TOP 8 REASONS A CHARITY SHOULD HAVE A FORMAL BUSINESS PLAN
Michael Tait explains his top 8 reasons why a charity should have a formal business plan.
A formal business plan is a vital tool for a charity. It aides in strategic planning, financial management, fundraising, accountability, risk management, performance measurement, regulatory compliance, and organisational performance.
A charity is as much a commercial concern as a trading business. Governance is just as complex too. Trustee directors of a charity have equal legal responsibilities to those of company directors. They therefore need a business plan from executives to judge the validity of strategy, and to be able to monitor the charity’s performance according to a plan.
Here are Mike’s top 8 reasons why a Trust should have a business plan:
1 Strategic Direction
A business plan provides a clear roadmap for the charity’s activities, helping to align efforts with its mission and long-term goals. It outlines strategic objectives and the steps and programmes needed to achieve them.
2 Financial Planning for the charity
A business plan includes detailed financial projections which are essential for budgeting and ensuring the charity remains financially viable. This helps in managing resources effectively and planning for future financial needs.
3 Charity Fundraising and Grants
Many funders, including grant-making bodies and donors, require a business plan as part of the application process. A well-prepared business plan demonstrates the Trust’s credibility and ability to manage funds responsibly.
4 Accountability and Transparency
Having a plan promotes transparency and accountability. It allows trustees, staff, volunteers, and stakeholders to understand the Trust’s objectives and progress.
5 Risk Management
A plan helps identify potential risks and challenges, allowing the charity to develop strategies to mitigate them. This proactive approach to risk management is crucial for the charity’s sustainability.
6 Performance Measurement
A plan sets benchmarks and performance indicators, enabling the charity to measure its progress and effectiveness. This continuous evaluation helps in adjusting strategies and improving operations.
7 Regulatory Compliance
The Charity Commission for England and Wales encourages good governance practices, including strategic planning. While it may not be a legal requirement, having a business plan aligns with best practices for governance and management.
8 Organisational Performance
A business plan helps in the efficient allocation of resources, ensuring that efforts and funds are directed towards the most impactful activities. This enhances the overall effectiveness of the charity’s operations.