Business Plans for Nonprofits

From NYCON's national partner, National Council of Nonprofits:

True or False: “Business planning is for businesses, and strategic planning is for nonprofits." Be honest. When you first heard the phrase "business plans for nonprofits," did you think, "We don't do that"? Many people think that businesses do business planning, and nonprofits do strategic planning. Strategic planning remains a core element of capacity building. State Associations of nonprofits report that strategic planning is perennially one of the most popular educational programs they offer. Funders often want to see a strategic plan along with a grant proposal. But increasingly, we’re hearing executive directors say to one another, “Do you have a business plan?” Are business plans for nonprofits becoming the new hot thing? And are they replacing strategic plans – simply by adding dollar signs? Advertisement Business planning is not the same as strategic planning. Ideally business planning will inform and improve a strategic planning process that keeps evolving. Business planning provides a sound financial context for the planning process and forces us to look at our nonprofit in the context of a competitive environment. It is hard work because it grounds big picture ideas in reality. Understandably given the option we might prefer to paint a canvas with a broad vision and fill in the colors, rather than first determine what it costs to buy the paint and canvas, and how to price our painting. (It’s much more fun to paint the picture and let somebody else figure out whether it will sell and for how much!) The problem for enthusiastic and inspired artists (as with board and staff members) is that the canvas gets bigger and bigger – but when the masterpiece is finished, there might not be a market for it.     For us amateur artists, two recent books approach nonprofit business planning from a strategic planning perspective and explain it in a very accessible way, even for those not familiar with business terminology. The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model , a new book by David La Piana and his distinguished colleagues at La Piana Consulting, may just change your attitude towards using the words “business” and “nonprofit” in the same sentence. Also take a look at Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by the terrific trio Jeanne Bell, Jan Masaoka, and Steve Zimmerman. We think both books are masterful in helping to explain why nonprofits need to pause and take a look at, well…let’s just say it, their “business model.”   Your nonprofit is in the business of something, whether it’s recycling computers, helping veterans rejoin the workforce, or preserving open space from development. And in order to pay for talented employees, that new website you dream of, and the internet connection that makes it work, your nonprofit needs cash. The problem is, assuming your nonprofit is like many others, it’s tempting to continually add new projects or improve existing programs to meet changing needs in the community. Just before a nonprofit launches that new program or makes the necessary adjustments, that’s the time to stop and ask, “How much is this really going to cost? And how will it be paid for?” The question should even be asked for services that clients pay for -- or that are paid by third-parties: “Are all the costs of the program paid for?” What we’re hearing is that many nonprofits have not calculated the full cost of running their operations. Consequently, the revenue received, whether through donations or fees for services (or a combination) might not cover 100% of what it costs to deliver those programs. Private philanthropy is concerned about this funding gap and the strain it puts on charitable nonprofits. The Donors Forum has convened a community of practice on the subject of overhead, bringing together funders and nonprofits to recommend how nonprofits can more easily identify and articulate the true cost of their work, and how grantmakers can become educated about the failure to pay full costs, as well as help nonprofits understand how to calculate the true cost of delivering services.   