4 Business Practices Every Nonprofit Should Use

You head up a relatively young nonprofit doing good and necessary work, an important asset to the community that you want to grow into something truly significant.  The question is, how do you and your small team of paid staff and volunteers tackle the issues holding the charity back? The following four classic business practices will fit nicely into your nonprofit toolkit.

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1. SWOT analysis for nonprofits

In a business context, the SWOT analysis allows companies to develop a complete picture of the factors, both good and bad, that can impact on strategic planning and decision-making.  While it’s not the only factor in evolving a sound business approach, SWOT is a major business resource in successful for-profit development and also in your nonprofit toolkit. The acronym stands for:

  • Strengths: Features that give an advantage over others.
  • Weaknesses: Features that are a disadvantage relative to others.
  • Opportunities: Elements that the project could exploit to its advantage.
  • Threats: Elements that could cause trouble for a project.

Smaller organizations often consider these elements informally but conducting a proper SWOT analysis forms a strong foundation for planning and strategy. Because it targets the four elements that make up the acronym, this business practice is useful for any nonprofit to fine tune initiatives, plans and goals.

When completed, the results from a SWOT analysis give vital information for using the next three tools. (Read more about SWOT analysis here.)

2. Nonprofit business planning

At the very onset, for-profit businesses have to generate a business plan. This business resource is usually the first step in acquiring the financing that for-profit companies need to operate. But the reason a business plan becomes so valuable for the charity sector is because it answers those tough questions all nonprofits will need to address.

You have a mission and a vision so the first question addressed by this business resource will be “Where are we headed?” followed closely by “How will we meet our goals?” Business planning for nonprofits makes space for organizational shifts and acts as a guide to negotiate changes successfully.

Get your nonprofit business plan in place and you’ll know how to achieve your outcomes, how long it will take and how much funding and other resources it’ll need. This process will address how the charity can keep afloat should external environmental factors change; the alternatives should Plan “A” fail.

Don’t forget to add a marketing section to your business plan. The goal is to produce a plan that is realistic, comprehensive, and stays true to the mission.

3. Map out a strategic guide

Third up in the arsenal of business resources, strategic planning sets out to find problems, channel resources, focus energy, strengthen operations and make sure that everyone is on the same page, working together to the same end. It addresses the changing environment that the organization functions in and defines its purpose.

With strategic planning in its nonprofit toolkit, a charity can identify tactics to achieve the mission and ways to accomplish these tactics using  measurable goals as guideposts.

In order for the plan to be relevant, revisit it from time to time and make adjustments. It’s supposed to be a “strategic” guide. As circumstances change, the plan can be adapted and the nonprofit’s strategic priorities reworked.

Keep the nonprofit’s board engaged with the strategic plan by discussing some facet at each board meeting. This is a good time to re-evaluate the priorities that were initially identified. Do they remain the key priorities going forward?

Running your organization like a business, using business resources, means having a disciplined approach with an emphasis on strategy. Without a strategic plan, it would be difficult to define your organization’s vision.

4. Sound financial management

Businesses that put financial planning high on their agenda tend to produce revenue faster than organizations that don’t. Key business resources for nonprofits point the way to fiscal best-practices and guidelines. Even in the smallest of organizations, implementing good financial management from the outset just makes sense.

The good news is that by creating wide-ranging fiscal guidelines and procedures while the nonprofit is still small, it will be poised to grow without a total revamp needed for an impractical financial system. Effective financial administration frees up more funds for growth – more funds for the mission.

For in depth information about dealing with accounting systems and procedures, as well as examples of financial guidelines and policies for your nonprofit toolkit, visit NonProfitAccountingBasics.org. If yours is a small or mid sized organization, two of the key elements to keep in mind are:

  • Policies setting out guidelines for transparency and accountability (in everything financial))
  • Procedure manuals, an up-to-date record of financial practices – how the organization operates

Within the often cash-strapped world of a nonprofit, enough outlay in infrastructure needs to be made to enable staff to do financial tasks efficiently. As an organization grows, your nonprofit toolkit needs finance and accounting practices that’ll require capable staff and up-to-date accounting software. Smaller groups can use the most skilled person to handle the finances and make certain that compliance with required nonprofit reporting and filing is done on time.

Running a nonprofit like a business means having a disciplined approach. Using these business resources as part of your nonprofit toolkit and incorporating good business practices into your daily operations will increase effectiveness and provide clear direction.

Adhering to sound business principles makes a nonprofit more likely to accomplish its mission. Knowing that key systems are running efficiently allows the focus to shift to the outcomes and other important factors like measuring impact; information your donors and supporters are waiting for.

(Visit The Robin Hood Foundation to see how they make funding to charitable groups based on sound business practices. They “make grant decisions to maximize impact, much like a financial manager chooses investments to maximize profit.”)

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