FundClass February 2002
FundClass Archives:
Capital and Endowment Campaigns For Small Groups
Edited Digest of Fund Class Topic #29, February 2002
Facilitated by Kim Klein
Please welcome our facilitator, Kim Klein, who will present the topic "Capital and Endowment Campaigns For Small Groups." We are thrilled to have Kim on board and know you will show your appreciation with active participation in class!
Kim Klein is internationally known as a fundraising trainer and consultant. She is the co-owner of Chardon Press, which publishes and distributes materials that help to build a stronger nonprofit sector. She is the founder and co-publisher of the bimonthly Grassroots Fundraising Journal, and the author of Fundraising for Social Change (now in its fourth edition). Her book is widely used by practitioners and students alike. It is required reading for nonprofit or public interest programs at the University of San Francisco, California State University-Chico, Harvard, Southern Methodist University, Hunter College, University of Baltimore, Tulane University and many more. In addition, she has written, "Fundraising for the Long Haul" (2000), which explores the particular challenges of older grassroots organizations, and "Ask and You Shall Receive A Fundraising Training Program for Religious Organizations or Projects", a teaching manual for lay leadership to teach each other grassroots fundraising. Her most recent book is an anthology of articles form the Grassroots Fundraising Journal called Raise More Money, which she edited with her partner, Stephanie Roth.
In addition to the writing she does for her own publications, she has contributed many articles to the leading books and periodicals in the field of fundraising. She is also a regular columnist for "Shelterforce Magazine" and "The New England Non-Profit Quarterly". Kim Klein also has a popular video series on fundraising, distributed by the Headwaters Fund in Minneapolis.
Kim Klein has worked in all aspects of fundraising; as staff, as a volunteer, as a board member, and as a consultant. She is best known for adapting traditional fundraising techniques-particularly major donor campaigns-to the needs of organizations with small budgets, that are working for social justice. Widely in demand as a speaker, Kim Klein has provided training and consultation in all 50 states and in 16 countries. She was named, "Outstanding Fund Raising Executive of the Year" in 1998, by the Golden Gate Chapter of the National Society of Fund Raising Executives.
She graduated with honors from Beloit College, majoring in Religion and Classics, and did graduate work at the Pacific School of Religion.
Welcome to Kim! Have a wonderful class, everyone.
Opening Statement
Hello, FundClass!
I am very happy to be with you for the next few weeks. I hope everyone has had a good Thanksgiving and is ready to buckle down for those last weeks of intensive fundraising before year-end. Then we have one or two days off before the intensive fundraising of the New Year begins!
In this class, we will explore how small groups can conduct capital campaigns. In this first posting, I will define what a capital campaign is and look at some things groups need to have in place to begin one. In the next posting, I will continue with the list of what must be in place before really beginning a capital campaign. Like most FundClass sessions, this one
will work best if you post questions and comments. I am most interested in any capital campaigns any of you are thinking about and what your questions or concerns are. I have seen very small groups raise very big money, so don't be shy!
Let's start by looking at three different groups and their capital needs.
An advocacy organization with an annual budget of $150,000 pays monthly rent of $600 for a two-room office with a shared bathroom and kitchen. Their landlord tells them that at the end of their lease their rent will increase to $1,000. As a result, the group is considering whether to buy a small house that could be converted to office space.
A modern dance company with a yearly budget of $300,000 rents a loft for $1,500 a month. The company managing their building tells them the building has been bought and they have two months to move. Desperately searching for space, they are invited to join other arts organizations in buying a large building. With so little time, they don't know whether to move to a temporary space and continue to look for a rental or take the plunge and help buy a big building now.
A developer wanting to build a mini-mart and parking lot on the property has approached an elderly owner of ten acres of forestland on the outskirts of a small town. A local land trust wants to convert the property to a park. The owner would sell to the land trust for less than the developer is willing to pay, but still the price tag is far more than the land trust can afford.
All three of these organizations find that thinking about owning property is both exciting and terrifying. They have no idea where to begin their planning process and how to figure out what is realistic for them.
For grassroots groups like these who have their hands full making ends meet from year to year (or even month to month), a capital campaign can seem daunting at best and impossible at worst.
Putting the Campaign in Context
First, let's remind ourselves of the fundraising context for a capital campaign by reviewing what organizations need financially and what donors can provide.
Organizations have three types of financial needs:
- Annual Funding: The money they need every year. For most grassroots groups, raising this money consumes all their fundraising time.
- Capital Funding: From time to time, groups need something that they don't need every year. Items such as computers, a new phone system, or furniture, or maintenance, such as rewiring or installing carpeting, are capital improvements. For these, additional money needs to be raised beyond a group's annual budget. For small capital needs, a group may just add the items to its annual budget and raise the money with an extra appeal, or submit a proposal to a foundation or an appeal to a generous major donor. When the capital improvement involves buying, retrofitting, or renovating a building, the group usually needs to conduct some kind of campaign to raise the money from a number of sources.