In today’s challenging economy, the severe consequences of failing to engage in business planning is laid bare when cash stops flowing. The cash flow crunch is a concern for a huge number of charitable nonprofits. The Nonprofit Finance Fund’s 2012 survey found that only 43% of nonprofits surveyed had more than 3 months of cash reserves – and many had less than one month. Nonprofits that continue to focus exclusively on what they do, instead of also what it costs to do it, will find themselves at risk of closing their doors for good. Here is just one example of the need for nonprofits and board members to focus strategically on business models: a 30 year old charitable nonprofit, dependent on donations to pay the rent and stay afloat, is hit hard by the recession when donations dry up. If the nonprofit closes its doors the community’s poor and disabled will be without access to medical equipment, such as wheelchairs, walkers, and oxygen tanks. For 30 years the nonprofit has collected donated equipment, refurbished it, and trained its new owners how to use it. For free. Now at the brink of being forced to shut down, the group’s executive director, reflecting on what happened, explained his mind-shift towards being more business oriented: “We’re not about money, but we have to be right now.”   A solid business plan will take into consideration not only the “vision” and the strategy for how your nonprofit will address needs in the community, but also how everything your nonprofit does fits within a competitive landscape, and how it will fund its activities in a cost-effective way. Done well, business planning is very comprehensive – and requires time. An outside consultant may be helpful to move the process along. The CEO, key program staff, and a few board members are usually tapped for the business planning team so that multiple perspectives inform the analysis of all aspects of the nonprofit’s operations: from mission delivery (programs, services, advocacy) to physical and human resources infrastructure, and marketing, to communications and fundraising activities. A business plan might also include funding projections, and address risk mitigation as well as how outcomes will be evaluated (and the associated costs).   The advantage of having a business plan in place – especially when an attractive new idea presents itself - is that some ventures, partnerships, or projects may strategically fit the mission and perfectly support the vision – but may not be successful financially. With the discipline of a business plan as the “enforcer,” it makes it easier to prioritize the activities that make the most financial sense, and to make hard decisions, such as stopping a program that offers little ROI. As champions for our nonprofits’ missions it is no longer enough to know deep in our bones that “the mission is good.” Instead we need to help boards and staff ask hard questions about money, so that the ability of each charitable nonprofit to deliver its mission into the future is protected. We encourage your nonprofit to take a look at the resources highlighted in this newsletter and on the Council of Nonprofits’ website, and we hope that when your nonprofit engages in this process, business planning will feel much more like painting a masterpiece than counting pennies. Coming soon - a new look for this newsletter and the National Council of Nonprofits   Interested in learning more about business planning for nonprofits? Join us for a free webinar on October 18th with Heather Gowdy and Lester Olmstead-Rose, authors of The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model. This webinar is an exclusive benefit for members of our network of State Associations. Contact your State Association for the registration link. Not a member? Find your State Association and join today!   This webinar is offered free of charge thanks to generous support from Resources on strategic and business planning (National Council of Nonprofits)    The Nonprofit Business Plan: The Leader’s Guide to Creating a Successful Business Model , by David La Piana, Heather Gowdy, Lester Olmstead-Rose, and Brent Copen   Nonprofit Sustainability: Making Strategic Decisions for Financial Viability, by Jeanne Bell, Jan Masaoka, and Steve Zimmerman   Business Planning for Nonprofits: What It Is and Why It Matters  (Bridgespan)   Sample business plans for nonprofits (Bridgespan)   Tools for business planning, creating a theory of change, a case for support, and building a revenue plan (for purchase from Social Velocity)   Congratulations to Valerie Lies, President & CEO, Donors Forum, and Ann Silverberg Williamson, President & CEO, Louisiana Association of Nonprofit Organizations, as well as Tim Delaney, President & CEO of the National Council of Nonprofits, for being named to the 2012 NonProfit Times Power & Influence Top 50 list.   The National Council of Nonprofits provides information about the failure of government to pay the full costs of services both on our Government-Nonprofit Contracting website and in Nonprofit Advocacy Matters, our bi-weekly newsletter on public policy and advocacy matters affecting charitable nonprofits. An upcoming edition of Nonprofit Advocacy Matters will include an update on federal reforms affecting indirect cost reimbursements. Subscribe today so you won’t miss the latest on this important issue.

