To most social entrepreneurs, the words business plan sound like something from another world: high tech, investors, Excel spreadsheets. But almost every foundation, major donor or business partner will end up asking you the same questions: what you do, for whom, how much it costs, and how you will know it works.
A good business plan answers these questions in advance, and above all it helps you think. In this guide we will go chapter by chapter through what it needs to include, and look at a sample business plan for a fictional venture, so you have something to start from.
What is a business plan, and why does a social venture need one?
A business plan is a document that describes the venture from every angle: what problem it solves, how, who does the work, how much money is needed, where the money will come from, and what is expected to happen over the next one to three years.
For a social venture it has three roles. It is a thinking tool that forces you to answer questions that are easy to put off. It is the basis for every funding request, because the project card, the foundation application and the donor presentation are all drawn from it. And it is a road map for the team that reminds everyone what they are trying to achieve.
How is it different from a regular business plan?
The structure is similar, but there are two important differences. First, the one who pays is usually not the one who benefits from the service. So the funding chapter describes donors, foundations and grants, not just customers. Second, success is measured in social change. So the plan includes a whole chapter on the outcomes you expect and how you will measure them.
The structure of a business plan: the chapters you need to write
1. Executive summary
One page, and you write it last. Someone who reads only this page should understand the whole story.
- The problem in one sentence, and who it hurts.
- What the venture does and what you have already achieved.
- How much money you need, for what, and for what period.
2. The problem and the target audience
- Exactly who the target audience is: age, area, circumstances. The more precise the description, the more convincing the plan.
- What difficulty they face today, and what it costs them in their lives.
- Well-founded data on the scale of the problem, with a source, alongside what you have heard yourselves in the field.
3. The solution and how it works
- What actually happens: who meets whom, how often, where and for how long.
- What is new compared with what already exists.
- What you learned from the pilot, if there was one, and what you changed as a result.
4. What already exists in the field
Foundations almost always ask who else is doing something similar. Write honestly about which organizations work in the field, how you are different, and who you could partner with. A venture that knows its surroundings looks more serious.
5. Theory of change and measures
- The chain: what you do, what comes out of it right away, and what changes over time.
- Two or three measures you will track, and how often.
- How you will collect the data, even if it is a short questionnaire at the end of each cohort.
We covered this chapter in more detail in the article Impact measurement.
6. Team and structure
- Who leads the venture and what relevant experience they have.
- Which roles are already filled, and which are missing.
- Volunteers, advisors and partners, and what each of them brings.
7. Action plan and milestones
A simple table for the coming year: what will happen in each quarter, and what you will know at the end of each stage. A good milestone is something you can check, such as opening a second cohort or signing a partnership with a local authority.
8. Budget and funding plan
- Expenses by line item: salaries, activities, equipment, marketing, administration.
- Cost per participant, a number foundations like to see.
- Funding sources: what is already secured, what is in process, and what still needs to be raised.
9. Risks
What could go wrong: a partner who drops out, difficulty recruiting participants, a major donor who does not continue. For each risk, write what you will do. An honest risks chapter shows the reader that you have thought the path through to the end.
A sample business plan: an illustrative venture
An illustrative example. The venture below is fictional and is meant only to show what the chapters look like once they are filled in. It is not an Alumot venture, and its numbers are not real data.
- Name: "Reading Together", reading mentorship for children in second and third grade.
- The problem: children in a certain neighborhood finish second grade struggling to read, and their parents do not know how to help.
- The solution: student volunteers meet with one child, twice a week, for half an hour of shared reading at school.
- What already exists: the school has extra tutoring hours, but they are in large groups. The venture complements them.
- Theory of change: regular sessions (activity), reaching 20 children a year (output), leading to improved reading levels according to the school's test and greater confidence in class (outcome).
- Team: a half-time coordinator, 20 students, and a supervising teacher on behalf of the school.
- Milestones: recruiting students in the first quarter, starting sessions in the second quarter, first measurement at the end of the year.
- Budget and funding: coordinator salary, books and refreshments. An application to a family foundation, a partnership with the local authority, and donations from the community.
- Risks: students dropping out in the middle of the year. The response: a list of replacements and an appreciation event in the middle of the year.
Notice that each chapter is written in a line or two. That is enough to get started, and later you expand each chapter as needed and according to who will read it.
How do you build a convincing budget?
A good budget is one people can believe. A modest number based on what you have already seen in the pilot is better than a big forecast with no basis. A few simple rules:
- Do not forget what you cannot see: bookkeeping, insurance, travel and management hours.
- Separate the first year from the following years, because setup costs do not repeat every year.
- Show a mix of sources. A venture that depends on a single donor worries every foundation. We wrote about this in more detail in the article A business model for a social venture.
Five common mistakes when building a business plan
- Writing before testing. A plan written before any experience in the field is mostly a guess. The first test can be done almost for free, as we explained in the article How to test a social idea with no budget.
- Writing too much. A busy reader prefers ten clear pages over forty general ones.
- Talking about intentions instead of actions. "We will empower the community" does not say much. "We will hold 30 sessions a year" says a lot more.
- Leaving out measurement. Without measures, it is hard to show that the venture works.
- Not updating it. A business plan is a living document. It is worth opening it at least once a year.
Building a business plan in three rounds
It is hard to write a good business plan in one sitting. What works better is building it in layers:
- First round, the skeleton: a sentence or two for each of the nine chapters. The goal is to see where you are missing answers.
- Second round, filling in: you add data, talk with partners and build the budget. This is where most of the gaps come to light.
- Third round, an outside read: you give it to someone who does not know the venture, and fix everything they did not understand.
How long should a business plan be?
It depends on who will read it. For internal use and a first conversation, a few pages are enough. For a large foundation or a call for proposals you will sometimes need a more detailed document, in a format they set. It is also worth keeping a one-page version, a project card, that you can send to any donor.
How can Alumot help?
At Alumot we help entrepreneurs whose ventures are already operating to raise resources, develop their business model and build partnerships. The mentoring is provided by volunteers with experience in social entrepreneurship and business development.
Every venture at Alumot receives a strategic consulting session and a resource development mapping once a year, guidance on writing project cards, and preparation for meetings with donors. On the financial side, the nonprofit manages the accounts and runs a system for tracking cash flow and budget. All the details are on the I Have a Venture page.
Frequently asked questions
What is the difference between a business plan and a business model?
A business model briefly explains how the venture creates value and where the money will come from over time. A business plan is the full document, which includes the model alongside the team, the budget, the milestones and the risks.
Do you need a business plan at the idea stage?
Not a full document. At the idea stage, a version of a page or two that helps you think is enough. The full plan is worth writing after you have tested something in the field.
Is there a ready-made business plan template?
The nine chapters in this guide are a good template to start with. When you apply to a foundation or a call for proposals, use the format they ask for, and move what you have already written into it.
How long does it take to write a business plan?
You can write a first version in a few working days, if you already have experience from the field. The part that usually takes the longest is the budget and the funding plan.
Who should read the plan before you submit it?
At least one person from outside the team, preferably someone with fundraising experience. They will see what is unclear, and which questions a donor might ask.
Have you written a plan and want to think it through with someone who knows the way? Tell us about your venture.