Do we need a business plan to register a charity?

Not always for the registration itself, but you will need one almost immediately afterwards for funders, and the thinking required to write it is the same thinking the Commission expects trustees to have done. Most organisations find it easier to write once, properly, at the start.

What is the difference between a charity and a CIC business plan?

The financial structure, mainly. A CIC plan usually leans harder on earned income and can show director salaries; a charity plan leans on grants and has to argue public benefit and handle restricted funds. The underlying discipline — evidenced need, honest costs, a funding mix that does not fail together — is identical.

How much detail do grant funders want?

Most application forms are short, and that is exactly why the plan behind them matters. The form asks for a summary; the assessor asks for the plan when the summary is promising. Having it ready is the difference between a two-day turnaround and a missed deadline.

Should the plan include full cost recovery?

Yes. Attributing a fair share of overheads to each service is now expected rather than frowned upon, and a budget without it understates what delivery costs — which the organisation then absorbs out of reserves it cannot spare.

Can SquarePlan write the plan for us?

Yes. Charity and CIC plans are written work rather than software work, because the financial structure — restricted funds, full cost recovery, a reserves policy — does not fit a standard trading forecast. From £499.

By purpose

Charity and CIC Business Plan

A charity or community interest company still has to work as a business, and the plan has to show it. What changes is who is reading: a funder deciding whether a grant will be spent well, a trustee board that is legally accountable for the decision, and in some cases a regulator. This page covers what each of them looks for.

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Written by Clive Unitt FCA, Founder & Chartered Accountant

What a funder or a trustee board is assessing

Grant funders receive far more applications than they can support, and the plan is how they separate organisations that will deliver from organisations that mean well. Four things carry most of the weight.

The need, evidenced rather than asserted. Who specifically is underserved, how many of them, and how you know. Local authority data, published research, waiting lists, or your own service records. "There is a real need in our community" is the most common opening sentence in a declined application.
Whether the money runs out when the grant does. Funders are wary of creating something that collapses the moment they stop paying. A plan that shows a single grant covering everything is a plan with a cliff edge in it. Show the mix, and show what happens in year three.
That the costs are honest, including the invisible ones. Underclaiming overheads is endemic in the sector and it damages the organisation that does it. Management time, insurance, premises, finance and governance are real costs of delivering the service. Most funders now expect to see full cost recovery and are suspicious of a budget that does not include it.
Reserves, and a stated policy on them. Trustees are accountable for the organisation remaining solvent. A reserves policy — how many months of expenditure you hold and why that figure — is expected in the annual report and is increasingly asked for in applications.

What it costs to get started

Setting up costs less than most people expect. The larger figures arrive with premises, staff and insurance once the organisation is delivering.

Cost	Typical range	What drives it
Incorporation or registration	Low hundreds	A CIC is registered at Companies House; a CIO is registered with the Charity Commission.
Business plan and financial projections	From £499	What SquarePlan charges to write the plan and build the forecasts.
Insurance	Varies widely	Public liability, employer's liability once you have staff, and trustee indemnity.
Safeguarding and DBS	Per person	Required wherever the work involves children or adults at risk. Budget for renewals.
Independent examination or audit	Annual	Which one applies depends on income and is set by the Commission's thresholds.

Registration thresholds and fees are set by the regulators and change. Check the Charity Commission and the CIC Regulator before budgeting, and take advice on which structure fits.

The figures trustees and funders check

A charity is judged on different numbers from a trading company. These are the ones that appear in funding applications, in trustee meetings and in the annual report.

Cost per beneficiary: The figure most funders reduce an application to. Total cost of delivery divided by the number of people genuinely reached — not the number the leaflet went out to.
Funding concentration: What share of income comes from your largest funder. High concentration is the most common cause of a charity failing, and a board that has not measured it does not know its own risk.
Free reserves, in months: Unrestricted funds available to spend, expressed as months of running costs. The right number depends on how predictable your income is; having a stated policy matters more than the figure.
Restricted versus unrestricted income: Restricted money can only be spent on what the funder specified. An organisation that manages the two in one pot will eventually spend restricted funds on core costs, which is a serious problem.

Registration and regulation

Which regulator applies depends on the structure you choose, and the structure should follow what the organisation actually does rather than the other way round. Take advice before registering.

