Business model nonprofit organizations
Nonprofit Business Model Statements
Although every nonprofit has a mission statement that defines the organization's core purpose and work, many are unaware of its useful companion, the business model statement: a brief summary that spells out the organization's economic drivers. Like a mission statement, a business model statement acts as a touchstone: a reminder and a guide for the organization's focus and strategies.
Nonprofit executives and board members usually have a good sense of the various types of funding that support the organization, but they may have a harder time explaining the organization's business model. Let's imagine a childcare center with the following mission statement: "We provide high quality child care in a cross-cultural setting." A first draft of their business model statement might read: "Our funding comes from government, parent fees, and fundraising."
This statement lists all the types of funding, but doesn't speak to the strategy for financial sustainability of the center. A second draft may come out this way: "We provide high quality child care for children with diverse racial, cultural and economic backgrounds, by combining government subsidies for low-income children with full-pay tuitions, supplemented with some parent fundraising."
Although this statement lacks graceful wording, it does explain the organization's strategy for financial sustainability, and it links that financial strategy with its program strategy. While mission statements are meant to be external messages as well as internal guides, a business model statement is primarily for internal use.
A Latino theater offers another example of a business model statement: Their first draft stated, "We produce plays and conduct youth workshops, sustained through a mixture of ticket sales, foundation grants, workshop fees, and an annual benefit."
Similar to the childcare center's model, this descriptive statement contains all the elements of the business model - the methods by which the organization accomplishes its mission and generates revenue. But while it lists the programs and revenue streams, it's not specific about the drivers for either the programs or finances. The business model statement should help focus the leadership's attention on what keeps this organization sustainable. A more focused business model statement was developed: "We produce Spanish and English plays supported by ticket sales and foundation grants, and supplemented by net income from youth workshops and an annual gala."
This straightforward sentence describes how the theater is sustained financially. It states bluntly that youth workshops and the gala are supplemental to the production of plays, the central purpose of the organization. It can serve as a reference point for staff and board when making choices, just as a mission statement does.