Non profit Financial Model Example

Financial planning is a crucial aspect for any non-profit organization, providing a structured approach to managing its resources effectively. This planning framework outlines the typical revenues, direct costs, employees, expenses, and assets you need to consider when starting or growing your non-profit business. By implementing a solid financial model, you may even discover new and profitable revenue streams that align with your mission and objectives.

The Non profit financial model structure

Revenues

Non-profit organizations have various revenue streams, each requiring careful calculation to ensure financial sustainability:

• Donations: Calculate by estimating the average donation amount multiplied by the expected number of donors.
• Grants: Consider the total amount received from grant applications, often supported by specific projects or operational goals.
• Fundraising Events: Projected by estimating ticket sales, sponsorship contributions, and any auction proceeds.
• Membership Fees: Calculate by multiplying the fee structure by the anticipated number of members.
• Product Sales: Generated from selling branded merchandise, calculated by estimating units sold times the price per unit.
• Service Fees: Applicable in cases where organizations charge for certain programs or services. Estimate based on the service fee multiplied by the projected number of clients.
• Investment Income: Calculate expected interest and dividends from invested funds or endowments.

Cost of goods sold

The Costs of Goods Sold (COGS) pertains to any direct expenses incurred while delivering services or products:

• Production Costs: Includes materials and labor needed for creating products like merchandise or educational kits.
• Event Costs: Covers venue rental, catering, and decoration costs for fundraising events.
• Service Delivery Costs: Any direct costs associated with delivering specific programs or services.

Employees

Typical employees in a non-profit setting include:

• Executive Director: Oversees all operations, implements strategy, and manages staff.
• Development Officer: Focuses on fundraising, writing grant proposals, and donor relations.
• Program Manager: Manages specific programs, ensuring they run effectively and align with the mission.
• Finance Manager: Handles financial reporting, budgeting, and financial analysis.
• Volunteer Coordinator: Recruits and manages volunteers to support the organization’s activities.
• Communications Coordinator: Manages public relations and promotes the organization through various media channels.

Operating expenses

Here are typical operating expenses for a non-profit organization:

• Rent: Costs associated with office or facility space.
• Utilities: Expenses for electricity, water, and telecommunications.
• Office Supplies: Includes stationary, software subscriptions, and postage.
• Salaries: Compensation for employees on the payroll.
• Insurance: Covers liability and organizational insurance policies.
• Marketing and Promotions: Costs for raising awareness through advertising and public relations campaigns.
• Travel Expenses: Includes transportation and accommodation costs related to business activities.
• Professional Services: Legal, accounting, and consulting fees.
• Maintenance and Repairs: For equipment and facilities.
• Training and Development: Expenditures for employee development and skills enhancement.

Assets

Typical assets required in a non-profit setting include:

• Office Equipment: Computers, printers, and other technological tools needed for operations.
• Furniture: Items like desks, chairs, and conference tables for workspace functionality.
• Vehicles: Used to transport goods or facilitate program delivery.
• Buildings: Owned property where operations are housed, if applicable.

Funding Options

Non-profits have various funding options available:

• Government Grants: Financial awards given by government entities to support specific initiatives.
• Private Donations: Contributions from individuals and businesses.
• Foundation Grants: Funding from private and corporate foundations.
• Sponsorships: Business partnerships that involve financial support in exchange for advertising or acknowledgment.
• Fundraising Campaigns: Organized efforts to solicit donations from the public or community.

Driver-based financial model for Non profit

A truly professional financial model for a non-profit organization is based on the operating KPIs (Key Performance Indicators) relevant to the non-profit sector. These drivers are essential for creating realistic and achievable financial plans.

• Number of Donors: Tracks the growth or decline in donor support over time.
• Average Donation Amount: Measures the average contribution size and identifies points for improvement.
• Event Attendance: A key metric for evaluating the success of fundraising events.
• Program Participation Rate: An indicator of how well programs are received or attended by beneficiaries.
• Volunteer Hours Contributed: Helps understand the level of community engagement and support.
• Membership Retention Rate: Measures how effectively current members are maintained over time.
• Grant Success Rate: Tracks the application and acceptance ratio of grants.
• Cost per Beneficiary: Evaluates the efficiency of financial resource utilization in programs.
• Social Media Engagement: An indicator of online interaction and reach with the target audience.

Driver-based financial planning involves identifying the key activities, or ‘drivers,’ that significantly impact business results, and using these to create financial plans. This approach helps establish relationships between financial outcomes and the resources required to achieve these results, such as personnel, marketing budgets, and equipment needs. If you want to know more about driver-based financial planning and why it is the right way to plan, see the founder of Modeliks explaining it in the video below.

The financial plan output

The goal of financial forecast outputs is to enable you, your management, board, or investors to:

• Quickly understand how your non-profit business will perform in the future.
• Get comfort that the plan is thought through, realistic, and achievable.
• Understand what investment is needed to implement this plan and what will be the return on the investment.

To achieve these goals, here is a one-page template on how to effectively present your financial plan. Apart from this one-page summary, you will need the three projected financial statements:

• Profit and Loss: Details income and expenses over a specific period.
• Balance Sheet: Provides a snapshot of the organization’s financial position at a given time.
• Cash Flow Statement: Showcases cash inflows and outflows within the organization.

Non profit financial model summary

A professional non-profit financial model will help you think through your business, identify the resources you need to achieve your targets, set goals, measure performance, raise funding, and make confident decisions to manage and grow your organization. By understanding and implementing these financial planning techniques, non-profits can ensure their mission is not only achievable but also sustainable in the long term.