- Endowment Funding: Organizations that think they will be needed forever, or at least as far into the future as they can project, will want to invest some of their money and use only the interest from the investment as part of their annual income. The principal that is set aside to be invested is usually referred to as an endowment.
- Gifts of Income: The majority of people earn money every year from a job, investments, a pension, or some combination of these. About seven out of every ten people give some of their earned income away. These gifts generally provide for the annual needs of the organizations they donate to. In other words, some of my income as a donor becomes some of your income as an organization.
- Gifts of Assets: In addition to their income, many people have saved or inherited assets that are in various forms of savings or investments-stock, property, bonds, art, insurance policies, and so on. A donor can also give these assets to an organization, which generally uses them for capital. In other words, I give some of my savings, or my capital, to increase the capital of an organization.
- Gifts from Estate: Everyone eventually dies, but they control what they own even in death through the terms of their will. Through their will, a trust, or other estate planning mechanism, a donor can arrange for nonprofit organizations to receive some or all of their estate. These gifts are most often used for endowment. In other words, the last set of gifts I will give, which form my legacy, are used for the group to exist long after I am gone.
Unless restricted by the donor, organizations can, of course, use gifts of assets and estate for their annual needs. In the case of very small gifts, or when donors regularly give stock as their annual gift, this may be appropriate. But for the most part, using assets and estate gifts for annual purposes is unwise because these gifts will not recur.
Similarly, but probably less obvious, using gifts made from a donor's income for capital or endowment purposes are also ill advised. First, you don't want to raid your annual income for funds to pay for capital costs (which many groups do). Second, any amount that a person can afford to give from income they should be encouraged to give every year and not just for a one-time event such as a capital or endowment campaign. I hope that it goes without saying, (but I will say it anyway, just in case) that if a person wishes to give a gift from their income to a capital or endowment effort, a group should not turn that gift away but accept it and thank the donor appropriately. When contemplating a capital campaign many groups will say, "Our donors don't earn that kind of money." However, the donors' earnings are less important than their savings. I have seen groups mount successful capital campaigns with lead gifts from older donors living on fixed incomes who have some highly appreciated stock or a piece of property they are willing to give. Because the donor can deduct the fair-market value of their gift, they avoid the capital gains tax on that part of their savings, enabling them to make a much greater gift than they might have thought they could, and at considerable tax savings.
Keep in mind, then, that in capital campaigns you are not asking donors to make extra gifts from their income; you are asking them to go to a whole new level with your organization-giving assets and often paying their gift as a pledge over a period of several years.
The Capital Campaign Case Statement
Once you decide that you want to embark on a capital campaign, you will need to develop a case statement for the campaign. The capital campaign case statement is a variant of the case statement every organization should have. (If any FundClass members are unclear what a case statement is, let me know.)The case statement justifies the existence of the group and answers the question, Why should this organization exist at all?
The case statement for a capital campaign justifies the need of the organization for whatever will be bought or built with its capital campaign funds. The capital campaign case statement says, "To do our work properly, we must have this."
The capital campaign case statement will use much of the language that is in the organizational case statement, but the goals and objectives will be specific to the capital campaign. They will describe why having the building is imperative or why the renovations will make the group able to fulfill its mission better. The capital campaign case statement may also describe how savings generated by the work of the capital campaign will be plowed back into program.
If your capital campaign is to create an endowment, the case statement must justify the need for the group to exist in perpetuity. It takes little commitment or even knowledge of a group to donate $25 to it; it takes a little more to donate $100 and quite a bit more to donate $1,000. Capital and endowment gifts usually begin at $10,000 and can go into the millions. The more that is at stake for the donor, the clearer the group needs to be about why the need is so critical and what it is going to do with the money.
The Capital Campaign Budget
Probably the trickiest part of the case statement is the budget, which will be the basis of the fundraising goal of the campaign. This is because there are a lot of variables, and some of them are hard to estimate ahead of time. Let's look at all the components that go into a capital campaign budget:*Cost of a building, renovation, property, or whatever is the actual capital expense.
*Cost of furnishings, including new computers, new phone systems, and wiring for these.
*If you are moving, include transition costs such as movers and staff time spent setting up the new space. If you are renovating, you may need to move out of your office for a period of time, which may mean including the costs of renting a temporary office.
*Cost of the capital campaign itself (staff, equipment, events, recognition items for donors such as plaques or certificates, etc.) Generally, for campaigns seeking less than $1 million, budget 15% of the goal for this item; for campaigns of $1 million to $3 million, budget 10% of the goal; if you are trying to raise more than $3 million, add 7%-10% of the goal.
