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…