The world of nonprofit organizations is interesting and exciting as they serve a noble cause and make the world a better place. But just like any other entity with a team, projects, and goals, organizations do also have their structures, hierarchies, mission, and vision. The purpose of a business model canvas is to align all it and give a well-defined structure to what the organization does and who it serves. In this guide, we will understand what a business model canvas for nonprofits is and how to make the most out of it.

What Is a Business Model Canvas

The business model canvas is a strategic management tool that can help you think about how your non-profit organization might better meet the needs of your target beneficiaries. It allows organizations to gain greater clarity on their current situation and plans, helping them work towards becoming sustainable entities that have the potential for growth.

This tool also has a great value in helping organizations understand how they differ from other organizations in their niche. This way they can identify gaps in their model and explore ways of filling them, which will help shape their long-term plan for success.

The canvas focuses on nine key areas:

• Key partners: Who are our most important partners and suppliers? Which partner provides which crucial resources? What are the major actions carried out by partners?
• Key activities: What critical tasks are required to support our value proposition, channels, customer connections, and income streams?
• The value proposition: What do we offer our clients? What issue are we attempting to resolve? What do we offer each consumer segment?
• Customer relationships: What kind of relationship does each customer segment desire? How expensive are the relationships? How can we include them in our company plan?
• Customer segments: Who are our clients? Who are we providing value for?
• Key resources: What critical resources are required for our value offering, channels, customer relationships, and income streams?
• Channels: How will we reach our target markets? Which are the most efficient channels?
• Cost structure: What are our primary costs in our company model? What are the most costly key activities and key resources?
• Revenue streams: How much are customers ready to pay? What are they now paying for and how are they paying for it? What percentage of total income is contributed by each income stream?

3 Types Of Business Model Canvases

If you google a business model canvas, you will most probably see a lot of articles and images portraying the same nine-area structure. However, the claim that there is only one type of business model canvas is not completely true. There are many variations and interpretations of this tool. Here, let us list the three most common and well-known ones and understand their differences.

The Osterwalder And Pigneur Variant

Also known as just business model canvas, as this is the type you will see most often. This is the one with the already-mentioned 9 key focus areas we covered above. Alexander Osterwalder, a well-known Swiss business theorist, and author published the first version of this variant in his blog back in 2005.

The Staehler Variant

A lesser-known type of business model canvas, this one was the PhD work of Patrick Staehler. Unlike the other two, it emphasizes the importance of team and values, with a section dedicated to these two. Two important questions one needs to answer when filling in this canvas are:

• Who is on our team?
• What are the competencies of our teammates?

The Lean Canvas

Inspired by the philosophy of lean business, Ash Maurya created the Lean Canvas in 2010. It is optimized to be fast and simple. Although the Lean Canvas has 8 sections, on average, it will take you less than 20 minutes to answer the questions in it and have a working business model in your hands.

The Lean Canvas focuses on customer problems and your solutions for them. It has an unusual section – unfair advantage, where you describe something you have that is hard to copy by others, even if they spend a lot of money. An unfair advantage can be your algorithm, a well-recognized brand, your location, unique knowledge in your team, a large user base, etc.

Which Type Suits Nonprofits The Most

If we speak generally, any type of business model canvas can suit nonprofit organizations. For a non profit business model canvas, sometimes you would need a couple of tweaks in the canvas structure to make it match the nonprofits’ reality of operating without a profit and focusing on making impact instead. Before we discuss which type of canvas suits nonprofits the best, let us answer two important questions that can arise in the minds of any organization leader if they were to use this tool.

Why Have a Non Profit Business Model Canvas?

Just like any project or program, a nonprofit’s idea starts with making initial assumptions. When brainstorming around a project idea, a lot of these assumptions will accumulate in your mind or on your desk as sticky notes in an unorganized manner. What business model canvas does best is to organize these ideas, assumptions and preliminary decisions in a framework where you can evaluate and validate them. Sometimes organizations will create several versions of the canvas, share them with potential donors and beneficiaries, gather feedback and invalidate these versions one-by-one until the best one remains.

This method drastically shortens the time you need to come up with a viable project idea while making sure that only the best of your assumptions and ideas remain in the final model.

Usually getting funding from governmental agencies or foundations involves going through a complicated and tiresome proposal writing and application process. So if your idea and model is weak, you have to go through this again and again. Here we can see another benefit of using a non profit business model canvas. By grouping your ideas and running tests on your assumptions early on, you reach the point of applying for funding with a well-validated model that is much more likely to succeed.

Another area where business model canvas makes a tangible impact is the avoidance of mission creep. Sometimes organizations will expand their mission and operations beyond what they were originally planning. This leads to contributing less to the original mission, failing to reach initial goals and facing an efficiency issue. Non profit business model canvas allows everyone to stay aligned on their mission and plan their activities in accordance with it.

How Is The Business Model Canvas For Nonprofits Different From Others?

Although it might seem like there is a significant difference between the business models of corporations and nonprofits, the overall logic is the same. Corporations have sales and revenue for incoming funds. Nonprofits have their donors that essentially serve the same role. Corporations pay dividends to stakeholders, while organizations spend funds on their beneficiaries. In both cases the funds exit the entity.

Thus, the difference between for-profit and nonprofit business models essentially drills down to how exactly funds enter and exit.

Why Is The Lean Canvas a Good Fit For Nonprofits?

When looking at the philosophy of Lean and understanding the lean canvas, you might think that it is something for tech startups and for-profit companies. However, the lean canvas does not explicitly position itself that way. Both the philosophy and the canvas itself are generic and can apply to any type of activity and entity, including nonprofit organizations.

To prove our point, let’s check some characteristics of lean canvas and see how nonprofits can benefit from it.

Lean Canvas Focuses On Problems

With this model, organizations create a clear definition of what the existing problems are in their area of operations. With a well-defined problem, they are more likely to get donor support and it is much easier for them to focus their resources on what matters.

Lean Canvas Offers Actionable Solutions

We have the solutions and key metrics on the canvas. Both of them were designed with the “actionable” concept in mind. How the organization is going to solve the problems is clearly defined, and the organization knows exactly what to do to resolve them. The metrics help them to properly monitor their performance and make adjustments to their activities when necessary.

Lean Canvas Shows the Connection Between Funding and Goals

Nonprofits operate in two areas – getting funding and spending these funds to create value for their beneficiaries. With the lean canvas, the flow of funds and resources from donor to beneficiaries is well highlighted.

How Nonprofits Can Use And Craft Business Model Canvas

Creating a business model canvas, in fact, is much simpler than one might think. Let’s take the example of the lean canvas and follow the steps necessary to craft it.

1. Defining Beneficiaries
   The eventual purpose of your organization is to make the world a better place for your beneficiaries. So your first step would be to clearly define who they are.
2. Understand The Problems
   What is the area where your beneficiaries need your help? By understanding the problems, you will also understand how to solve them.
3. Find The Solutions
   You know who will benefit from your activities. You also know what their problems are. Your next step is to have actionable solutions to these problems.
4. Defining Donors
   Your next step would be to understand who the organizations, government agencies, or individuals are that are ready to contribute funds.
5. Decide On The Metrics
   Did you do your job well? The best way to find it out is by clearly defining your key metrics.

To Conclude

Business model canvas has proven to make a significant impact on any company or organization that has taken advantage of it. It is still relatively uncommon for nonprofits, but the benefits are so tangible that including it into your management toolset is definitely worth the time and effort.