Editor’s Note: This is the second of a 7-part series on Developing A Growth Business Plan. The series is based on presentations made at the Social Impact Exchange Symposium on Scaling Impact held June 14 and on the experiences of nonprofits that participated in the business plan competition. Industry and Market Analysis was presented by Summer Spencer, director of Community Wealth Ventures.

“Know your consumer,” “Assess the competition,” and “Anaylze the marketplace” don’t sound like mantras from the nonprofit sector. But they should be.

Nonprofits aiming to scale, and the funders who support them, are realizing that industry and market analysis and using business principles lay a solid groundwork for scaling.

A more nonprofit-friendly term for “industry and market analysis” is Environmental Scan. Summer Spencer, director of Community Wealth Ventures, makes a strong case that such a scan is an essential tool for nonprofits preparing to scale.

An Environmental Scan requires a deep dive into the nature of the social problem you want to address:

• roots of the social problem;
• size or extent of the social problem;
• impact on consumers within the environment;
• current status of the social problem;
• who/what is impacted by the social problem.

And don’t forget to look at other factors that influence your ability to succeed, such as government regulations, available funding, what others have been done that worked well, and best practices.

Like a business, a nonprofit operates in a market, one in which consumers/clients:

• have wants and needs;
• are distinguisted by demographics, geography, and culture;
• can be targeted by what they will accept in a product, its delivery and its price.

Like a business, nonprofits face competition, from other service provides, from other demands on time the time of clients and intermediaries needed to deliver services, from those providing similar services.

An Environmental Scan is, therefore, an assessment of the social need your organization will fill, the competition, and the competitive advantages your organization has.

It will help answer the questions that must be asked in order to develop a theory of change:

• What societal needs are you meeting?
• Who do you work with to make that impact?
• What changes to you want to make with/through those stakeholders?
• How can you make those changes?
• What are the outcomes of your work?

Your theory of change is the pathway your organization will take to achieve its mission: the strategy, the assumptions guiding that strategy, the results you will achieve.

It is how you and your funders know where you are going and how to tell when you get there. Scaling Impact: A Primer For Nonprofits and Getting Ready to Grow. Yes, it is aimed at small businesses but the tools and process apply to nonprofits as well.

Does your nonprofit know what external factors could impact its ability to succeed? 

Read part 1, Another Nonprofit Learns the Value Of A Business Plan