Registered charity: In England and Wales, registration with the Charity Commission is required once income passes the threshold, and immediately for a charitable incorporated organisation. Scotland is regulated by OSCR and Northern Ireland by CCNI, with their own rules.
Community interest company: A limited company with a community purpose, registered at Companies House and overseen by the CIC Regulator. It carries an asset lock, files an annual community interest report, and can pay directors — which a charity generally cannot without permission.
Public benefit: A charity must be established for exclusively charitable purposes for the public benefit, and trustees have to report on how they have met it. The plan is where that argument is first made properly.
Trading: Charities can trade in furtherance of their objects. Substantial non-primary-purpose trading usually needs a subsidiary, for tax reasons. If earned income is a significant part of your plan, get this structure right at the start.

The plan is read by people who are personally accountable

A company director who backs a weak plan loses money. A charity trustee who backs a weak plan is personally accountable for the decision, and is doing so unpaid, in their spare time, on the basis of what you have written down. That changes what the document has to do.

It has to be honest about what is uncertain, because a board that discovers the uncertainty later will not trust the next thing you bring them. It has to separate what is funded from what is hoped for. And it has to be readable by an intelligent non-specialist in twenty minutes, because that is the realistic amount of attention a trustee meeting can give it.

Evidence the need, do not assert it

The single most common weakness in a declined funding application is an opening section describing a need that everybody agrees exists, with nothing behind it.

Assessors read dozens of these. What separates the fundable ones is specificity: the number of people affected in your area rather than nationally, the source of that number, the gap between what is currently provided and what is required, and why your organisation is positioned to close it. If you already deliver something, your own service data is the strongest evidence available to you, and it is almost always under-used.

Cost it properly, including the parts nobody sees

There is a habit in the sector of shaving the budget to look efficient. It backfires twice: the service is delivered at a loss and the reserves absorb it, and experienced funders read an unrealistically low overhead figure as inexperience rather than thrift.

Full cost recovery means each service carries its fair share of the things that make delivery possible — management, finance, governance, insurance, premises, IT. Most major funders now expect to see it, and several explicitly ask for the methodology. Getting this right in the plan means every subsequent application starts from a defensible number.

Show what happens in year three

Grants end. The question a funder is really asking is whether they are starting something that survives them, and the plan answers it or it does not.

That does not require certainty. It requires a stated intention: which income streams grow, what the organisation stops doing if a renewal fails, and what the reserves are for. A plan that shows one grant covering everything for three years and nothing afterwards is a plan with a cliff edge, and assessors have seen enough of them to spot one immediately.

Where the money comes from

The strongest plans show three or four income streams that do not fail together.

Grants: Trusts, foundations, lottery and local authority. Name the funders you are approaching, the amounts, and when each decision is expected — a cash flow built on unconfirmed grants needs to show what happens if one does not land.
Contracts and commissioning: Larger and more stable than grants, and considerably more demanding on reporting and unit costing. Price these properly: a contract delivered below cost subsidises a public body out of your reserves.
Earned income: Training, room hire, retail, consultancy. The most under-used route to unrestricted funds, and unrestricted is what keeps the lights on.
Donations and fundraising: Regular giving, community fundraising, Gift Aid. Slow to build and the most resilient once it exists — worth starting before you need it.

Frequently asked questions

Do we need a business plan to register a charity?: Not always for the registration itself, but you will need one almost immediately afterwards for funders, and the thinking required to write it is the same thinking the Commission expects trustees to have done. Most organisations find it easier to write once, properly, at the start.
What is the difference between a charity and a CIC business plan?: The financial structure, mainly. A CIC plan usually leans harder on earned income and can show director salaries; a charity plan leans on grants and has to argue public benefit and handle restricted funds. The underlying discipline — evidenced need, honest costs, a funding mix that does not fail together — is identical.
How much detail do grant funders want?: Most application forms are short, and that is exactly why the plan behind them matters. The form asks for a summary; the assessor asks for the plan when the summary is promising. Having it ready is the difference between a two-day turnaround and a missed deadline.
Should the plan include full cost recovery?: Yes. Attributing a fair share of overheads to each service is now expected rather than frowned upon, and a budget without it understates what delivery costs — which the organisation then absorbs out of reserves it cannot spare.
Can SquarePlan write the plan for us?: Yes. Charity and CIC plans are written work rather than software work, because the financial structure — restricted funds, full cost recovery, a reserves policy — does not fit a standard trading forecast. From £499.

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Clive Unitt FCA

Founder & Chartered Accountant (FCA)

Clive is a Fellow of the Institute of Chartered Accountants in England and Wales and the founder of SquarePlan. He has spent over thirty years working with businesses from sole traders to multinational public companies.

He writes here about business planning, financial projections and the UK tax and funding questions that come with starting out.

More about Clive → ICAEW member record Companies House LinkedIn

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