Anisa: The Nonprofit Business Model Canvas

By Grant Smith

The nonprofit is unique among businesses. A regular for-profit business has one main type of customer or client, one that receives products or services in exchange for payment. The business then uses the revenue to pay for administrative expenses, marketing, salaries, etc., and everything else production related. In a regular for-profit business, the person who pays is also the person who receives the product or service. But, in a nonprofit the traditional client is split into two: the donor client and the beneficiary client. One pays and the other receives the product or service. This division creates a business logistics problem. You now have two people for every one that a regular business has.

In a regular business, the client or customer has one reason for dealing with you, to satisfy their wants and needs. Again, with a nonprofit that client is now split in two, each desiring to have their individual wants and needs be satisfied. To achieve that a nonprofit needs to incur differently oriented costs, perform different activities, market to each differently and measure the success of each relationship differently. In essence, nonprofits need two different, yet complementary, business models.

A widely used and highly effective method for innovating and mapping out the basics of a business model is the Business Model Canvas, developed by Drs. Alexander Osterwalder and Yves Pigneur and over 400 practitioners. It is currently being used by some of the largest corporations in the world as well as some of the smallest startups. It is used to describe and map out the nine most essential elements of a functioning business: customer segments, value proposition or offering, distribution channels, customer relationships, revenue streams, key resources, key activities, key partners and cost structure. But, the model as it stands does not work very effectively for most nonprofits. It would need to take into account what was explained above, the fact that the customer is split between donors and beneficiaries.

The Nonprofit Business Model Canvas was developed as an alternative to the Business Model Canvas, specifically designed with nonprofits in mind. Under the new model, nonprofits can map out both business models, the Donor Model and the Beneficiary Model, on their respective canvas. Together they form a complete nonprofit business model.? Let?s look at what they both cover.

The Donor Model canvas is the revenue side. But, at its heart is a donor-oriented value proposition. Even though Donors don?t receive the products or services nonprofits offer, they still are essentially people or groups of people that have needs and wants. At the base of every relationship there is some level of give and take or exchange. Even if what is received by the donors is a warm, fuzzy feeling, they wouldn?t have that feeling if the nonprofit didn?t give them any way of knowing that the nonprofit?s mission was being accomplished. If that was missing, the warm and fuzzy feeling would turn into a hesitant, concerned feeling. Ultimately, your donors need to receive something in return for donating and not just anything. They need to receive what they want or need, something they didn?t have before, a value-added proposition that they can agree with. And yes, there is a donor market with scarce nonprofit resources and value-proposition-oriented competition for available funds. The market ?clears? when the nonprofits with the best and most relevant value-propositions match up with the right donor segments and there is an exchange.

Everything else in the Donor Model revolves around who your donor segments are and what value proposition they are interested in. To be specific, these elements include:

Distribution Channels ? the touch points where you are interacting with your donors;
Donor Relationships ? the type and level of relationships you have with each donor segment;
Revenue Streams ? how your nonprofit captures value in the donor market;
Key Non-program Resources ? the different assets that are indispensible in your donor model. These include intellectual capital, human capital, financial capital and physical capital;
Key Non-program Activities ? the most important activities you need to perform to create and capture value in the donor market;
Key Non-program Partners ? those that can help you leverage your Donor Model with added connections, resources or activities. They compliment the Donor Model, allowing you to focus on your core activities;
Non-Program Cost Structure ? the essential non-program monetary costs for operating your donor model.

On the Beneficiary Model side of the Nonprofit Model Canvas the outcome isn?t revenue, it?s impact. A nonprofit is created to fill a social mission that cannot be or just isn?t fulfilled by for-profit organizations. The value you add to society needs to be unique from or done more efficiently than that of the for-profit world, or else you will be competing for discretionary income in a market where you cannot provide products or services to those that are giving you money, while your competitors can provide them and are still fulfilling a social mission. Your beneficiary-oriented value proposition (or ?Mission Offering?) also needs to be relevant to both your beneficiary segments and the social ill you are offering to correct.

First, each beneficiary segment needs to be identified, and then the corresponding Mission Offering must be outlined for each segment. From there you need to work through the following seven elements:

Distribution Channels ? the touch points where you are interacting with beneficiaries.
Beneficiary Relationships ? the type and level of relationships you have with each beneficiary segment;
Impact Metrics ? quantifiable measures of impact, influence and the creation of beneficiary-oriented value;
Key Resources ? essential assets you need to create beneficiary-oriented value.
Key Activities ? the most important activities you need to perform to create and capture beneficiary-oriented value i.e. impact;
Key Partners ? those in your network that can help you leverage your Beneficiary Model with added connections, resources or activities. These may be specific donors, but in general they are people or organizations needed to acquire and/or create value for beneficiaries.
Cost Structure ? Program costs essential to creating value for beneficiaries.

The two sides of the Nonprofit Business Model Canvas are not mutually exclusive. Resources on the donor side may have to be shared with the beneficiary side and vice versa. They form under one organization, but they have two different focuses: value for revenue and value for impact.

To use the Nonprofit Model Canvas, first download a copy from off the Innovative Nonprofit Magazine website (InnovativeNonprofit.com) and print off a poster sized copy. The first rule of the Canvas is to never make things permanent i.e. don?t write on it. Instead, write your elements on sticky notes and place them on the Canvas. If you cannot afford to print one off, draw one out on a poster board or use a whiteboard (you can write on that one). Make sure to take a picture of each version you make. This will be a journal of your progress as you adjust to the needs of your donors and beneficiaries and as you test your hypothesized model elements.

Each sticky note is either going to be based on a fact or an assumption. If it is not known for sure, then it is an assumption. To help identify these apart from one another, you might add a star to indicate that there is an assumption there that needs to be proved. One goal should be to eventually end up with the least amount of assumptions on your Canvas as possible. But the main goal of your efforts after completing the Canvas should be to prove the model itself.

If the model cannot be proved correct, then it?s possible that either one or more of your assumptions were incorrect, the model was not executed correctly, or you have broken elements to your business model. In any case, regularly recurring retrospection should occur i.e. you should meet back up to discuss the efficacy of the model on a regular basis. By doing so, you can ensure that the you are adapting to the current needs of both your donor and beneficiaries, and you are examining any external influences that may have an impact on your model e.g. rising costs, newly available distribution channels, changes to the demographics of donor segments, etc.

For more information on how to conduct a Nonprofit Business Model Canvas strategic meeting, download the facilitator?s guide. We are eager to hear feedback and stories about your use of the Nonprofit Business Model Canvas. Please comment below or email me.

Poster Size (30?20 in. and 36?25 in.):
Beneficiary Model
Donor Model

Economical Poster Size (9 page print out):
Beneficiary Model
Donor Model

Economical Small Poster Size (6 page print out):
Beneficiary Model
Donor Model

Source: http://www.innovativenonprofit.com/2012/08/the-nonprofit-business-model-canvas-2/

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