NGO Startup Analysis with Nonprofit Business Model Canvas

 

By Omodiaogbe Samuel

Last Updated: December 6, 2023

Introduction

A Non-Governmental Organization (NGO) is a not-for-profit organization that is independent from state or international government. A Nonprofit Business Model Canvas is the blueprint for how an NGO creates and delivers value for both its beneficiaries and donors. It is a useful communication tool to concretely and clearly demonstrate the organization’s strategy so that everyone on the team can understand their role in creating and delivering value. As an NGO, think of the Nonprofit Business Model Canvas as the first step in making a proposal for funding. Each section represents the types of questions you should be asking yourself, after conducting research on each on the building blocks. The process helps you take the idea from your head and put it on paper, ultimately helping your team answer the questions they need to answer in order to make a decision, allocate resources, or submit a funding/grant proposal.  Because the canvas makes it easy for you to share ideas and solicit feedback, it therefore can be used to quickly communicate both current and potential strategies during strategic planning sessions.

The Conceptual Framework

The main difference between modelling non-profit and a for-profit is that the former reinvests all its profit towards impact. However, nonprofits are business enterprises as well, built on the underlying business principles which determines if the organization is going to succeed or not. In fact, the Nonprofit Business Model Canvas is derived from the popular Business Model Canvas. However, there are some modifications made in order to make it fit into the NGO context. Most of the ‘left-hand side’ of the model is much the same in a for-profit and not-for-profit context, but the ‘right-hand side’ is often where the major different is found. In a not-for-profit context, terms such as ‘Revenue Streams’, ‘Customer Segments’ or even ‘Value Proposition’ may make little apparent sense. So, for a non-profit, that’s the first thing we need to fix by modifying the canvas to fit into the nonprofit context. Therefore, the following changes are made:

  • Value Proposition to Social Value Proposition:
  • Customer Segments to Co-Creator 
  • Customer Relationships to Relations 
  • Revenue Streams to Outcome Streams

Essentially, the idea of the canvas is to create 1-page business modelling that helps you capture your idea in less than 60 minutes instead of about 20 weeks of developing a business plan. At this stage, you’re not looking to create a complete project proposal. You’re taking the idea you have and developing it enough so that you and your team can be of the same page of having a good sense of what you’re proposing. The goal is to sketch or snapshot the baseline of your current thinking. Perfection is not the goal. While the approach is quick, it is still rigorous as you’ll still need to think it through. Essentially, in non-profits there is a distinction between who value is created for and how it is funded. Therefore, the nonprofit business model canvas clearly highlights the connection between these two distinct groups in one model. Therefore, an NGO that demonstrably serve their beneficiaries in a clear and effective way have an easier time in fundraising.

                        Characteristics that make Nonprofit to be unique

Running a nonprofit is generally more complicated than running a comparable size for-profit business. Challenges unique to the nonprofit sector could include mission creep, mission drift, misaligned social value proposition, unfocused resources, lack of overall strategy, underfunded, etc. Essentially, the nonprofit is characterized by the following factors:

  • For the nonprofit, the “customers” may be the clients or the beneficiaries that receive services. You also have to consider the fact that you have a social value proposition in which donors expect a “social return.”
  • Diverse stakeholders: Volunteers, beneficiaries, investors, philanthropists – all of which can be further segmented.
  • Dynamic stakeholders’ relationships. For example, a donor might not just be a donor, but also be a beneficiary of services.
  • Diverse outcomes: You also need volunteers, membership sign-ups, behavior change, mission-related outcomes etc.
  • Double Social Value Propositions: one for beneficiaries, one for donors. You need to create social value for both sides
  • Dynamic: Emerging trends could prompt nonprofits to revisit their canvas blueprint more often than usual: marketplace trends, cross-sector collaborations, political developments, , etc.

Components of the Nonprofit Business Model Canvas

The nine building blocks of the Nonprofit Business Model Canvas are:

  • Co-Creator
  • Social Value Proposition
  • Relations
  • Channels
  • Outcome Streams
  • Key Resources
  • Key Activities
  • Key Partners
  • Cost Structure

Co-Creator

The concept is about partnership in value creation. By partnering with beneficiary, donors, and other stakeholder in the value creation process, the nonprofit organization tends to make more impact. Specifically, there are four building blocks of co-creation:

  • Dialogue: Dialogue at every stage of the value chain encourages not just knowledge sharing, but even more importantly, understanding between NGO and its stakeholders
  • Access: By focusing on access to value at multiple points of exchange, the nonprofit can broaden its view of the opportunities to creating deeper experiences
  • Risk Reduction: if beneficiaries become co-creators of value with the NGO, they will demand more information about potential risks of their offerings
  • Transparency: Transparency of information is required to create the trust between the NGO, and the beneficiaries or donors

Key questions to ask:

  • For whom are we creating value?
  • What problems or challenges are we trying to solve?
  • What programs and services do we deliver?
  • Who are our stakeholders?
  • What value do we deliver to co-creators?
  • How do we incorporate feedbacks of the co-creators?
  • What relationship do we establish and maintain with them?
  • How do we continue to engage the co-creators and donors?

