A guide to establishing a business plan for charities

When it comes to “having a plan”, the imperative for charities goes beyond the obvious need to have a clear idea about where they are going and how it ties into their broader purpose. Charities in fact have a very specific obligation under ACNC requirements: the all-important “business plan”. In this insight, we explore what this “business plan” is and what charities need to consider when putting one together.

Last updated 20 May 2022

A charity’s business plan plays an integral role in:

  • Focusing the efforts of the responsible persons of a charity;
  • Articulating how a charity’s vision is going to be implemented;
  • Establishing that a charity has the capacity and competence to comply with the Governance Standards, and if operating overseas, the External Conduct Standards.

If applying for registration as a charity with the ACNC, a business plan gives the ACNC registration assessor greater confidence that the charity is able to meet all of its obligations and will be operational within 12 months of registration.

One of the key considerations in developing a business plan for charities involves establishing strategic priorities. This requires the incorporation of the charity’s objectives over the next couple years, the timings and the broad strategies that will allow the charity to achieve this. 

These objectives will generally need to address each of the charitable purposes included in your charity’s constitution and how you intend to meet them.

Step-by-step process in developing a charity’s strategic priorities

Step 1: Know your Mission/Goals/Objectives

You should start with your broader mission and purpose. Ask yourselves 3 questions:

  1. Why are we here?
  2. Who are we trying to help?
  3. What does success look like?

The answers to these questions should be fairly obvious to you based on your charity’s governing document. If it’s not – then it may be time to review your constitution.

You should be specific about who you are really targeting to help. There are legal definitions of what constitutes the ‘relief of poverty’ based on assisting people who are genuinely in ‘need’. If you are going to be in the business of helping, you need to know precisely who the needy are and precisely how you are going to help them.

Step 2: Establish your strategic priorities

Once you have articulated and considered your mission and purpose, the next question to ask is “What are our real priorities?”

Once you know your ‘why,’ assessing your current strengths, weaknesses, opportunities and threats (SWOT) will help strategically prioritise the steps to your success and address what stands in your way. In this step, you should include detail of the facts, estimates and assumptions.

For small charities, the ACNC has made it very clear that it will be taking compliance action to ensure charities are meeting public expectations for board governance – a key threat as well as an opportunity to include in your analysis.

Step 3: Timing

Sort out your timing for the priorities you have identified in Step 2 in order to prioritise your projects. 

A key question to ask here is: “What do you need to do in the next 12 months -v- the next 3 years to achieve your strategic goals?”

Step 4: Goals

Outline the key deliverables and timings for each of the projects you have identified in Step 3 as a priority in the next 12 months using SMART goals –

Specific, Measurable, Achievable, Relevant, Timely.

Step 5: Resourcing

The next step is to determine your resourcing requirements. In doing so you should ask: “What ‘resources’ are you going to need to make these goals happen in the next 12 months?”

Resource requirements take different forms. They can be categorised as follows:

  • Human resources – 
    • What people, skills and competencies will you need to get each of these things done? 
    • Do you have the right directors, staff, and volunteers? If not, how will you get them? 
    • Will you employ full, or part-time time staff, or use contractors, or recruit volunteers? 
    • How many people will you need and in what roles?
  • Financial resources – 
    • What’s the budget for each of these strategic projects? 
    • Will you fund it within your existing budget or is additional funding required? 
    • If you are going to rely on donations to fund a project, how will you fundraise? What’s the fund-raising target? How will you market the campaign?
  • Physical resources – 
    • What do you need to undertake each project? 
    • Can it been done with your existing office space or will you need extra? 
    • What about office equipment, phones, vehicles?
  • Technological resources – 
    • Is your website up to date? 
    • Will you be processing payments? 
    • Do you have the right terms and conditions and are you managing your privacy obligations in collecting personal information and managing data?

Now that you have a good sense of your strategic priorities and how you will meet them – what does Business As Usual (BAU) look like for your charity in the next 12 months?

Here are 5 things you must do to stay in business as a charity

  1. Administration and governance – the system of policies, procedures, record-keeping and regular reporting that enables the directors to understand, monitor and supervise the charity’s operations in accordance with ACNC Governance Standards (and External Conduct Standards if applicable).
  2. Financial Management – the system of financial and budgetary controls, delegations and regular financial reporting that enables the directors to understand and supervise the charity’s finances.
  3. Risk Management – the system, strategy, plan, registers and policies by which the directors identify and manage the charity’s operational and financial risks.
  4. Working to your purpose – the products, programs and services that you have to undertake every year to assure a fair-minded observer your charity is operating in accordance with its charitable purposes.
  5. People and resources –the human, financial and technological capital the charity will need to operate. This includes the skills and competencies the charity requires to undertake its operations.

What should be in a charity’s business plan?

Your charity’s business plan will combine the strategic priorities listed above, how you will deliver on the strategy and your BAU requirements over the next 12 months (or more).

The plan should include the following:

  • Operational Plan – The programs, products and services you plan to deliver.
    • Applying your SMART goals, what are the program deliverables and how will you deliver them? 
      • Make your goals impactful – for example, in the coming 12 months, we plan to help 100 unemployed youth gain employment through our job-ready skills, training and mentoring program.
  • Marketing Plan – this should identify how funds will be raised, as well as the promotion plan of the charity. 
    • This includes stakeholders, donor target groups, and the methods to be deployed (such as media outlets and measurable outcomes to be achieved). 
      • For example, In the coming 12 months, we plan to campaign for and raise $80,000 from business donors in our community to fund a part-time social worker position to assist long term unemployed young people become job ready. We will do this by hosting up to 4 fundraising events for local business leaders.
  • Organisation Chart – the charity’s business plan should include an organisation chart showing the roles and reporting lines of the employee, contractor and volunteer positions.
  • Annual Budget – your annual budget is an important tool to demonstrate that the directors have control of the finances. 
    • You should apply the assumptions and predictions from your strategic analysis to predict and detail all the anticipated sources of revenue. 
    • This includes the amounts and timing of revenue from each source and all anticipated areas of expenditure (such as the amounts and timing of expenditure in each area and the projected cash flows for revenue and expenditure for at least the year ahead). 
    • The charity’s monthly performance against the budget then forms the basis of your monthly financial reporting to the Board. It also helps the board to make decisions about whether to approve new expenditure or not – if it’s not in the budget, you will need to increase your revenue or cut some other item of expenditure to fund it!

Bringing the elements of the charity’s business plan together will help to demonstrate that you understand your duties as directors and that your charity has the financial and operational capacity to pursue its charitable objects in accordance with the law.

We have assisted countless charities in developing and improving their governance and policy documents. If you have any questions regarding this article or your charity in general – please get in touch for a confidential discussion with the Birchgrove Legal NFP Team today on (02) 9018 1067.

Birchgrove Legal is a boutique Sydney law firm that specialises in the not-for-practice sector. Its market-leading practice is at the cutting edge of innovative approaches to serving NFP sector organisations across the spectrum of entity types. Get in touch with one of our authors to discuss your needs further.

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