Copyright 2012 National Council of Nonprofits. All rights reserved 1200 New York Avenue, NW | Suite 700 | Washington, DC 20005 | www.councilofnonprofits.org

GuideStar Illustration: Nonprofit Organizations in US

Interesting overview of the number of nonprofits in the US.

Answers About Health Care Reform for New Yorkers

Many of you have questions about health care reform in New York and what its implications are for both you and your clients. Here is an article that clearly explains some of the main questions people are asking. These answers come from James Knickman, a knowledgeable and reputable source, who is the President and Chief Executive Officer of the New York State Health Foundation (NYSHealth), a private, statewide foundation dedicated to improving the health of all New Yorkers.

"What the Health Law Really Means for New Yorkers"

How America Gives- Fundraising Tool

Check out this great new interactive tool that can help nonprofit directors get information about the giving patterns in every state, county, city and ZIP code in the United States. This is an exciting new tool that can help  you out with fundraising. 

How America Gives is a free resource that spotlights giving statistics across a variety of income levels and allows users to compare and share data about charitable contributions. You can access it here:http://philanthropy.com/givingmap 

You are also invited to check out our exclusive How America Gives special report, which includes rankings, analysis, and much more: http://philanthropy.com/americagives 

Nominate an Oustanding CPA; Join the NYCON Board

2012 Michael H. Urbach, CPA, Community Builders Award Now Accepting Nominations Submission Accepted through August 24th, 2012  Sponsored by the New York Council of Nonprofits (NYCON) and the New York State Society of Certified Public Accountants (NYSSCPA)   Lewis Kramer, Urbach Award Recipient and Doug Sauer, CEO, NYCON The New York Council of Nonprofits, Inc. (NYCON) and the New York State Society of Certified Public Accountants (NYSSCPA) are pleased to announce this call for nominations for the Ninth Annual Michael H. Urbach, CPA Community Builders Award. The award is named in honor of the late Michael H. Urbach, CPA, former partner of Urbach, Kahn and Werlin, former NYS Commissioner of Tax and Finance and Chair of the State Employees federated Appeal, and board leader of a number of charities. This award is in recognition of the important role, talents and leadership that a Certified Public Accountant (CPA) in New York State can provide as a board member for community-based charities.   Award Criteria & Submission Candidates must: Be a CPA in good standing and a member of NYSSCPA. Have served as an Officer on at least 3 different charitable 501(c)(3) community-based nonprofits with service as President/Chair at least once. Have demonstrated exemplary board leadership resulting in significant and positive organizational impact including, but not limited to, financial turn-around, growth, and/or organizational re-structuring. Preference will be given to nominees whose board leadership accomplishments have been with community-based charities. Deadline - August 24th, 2012 Nominations addressing the candidate's qualifications must be received by August 24th. Nominators are strongly encouraged to address the qualifications related to the four (4) criteria mentioned above and to include at least three (3) letters of support from the charities who have benefited from the candidate's volunteer leadership. Send two (2) packets of nomination materials to: Urbach Community Builders Award Committee New York Council of Nonprofits 272 Broadway Albany NY 12204 or email the packet to Melissa Currado, Executive Assistant to the CEO at mcurrado@nycon.org. NYCON Now Accepting Applications for Board Membership A great opportunity to volunteer your time and lend your expertise to help nonprofits of all types improve the quality of life in New York State.    The New York Council of Nonprofits' Board Development Committee  is now accepting applications for nominees for its Board of Directors. Terms are for three years, starting January 1, 2013, with a three consecutive term limit.  Successful nominees will be presented for election to our Membership at NYCON's Annual Meeting on October 4th in New Paltz. Applicants must be individuals of high integrity, demonstrate commitment to our state's nonprofit sector, and be willing to invest the time, effort, expertise and influence necessary on a regional and statewide basis to further NYCON's mission. All applications will be considered by the Board Development Committee however priority consideration will be given to individuals who meet more than one of the following characteristics: Resides in Hudson Valley, Metro New York or Central New York regions Has public policy knowledge & expertise, particularly with respect to state government Has marketing & Media Relations expertise Is affiliated with Organized Philanthropy Has Banking & Corporate Business expertise & affiliations Is a racial or ethnic minority Applications are due by August 27th, 2012. If you are interested we encourage you to review the NYCON "Board Brief" document and complete the application below: Download an application Download the NYCON "Board Brief"  Candidates are recommended to the Board by the Committee and the Board in turn recommends a slate to the NYCON Membership which convenes for our Annual Meeting at Mohonk Mountain House on October 4th during Camp Finance.  Board members elected by the members begin service in January 2012.  Questions? Please contact us.

All About the Board Members... Nominate an Outstanding CPA Board Member by August 24th Are You Interested in Joining the NYCON Board? Thank You to Our Supporters! NYCON and NYSSCPA would like to recognize The Community Foundation for the Greater Capital Region for their grant contribution towards the Michael H. Urbach, CPA Community Builders Award. For More Information visit NYCON at WWW.NYCON.ORG     or contact Melissa Currado at (800) 515-5012 or mcurrado@nycon.org  Co-sponsored by The New York State Society of Certified Public Accountants 　 www.nysscpa.org

Our Nonprofits Role in Political Activity: Ideas to Consider

Food for thought offered by the National Council of Nonprofits about our involvement in political activity:

The Underutilized – Yet Vital – Role of America’s Charitable Nonprofits 

by Tim Delaney, President & CEO

I just returned from London, where I had the good fortune of meeting with nonprofit leaders from several countries and soaking up English history, culture, and (of course) rain. Whether learning about nonprofit trends elsewhere from international colleagues, listening to debates in both Houses of Parliament, touring the British Museum, or even just walking London’s streets, I couldn’t help but constantly compare home and abroad.