Social Value Propositions

A social value proposition is a way of expressing the benefit that your service offering has to your target audience. It answers the hidden questions that every potential beneficiary is subconsciously asking when learning about your services: “So what?” and “What’s in it for me?”. But the social value-proposition concept goes beyond providing value to the beneficiaries, it’s more about how it contributes to the aims of the nonprofit organization. Therefore, it’s about how it delivers value to the entire shared-enterprise, which could include those with whom it does not have direct transactions. For a non-profit, reputation and trust are the keys here – particularly in relation to non-clients or, especially, anti-clients, who will hold the organization to account on those values

Key questions to ask:

  • What problems or challenges are we trying to solve?
  • What value do we deliver to our beneficiaries?
  • What value do will we deliver to co-creators?
  • What value do we deliver to stakeholders?
  • What value do we deliver to non-clients and anti-clients?
  • What are our differential factors?

Channels

The medium through which a nonprofit provides its social value proposition to its beneficiary is known as a channel. Channels are beneficiary touch points that play an important role in their experience. Apart from the beneficiaries, we also need to think of the channels to reach and engage with the co-creators. Traditionally, this component would be made up of physical channels only. However, presently, you can have both physical and digital―internet or mobile channels. Also, the NGO can reach its beneficiaries either through its own channels or partner channels. The important thing is to make sure your channels provide you with enough visibility to reach the beneficiaries, donors and other stakeholders

Key questions to ask:

  • How do we gain access to our beneficiaries?
  • How do we reach stakeholders?
  • How do we reach co-creators?
  • Are their preferences changing with regards to channels?
  • How do we provide ongoing communications, support, and awareness?
  • How do they want to be reached regarding the delivery of our Social Value Proposition?
  • Which channel is most cost-efficient?

Relations

There’s a collection of relationships that are usually implied or glossed-over in a commercial business-model, but are often extremely important in non-profit. The relationships with donors and beneficiaries stand out. Donors put value into the service, and they also help to provide credibility in attracting partners and other stakeholder. On the other hand, beneficiaries are a bit like customers, they retrieve value from the backchannel, rather than putting it in, as customer-roles do. For a non-profit, investor could include donors, volunteers, fund-raisers and all those that contributes to its success. On the other hand, a beneficiary is anyone who retrieves some form of value from the organization. Therefore, there is need to strike a relationship with these key stakeholders. Also, relationships with non-clients and anti-clients are imperative in determining the success of the organization

Key Questions to ask:

  • What kind of relationships do co-creators want from us?
  • What bonds do we establish and maintain with them?
  • Which relations have we established?
  • How are they integrated with the rest of our business model?
  • What is our relationship with the donors?
  • What is our relationship with other stakeholders?
  • What is our relationship with non-clients and anti-clients?

Outcome Streams
Non-profit organizations like an NGO ought to be built on sustainable model that need to have clarity around the concepts of income generation and continues cash flow. However, focusing on the financial measures alone is just one part. We also need to take a look at the nonfinancial measures.

  • Financial generation includes sources such as donations, grants, sales proceeds, revenue, membership sign-ups, transactions, etc.
  • Non-financial outcome includes behavior change, social impact, mission-related milestones and outcomes, etc.

Both the financial and the nonfinancial outcomes should be given equal priority

Key questions to ask:

  • What does it really cost to run our operations?
  • What costs are inherent in our business model?
    What value is the co-creator truly willing to return or contribute?
  • What routines and processes do they prefer?
  • How do we fund our operations?
  • What non-financial outcomes do we expect?
  • What is our mission related milestones?
  • How do we sustain the operations of the organization?

Key Resources

Key Resources describes the most important assets required to make a business model work. These can be things like your office, hosting requirements, human resources, financial, equipment, transportation, electricity etc. These resources should be mapped to the key activities. They are considered as an asset, which are needed in order to sustain and support the organization. The component must include every resource without which the organization would not succeed. Make sure to split them into the most important ones, how and where you will get them. However, key resources can be owned or leased by the organization or acquired from key partners

Key questions to ask:

  • Which Key Resources do our Social Value Propositions require?
  • What other key resources are needed at the engagement level?
  • How scarce are these resources?
  • How easy or difficult to replicate are they?
  • Are these resources easier to access for us than for others?
  • Do you have preferential access/rights on them e.g., patent, contracts, or rights?

