepreneurs need to guide themselves and their early staff members.

In the long run, though, it's the management team that will usually be the most familiar with the business model since management teams have the incentive and the time to pick through all the operational assets of a given program. This is because they oversee the staffing and resources that make up the model. This suggests an understated truth: at its heart, a business model is nothing more than an internalized guide to making decisions ...