It’s important to have a clear plan on how you intend to run your organisation in order to sustain its operation in the future. One of the key questions to be answered is how you expect to generate an income e.g. donations, grants, selling products and services? This is what we call the business model.
Your business plan will help clarify your project idea and define your long-term objectives. It provides a blueprint for running your organisation and a series of benchmarks to check your progress against. It is also vital for convincing your bank, your community and any potential investors to support you.
Choosing a business model
As a community organisation or charity you may not even think of yourself as a business, but every community business has the same elements as a normal business – customers, products and services, finance, marketing and profit. The key difference is that any profit generated is for social and community benefit, not individual gain. However you still need to generate profit (or ‘surpluses’) to return to the business or to spend for community benefit.
In order to write a convincing business plan, you need to understand and articulate your business model and make sure it is reflected throughout your plan. Your business model is the plan for the successful operation of the business, identifying sources of revenue, the intended customer base, products and details of financing.
Business models for community businesses tend to be more complicated than for conventional businesses. You will most likely have a mix of income including fees and charges, sale of services, donations and possibly contracts with public sector bodies. Your business model may be based on cross-subsidising one part of the business to support another, such as using income from pitch hire to subsidise coaching for children, or having differential hire rates for local residents, clubs and commercial businesses.
Another complication for community business planning is that the customer doesn’t always pay – so you may have users such as children or older people for example, where the service is paid for by a donor or a public sector client rather than directly by the user.
Every community business has a different business model. What matters is that you are clear about yours and that the rest of your business plan reflects this in terms of staffing, financial projections, governance, etc.
Part of the business model for every community business is its ‘social return’ i.e. its benefit to the community, so your business model also needs to show who benefits and how. If you are taking on an Asset Transfer, the Local Authority owner of the asset will be scrutinising your business plan to see that you have properly costed and planned for continuing to generate a social return into the future.
A good way to start your business planning is by using Locality’s Balanced Scorecard to create an overview of your business plan on one page. The Balanced Scorecard is a simple business tool, designed to capture on one page various aspects of the organisation – business model, organisational development, financial return and social return – setting out in each case where the organisation is now and where it wants to be soon (e.g. two years time) and later (e.g. five years time).
There are many other business plan templates and guides available, for example, Unltd’s information on putting together a business plan.
Here are the main sections we would expect to see in a business plan:
- About the organisation and/or people behind the business
- Mission/purpose of business and how you intend to achieve it
- Product/service, pricing and projected sales/outputs
- The market, the competition, the operating environment
- Risk analysis
- Resource needs and business operations
- Income & Costs projections
- Funding and finance needs
- Cashflow forecast.
Costs and Income
Forecasting your future costs and income is the core of your business plan. You will need income and spending projections and cash flow projections for at least three years.
Read more about forecasting here.
Cash flow is the way in which money flows in and out of your bank account.
When the capital, revenue costs and income have been projected and show that income exceeds costs, it is important that these are put into a cash flow for the first years of the project and that the timing and assumptions about timing for income in the cash flow are clearly explained and presented. Businesses often failure due to problems of cash flow rather than their overall profitability.
This resource also includes an example of a cashflow forecast.
Whole life costing for assets
Whole Life Costing is the systematic consideration of all relevant costs and revenues associated with an asset. Typically, a surveyor estimates over a 20-25 year period what it will cost to operate, repair, replace and renew building or landscape elements.
These costs are then given a current value in order that the owner can make decisions about and plan investment in the asset. It involves making judgements about which elements (windows, doors, etc.) will need replacing or repairing and what kind of cyclical maintenance (like decoration) will be required.