Key Activities

Key Activities are the most important activities the NGO need to be engaged in to deliver on the social value proposition. These are the most important things that you must handle to make your business model efficient. They are mandatory activities that you need to carry out as they determine if the organization will succeed or not

Key questions to ask:

  • Which key activities do our social value propositions require?
  • What activities are needed to sustain our operations?
  • How do we deliver value to our beneficiaries?
  • What’s the value delivery process?
  • What are the services you provide?

Key Partners

Key partners are the external organization that you need to have relationship with to perform your key activities and deliver on the social value to the beneficiaries. In order to optimize operations and reduce risks of a business model, NGOs usually cultivate strategic relationships so they can focus on their core activity. Essentially, key partners also should be mapped to key activities. For an NGOs, such partnership could include advocacy alliance, cause marketing alliance, strategic alliance, coopetition, buyer-supplier relationship, etc.

Key questions to ask:

  • Who are our key partners?
  • Which key activities do your partners perform?
  • Which key resources are we acquiring from partners?
  • Which key activities do partners perform?
  • How is the partnership funded?
  • Which key activities do partners perform on your behalf?
  • How can you leverage these partners relationships to deliver more value to your beneficiaries?

Cost Structure

The cost structure consists of the amount of money you need to keep the organization alive. There are several factors to consider here including fixed and variable costs. You have to make sure that you factor in all the costs. You may split them into the most essential ones and the most expensive ones. You may also want to consider the cost of the key partnerships and other important activities. Cost includes: operational expenditure, capital expenditure, overhead, administrative, labor, utility, transportation, etc.

Key questions to ask:

  • What does it really cost to run the nonprofit operations?
  • What costs are inherent in our business model?
  • Which key resources and activities are the most expensive?
  • What does it cost to run and maintain the operations?
  • What are the most important cost drivers in the business model?
  • Which key resources and activities are most expensive?

Application

For us to practically demonstrate how to use the Nonprofit Business Model Canvas to conduct analysis and make strategic decisions, we will now apply the model to an NGO startup as a case study

Case Study

Cheerful Heart Foundation

Cheerful Heart Foundation is a Non-Governmental Organization (NGO) that was establish to cater for the need of children of mentally challenged mothers in Nigeria. The primary focus of the organization is to give meaningful lives to the children by ensuring their nutritional and educational needs are provided just like every other privileged child in the society. The cause of the problem according to our research is as a result of men taking advantage of the mentally challenged women, and in the process put them in family way. Such women don’t have the mental or financial capacity to cater for the children. Therefore, they roam around the street with their mother―without shelter, good nutrition, nor education. Because their mothers cannot fend for them, they rely on goodwill of passerby for tips. Some of the children end up as victims of trafficking, child slavery, and sexual molestation. The sad news is that no meaningful measure has been taken by the government to cater for such children, as they’re left to their fate.

This is where Cheerful Heart Foundation comes in. We’re NGO whose mission is to give meaningful life to children of mentally challenge mother living on the streets. We’re determined to give hope to such children by providing them the basic human needs. We believe that the children are not responsible for the circumstances of their birth, and therefore should not be made to suffer for the crime of the men that took advantage of their mothers. As a result, they deserve decent accommodation, good nutrition, quality healthcare, and excellent education. It’s our believe that if the children are given proper means of live and livelihood, that they would turn out to be better citizens in the society. For the mothers whose conditions can be salvaged, we will provide them the best healthcare, while taking on the responsivity of giving hope to the child. But for those that their condition cannot be salvaged, the children will have to be separated from the mother for proper caring

For us to know what is required to setup and run the NGO effectively, we’ve decided to use the Nonprofit Business Model Canvas to conduct the analysis of the organization. The Nonprofit Business Model Canvas is a quick, easy, but comprehensive way to capture the startup idea. It is a visual representation of the 9 key building blocks that form the strategic components of the model. The canvas serves as a blueprint that will help us to design, and operationalize our idea in a more systematic approach. Specifically Cheerful Heart Foundation decides to deploy the canvas to enable us determine the feasibility of the business model. And also, to analyze how the various components fit together with the goal of actualizing our mission of giving quality lives to our beneficiary in a sustainable way. 

                  Nonprofit Business Model Canvas of Cheerful Heart Foundation

                                 Analysis of the Application

Co-creator: On the co-creator, we have three categories, such as beneficiaries, investors and donors, and volunteers and collaborators. Each of the categories was further divided into subcategories. Such breakdown makes us to address the specific needs of the co-creator.