First thing up for comparison was language. One odd term (to me) was calling a meeting a “consultation.” Another particular language difference caught my ear: Europeans engage in “campaigning” rather than “lobbying.” That startled me at first, because here “campaigning” normally means partisan political activity that expresses support for or opposition to a candidate for public office, which nonprofits in our country clearly can’t do. Later, when hearing peers describe how laws in many countries were so complex as to discourage nonprofits from engaging in certain activities, I realized that is how U.S. laws operate regarding many core democracy-building activities: our federal laws allow nonprofits to both lobby and encourage participation in elections, but those laws appear so complex that they frighten too many away.

That insight dialed up a trend I have noticed in the U.S.: nonprofit capacity-builders often shy away from external policy matters because they hear terms that sound like a foreign language to them. Similarly, nonprofit policy advocates frequently flee internal discussions about topics like finances, HR, and IT (activities that capacity-builders deal with daily) because terms used are less familiar to them. Yet our sector can’t be effective in serving our communities if we over-specialize and compartmentalize like this. We all need to have a basic understanding of our sector’s vital role in building democracy – and then operationalize our role as champions for our communities.

After all, as revealed in the now-classic Forces for Good, high-impact nonprofits both deliver services AND work with government and advocate for policy change to accomplish their missions. Indeed, as the Minnesota Participation Project (an initiative of the Minnesota Council of Nonprofits) reminds us in this article, Election Cycle Dos and Don’ts, charitable nonprofits are uniquely positioned to nurture democracy.

Another item begging for comparison was public transportation. London’s constant whirl of buses and subways magically achieved their basic purpose of moving oodles of people. Then at night, it seemed advanced drivers would climb aboard the double-decker buses and push them full-throttle, while still safely navigating their behemoths along crowded, narrow streets. But while aboard an open-topped double-decker bus that had to take a sudden detour, I saw some tourists slapped in the face by an unanticipated tree branch (which I fortunately ducked under).

These three ways of moving people – basic, advanced, and popped-in-the-face – also made me think of how we can safely move nonprofits to greater engagement in promoting democracy.

Basic

These activities are so basic, safe, and important that all nonprofits ought to engage in them. Simply remember to remain strictly nonpartisan in these activities. Just as public buses don’t just board only Democrats or Republicans, the goal here is to move more people to the polls; once people arrive there they can choose their own destination.

• Educate and empower. Your nonprofit touches many people. Imagine if each person voted. In California, CalNonprofits has launched an effort – the Vote with Your Mission campaign – to have 100% of eligible nonprofit staff members, board members, and volunteers vote. Start your own effort to get everyone associated with your nonprofit to vote! 
• Register Voters. NonprofitVOTE provides everything you need so that your nonprofit can roll out a successful (and legal) voter registration campaign: from a planning checklist to a downloadable voter participation starter kit, it’s all there.

Advanced
In good conscience, I wouldn’t encourage inexperienced drivers to drive a massive double-decker bus through crowded streets. The Center for Lobbying in the Public Interest (CLPI) provides an excellent "roadmap" for election-related activities that are legal and safe – provided you have experienced advisors accustomed to navigating the particular requirements of the law.

• Create a Candidate Questionnaire. Here’s a powerful sample questionnaire from the North Carolina Center for Nonprofits. The great thing about candidate questionnaires is that they require all of the candidates to give focused consideration to nonprofit issues. Plus, it’s a unique way to educate future officeholders (see Qs 4, 6, 10 in NC sample). This article from The NonProfit Times provides tips on creating unbiased, informational candidate questionnaires.
• Host a Candidate Forum. Inviting all candidates (remember to remain nonpartisan!) to a candidate forum is a great way to make it easy for your community to learn about the candidates. As a neutral broker, with the best interests of the community in mind, your nonprofit has the opportunity to increase public understanding of the issues affecting your community. Here are tips for hosting candidate forums, including what to do when a campaign comes knocking, courtesy of NonprofitVOTE.

