Vanessa Lindsay of the Nonprofit Founders Club explains why nonprofits shouldn't use traditional business plans. Business plans require collateral and personal credit, and getting a loan puts personal liability on the founder. Instead, write grant proposals tailored to specific funders, which don't require repayment or collateral.
Hey, hey, hey, you know, I see a lot of people online telling new nonprofits to write a business plan, and I'm like, why? Why would you tell a new nonprofit to write a business plan? There's already so much to do in starting and building a nonprofit, and writing a business plan is not one of them. Hi, I'm Vanessa Lindsay, and I'm with the Nonprofit Founders Club, and I am here to teach you about all things nonprofit. You know, one of the things is business plans are generally for for-profit businesses. You give it to a bank or other investors for loans, like I want to get a loan. They show up, give me your business plan. The personal or new nonprofit business has collateral, and they have a business where they're selling something to generate revenue, because it's like, how are you going to pay that loan back that you're getting from the investor or from the bank, right? And think about it, who's going to give you a loan when most new nonprofits, they have no income, they have no cash-generating products or services to pay back the loan? What are you going to pay the loan back with? Nonprofits are generally dependent on donations, events, and grant funding. Secondly, you have a service that you're giving away for free to people. So how are you going to recruit some money? Okay, so if you write a business plan to get a loan, how are you, as you are starting your nonprofit, going to pay that money back? Okay, so when you get a loan, most of us know that when you get a loan, it depends on your credit. You must have some collateral. Or you need a cosigner. So the loan technically will be legally yours in your name and your Social Security number. So you're the one that's taking out the loan for your nonprofit because your nonprofit doesn't have anything to use as collateral. So do you really wanna start your nonprofit with being obligated and in debt to pay back a loan if you were to get one, especially when you're a new nonprofit? Guess what? You don't have a proof of concept or history on what you're gonna be doing in the community if it's going to work, if it's— it's probably needed, but do people want it? Are they going to come? And how are you going to get your funding? So if you're going to spend your time writing a business plan, I think your time would be better spent writing a proposal to a specific funder. Each funder has their own guidelines, and your business plan, trust me, will not fit into those guidelines. So you're going to have to rewrite it anyway. So your time is better spent writing a grant that you do not have to use your own personal Social Security number. You don't have to get a cosigner, and it does not require your credit score. And then there's no collateral to secure it. And best of all, guess what? You do not have to pay it back. The money can be used for the services that you want to provide in the community. So one of the things you can do is this. If you just feel like you just need to write something, which you really do need to write this, is you can start writing a strategic plan. So you can write a strategic plan or you can begin writing your grant. So if you wanna learn more about grant writing or creating a strategic plan, check me out over at the Nonprofit Founders Club. I'm Vanessa Lindsay, and I help new nonprofit founders start, grow, and build nonprofit organizations so they can leave a legacy and an imprint on this world. I'll see you soon.