Social Value Proposition: These are the value we create for the beneficiaries that makes us district in the market. And they all centers on our mission of giving hope to the mentally challenged mothers. Therefore, the social value proposition of Cheerful Heart Foundation revolves around hope giving

Channels: The channel we need to use is a combination of both traditional and digital. Relying only on the bricks and mortar model would not give us the awareness we desire. Therefore, digital channel will give us fast publicity that would make people of goodwill to support us by helping to identify where the potential beneficiaries are located in the communities

Relations: This has to do with network of relations we need to foster in order to deliver on our value proposition. Such relations include those with the investors, communities, government agencies, and other key stakeholders

Outcome Streams: These are financial and nonfinancial outcome streams. On the financial, we’re looking at corporate, individual and international donations, grants, and sponsorship. While on the nonfinancial part, the focus is on the impact we want to make on giving meaningful life to our beneficiary, as well as addressing a social problem

Key Resources: These are the resources we need to have in place for us to have effective operations. These are resources we need to acquire, as well as resources we need access through strategic partnership

Key activities: For to be in business we need to engage in some activities such as caring for the children and mothers, partnering with schools, and engaging with donors, volunteers, or other key stakeholders.

Key Partners: Certainly, we cannot do it alone. We need to partner with other NGOs, relevant government agencies, corporate organizations, communities, volunteers, and categories of co-creators. These are the partnerships we need to engage in if we must create the maximum value we desired.

Cost structure: We need to incur fixed and variable costs if we must have smooth operations. Such costs include the cost of labor, rent, electricity, equipment, transportation, capex, and partnership costs

Indeed, the canvas serves as a blueprint to help Cheerful Heart Foundation to design, and operationalize its idea in a more systematic approach. The canvas helps the organization and the team to answer pertinent questions relating to strategic decision-making, allocation of resources, or developing proposal for grants. It also makes it easy for the organization to share ideas and solicit feedback, as it tests the model in the market. Remember, the model is not static but dynamic. Therefore, it’s a quick communication and iterative strategic planning tool until we arrive at a viable and sustainable model. Essentially, the nonprofit business model gives Cheerful Heart Foundation a simple a comprehensive approach to create and deliver value for our beneficiaries and other stakeholders

Benefits of the Nonprofit Business Model Canvas

  • Easy to understand: Because the canvas is just on a single page and visual, therefore it’s very easy to understand.
  • Focused: Each of the nine building blocks is focused on addressing specific aspect of the analysis with the aim of achieving the overreaching goal
  • Flexible: It’s quick and easy to make changes to the model and sketch out different ideas in response to feedback from the market until you reach a proof of concept
  • Holistic approach: the canvas forces you to think about not only the value you create for the beneficiary, but also the stakeholders including the donors, investors, volunteers, and other critical stakeholder
  • Connections: The single page graphical nature of the canvas shows how the different parts of the model interrelate with each other. This can be really difficult to ascertain from a traditional business plan.
  • Easy to Communicate: Because the canvas is so easy to understand you’ll be able to share and explain it easily with your team, making it easier to get them on board with you
  • Strategic planning tool: Nonprofit Business Model Canvas is a strategic planning tool because it helps you to ascertain if you have a viable business model, and whether you have the right strategy to succeed in the market

                                 Conclusion

By working through the 9 building blocks, you have understood the clarity of how to use the canvas to analyze and create an effective strategy. It is important to note that you may not be able develop your desired nonprofit business model in the first try. The whole point of working with the canvas is that it allows you to manipulate potential business model in the early stages as you continue to iterate until you pivot to what is viable. At that stage, the assumptions you included might be tentative and will change often as you continue the journey. Once you have developed the model, you can only understand it’s robustness and viability when it’s tested in the field. Therefore, you need to adapt and modify it based on the feedback until you reach a proof of concept. This process takes time and iteration, so expect your team to work on your model on a continuous basis until the desired result is attained. Essentially, the more you can demonstrate results from your programs by running small tests on the critical assumptions, the more likely you will be able to secure funding

Omodiaogbe Samuel, MSc. CMC, ChMC, FIMC

Omodiaogbe is a Strategic Management Consultant, and he the Principal Consultant/CEO at Vast Thinking Consults Ltd where he help organizations and business leaders to create superior value. Omodiaogbe holds BSc. and MSc. in Economics. Also, he is a Certified Management Consultant (CMC), a Chartered Management Consultant (ChMC), and a Fellow, Institute of Management Consultants, Nigeria. He is an Instructor on Coursera, where he teaches 25 courses in Strategic Management. Omodiaogbe is one of the world’s leading learners on Coursera and Edx with over 500 Certificates from top-ranked Universities, Business Schools, and Organizations.

Contact him:
Email; somodiaogbe@vastthinking.com.ng
Visit: www.vastthinking.com.ng

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