Avoid Getting Popped

The IRS has published materials that make clear that nonprofits may legally engage in nonpartisan election-related activities. But those same materials point out that if the nonprofit moves beyond being strictly nonpartisan, there can be serious consequences. Unfortunately, too many nonprofits freeze when learning about possible “serious consequences,” without ever considering the bountiful community benefits. That’s akin to hiding under the covers quivering in fear that if you get on a plane to London it might get hit by lightning.

• Remain Nonpartisan. Nonprofits have plenty of room – and responsibility – to serve their constituents and communities by encouraging people to use their voices at the ballot box. The main thing to remember to avoid being popped is to pay attention to what it means to remain nonpartisan. 
• Proactive Protections. Consider adopting a political activity policy to keep your nonprofit, board, and staff aware of the importance of remaining nonpartisan. When you hire a new employee, and when you orient board members, make sure they know that as a tax-exempt 501(c)(3) charitable organization, your nonprofit must remain nonpartisan.

* * *

At the Churchill War Rooms, I learned that the now omnipresent expression of “Keep Calm and Carry On” was first printed in 1939 on posters for use if the Germans invaded. After the war, those unused posters were tossed – yet some were found, so the expression remains alive. With the American campaign season heating up and raising the temperature of political rhetoric, charitable nonprofits and their board members would be wise to apply the message from our friends across the pond: “Keep Calm and Carry On.” Don’t let false lore about nonprofits being unable to do anything relating to elections scare you or the blitz of negative campaign ads rattle you. Keep calm. Know there are many legal, easy, and vital ways for nonprofits to advance their missions in serving their communities by helping citizens vote. Then carry on!

Why should nonprofits encourage voting?

Permissible Activity Checklist from NonprofitVOTE
Initiatives & referenda elections, as the Center for Lobbying in the Public Interest notes, follow laws regarding lobbying, not partisan electioneering, (because the voting public is being “lobbied” to vote yes or no).

Engaging Online
Influencing Public Policy in the Digital Age: The Law of Online Lobbying and Election-related Activities is a report from the Alliance for Justice that includes information on what nonprofits can and cannot include on their websites during an election.

The Nonprofit Law Blog and Gene Tagaki’s interview on Nonprofit Radio provide a legal overview and explain how campaign activity restrictions apply to websites and social media.

Resources

IRS Fact Sheet on election year activities
Test your knowledge. Here are 21 examples of actions by 501(c)(3) nonprofits. Which ones are permitted under IRS regulations?

Election Year Risks (Nonprofit Risk Management Center)

Help someone get an absentee ballot

Tools

NonprofitVOTE's online starter kit 

Council Services Plus Update on Health Care Reform: Are You Prepared?

NYCON's insurance subsidiary Council Services Plus (CS Plus) offers info, resources and direct insurance assistance to nonprofits across NYS.  CS Plus only works with nonprofits, and has brought over $1 million in savings to nonprofit clients. Visit www.councilservicesplus.com for more info or e-mail.

Health Care Reform: Are You Prepared? The United States Supreme Court largely upheld President Obama's health care law, the Affordable Care Act in a mixed decision. The court's ruling, seen as one of the most significant in decade, is a crucial milestone for the law, allowing almost all of its far-reaching changes to roll forward. The decision did significantly restrict one major portion of the law: the expansion of Medicaid, the government health-insurance program for low-income and sick people. The ruling gives states more flexibility not to expand their Medicaid programs, without paying the same financial penalties that the law called for. The legislation for the Patient Protection and Affordable Care Act (PPACA) will impose significant new responsibilities on employers, some of which are already effective. While further guidance is expected on the application of these requirements, the following provides a summary and timeline of key provisions of the PPACA. As employers look ahead to the implementation of the PPACA, CS Plus will be providing additional updates to provide clients with compliance strategies in connection with various components of the new law. Summary of the Affordable Care Act The Affordable Care Act (umbrella term for the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010) was passed by Congress in March 2010 to overhaul the health care system, expand affordable coverage, change insurance rules and create an online marketplace (exchange) in each state for the individual and small group markets. Most U.S. citizens and legal residents will be required to have health insurance in 2014. Those without coverage would pay a tax penalty based on household income to be phased-in starting in 2014. Federal subsidies will be available to assist those who cannot afford to purchase coverage. Large employers (50 or more full-time employees) will be required to "pay or play" starting in 2014. Qualifying small employers (no more than 25 employees) are eligible for a tax credit for offering coverage beginning in 2010. The tax credit increases in 2014 if employers buy from the exchange, and then phases out in 2016.  How Health Reform will Impact Businesses The Patient Protection and Affordable Care Act (PPACA) impacts businesses in several ways - from the types of benefits offered under insurance plans, to the ways employers conduct their businesses. Some provisions are already in effect and more will be implemented over the next several years. General Impacts on Employer-Provided Coverage There are several mandates from the Patient Protection and Affordable Care Act (PPACA) already in effect. View the Timeline below for more information on timing of provisions. Some of the key mandates are below. Grandfathering - "Grandfathering" allowed some plans to be exempt from some Health Care Reform provisions. Lifetime Limits and Annual Limits - Law prohibits imposing annual limits on Essential Health Benefits and any lifetime dollar limits. Medical Loss Ratio (MLR) Reporting - A Medical Loss Ratio or MLR is the percentage of premium dollars insurers spend to provide covered medical services and improve the quality of health care for their members. No Pre-Existing Conditions Exclusions - As of September 2010 there are no pre-existing exclusions for children under age 19. Beginning in 2014, this provision applies to everyone, including adults. Patient-centered Outcomes Research Fee - The Patient-Centered Outcomes Research Tax, also known as the Comparative Effectiveness Research Fee, is a fee paid to the government to fund Patient-Centered Outcomes Research Institute (PCORI) research. Preventive Services - The Patient Protection and Affordable Care Act of 2010 (PPACA) requires health plans to cover designated preventive services without any member cost sharing. Summary of Benefits Coverage - The Departments of Health and Human Services, Labor and Treasury recently issued final regulations requiring health plans to provide a SBC and Uniform Glossary that clearly explain benefits and coverage within a standardized template with uniform language. W-2 reporting - PPACA contains a requirement for employers to report the cost of health coverage under an employer sponsored group health plan on an employees W-2 form. The cost includes both the cost paid by the employer and contributions from the employee. Women's Preventive Services - The Patient Protection and Affordable Care Act (PPACA) requires health plans to cover designated women's preventive services without cost sharing for the member. Cost-sharing includes deductibles, copayments and coinsurance. Some of the benefits and services outlined in the women's preventive guidelines are already included within the existing PPACA preventive services requirements.          Establishment of Health Insurance Exchanges On April 12, 2012 Governor Andrew M. Cuomo issued an Executive Order to establish a statewide Health Exchange. State-established health insurance exchanges must begin to operate on January 1, 2014. The Exchanges are virtual marketplaces that allow individuals and eligible employers to purchase health insurance. Initially in 2014, only employers with up to100 employees can purchase insurance for their employees through the Exchange. Prior to 2016, states can limit the size to businesses with up to 50 employees. Beginning in 2017, states can allow employers with more than 100 employees to purchase health insurance for their employees through the Exchange. How Does Health Care Reform Affect Small Businesses? In addition to the key provisions outlined, it's important to know that small businesses already have an opportunity to qualify for: Small business tax credits - In an effort to help small employers offer affordable coverage to their employees, the Patient Protection and Affordable Care Act provides for tax credits for qualified small employers. These credits began in 2010. The credits increase in 2014, but are only available for coverage purchased on an Exchange. The small group tax credit sunsets in 2016.   Timeline It will take several years for changes to be enacted and regulations written. However it's important to begin to understand what will be happening in the near future versus long term changes. To view a larger image of the timeline, CLICK HERE.

If you have any questions regarding this update, please contact Anthony DeCicco, Account Executive, Group Benefits at adecicco@councilservicesplus.com;  or by phone at (877) 501-4277, ext 123.