*Maintenance Fund: Add some money to the campaign for big repairs and updating equipment. This fund is not for general operating costs of the building. This money should be invested like an endowment. You want to have enough in this fund that you can pay for most repairs with the interest generated by the fund, or at least so that you will not deplete the whole amount with one large repair.
*Debt service on bridge loans. Money pledged during a capital campaign comes in over a period of time and usually accrues more slowly than the expenses associated with the capital project. As a result, groups often have to borrow against the unpaid value of the pledges. Banks recognize pledges as collateral and will loan money against a certain percentage of their value. Debt service is the interest on these loans. This amount can vary widely and may be hard to determine in the very beginning of your campaign. Remember that you can change your budget if necessary, but it is much better to lower it than to have to raise it. Of course, you will not have this item if you choose to wait for all the pledges to be paid before you start spending any money. Also, a generous donor may loan you the money you need at no interest, but don't plan on that unless you know for sure it will happen.
*Cost overruns: Building projects inevitably run over their estimated costs. A contractor may be able to suggest a percentage of the total to add to your budget to cover such overruns. Also, ask other groups and individuals what
their experience has been on this point.
*Discount: Not all pledges made will be paid. Sometimes stocks aren't worth as much by the time they're sold as when they were transferred; some donors cannot pay their pledges despite their good intentions; and once in a while a donor simply does not pay. Most groups build in 13% for loss of pledge income. This is a conservative estimate, which means you would almost never lose more than this amount.
When you add up all these costs, you will see that the total can be twice as much as the building itself.
Beyond these hard costs, you should factor in loss in annual income. A good capital campaign will not cause a decrease in annual income, but during a capital campaign it is unlikely that annual income will rise significantly. If you normally count on being able to raise 10% more every year from your donors, during the two or three years of your campaign you will probably not be able to do that. So, you will experience a "loss" of the increase in annual income you would normally count on. This means you either won't be able to expand programs during the capital campaign, or you will need to put some money aside for one or two years before beginning the campaign to cover your needs.
The good news about annual fundraising is that a well-run capital campaign will always produce an increase in annual income after the campaign is over. People will be excited about the new facility, many people will have realized that they can afford to give more than they had been giving, and you may well have attracted some donors to the capital campaign who then become annual fund donors.
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Don |
Kim...what an outstanding opening statement! I wish only with two things. First, that I had the benefit of your knowledge and experience before we began our 2.5 million dollar campaign and second, that you were here right now to assist me in completing it. |
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Melanie |
Excuse me, I really don't want to sound like an idiot, but, what's a grassroots group? |
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Jeanne |
Not a dumb question. Having worked a lot in international development, I think it's important for those organizing for a cause at the national or regional or international level to gain real "grass roots" experience -- understanding of how the constituents, or those most affected by decision making, think. "Grass roots" refers to the most local level of political opinion or political behavior or organization to bring about a solution to a perceived problem. A grassroots group is one that is "close to the ground" in relation to a particular issue, indigenous, a stakeholder in a local cause--a collection of people with common interest, usually organized for a purpose. Example: people who want to prevent a shopping center from being built, because it would cause heavy traffic in a neighborhood and change quality of life. Local chapters of Planned Parenthood would be the grass roots for the national membership organization. A village might be the grass roots for political decisions related to building of roads or as those most concerned with effects of industrial water pollution. A non-profit might be (or might not be) a "grass roots" organization. You might want to check out the following web site: Grass-Roots.org (www.grass-roots.org) tells the stories of the most innovative grassroots programs in the United States and the local heroes who've found effective ways to build their communities, fix what's broken and make them better. We hope you'll be inspired, and then we hope you'll decide to roll up your sleeves and get involved in your own community, be it in the U.S. or anywhere on Earth. |
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Vivian |
Thanks, Kim, for a great "opening volley" that was informative but compact and useful. |
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Cyndi |
First, I'm so thrilled that Kim Klein is facilitating this class. Kim, when I lived and worked in the S.F. Bay Area I had the pleasure of attending several of your workshops. I look forward to the tidbits of wisdom I'm sure to gather from this forum. |
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Janie |
I am a relatively inexperienced Education & Outreach Coordinator for a very grassroots environmental group in Northern California. We do community cleanups, a popular educational fair, and support environmental educational programs. We also advocate for the local environment and that makes us controversial, which can make fund-raising difficult sometimes. We know we are going to be needed around here for a LONG time to come. We are contemplating creating an endowment fund, even though we're very small, because there exists a community foundation to help run and advertise it. Nevertheless, I'm a complete tyro in such things, so I am DELIGHTED that Kim is here to teach us about all this. I have so wanted to take a class of yours, but our running money is low - we're also running a major donor campaign to get some predictable monthly income. So....I hope you come to Chico, Redding, or Sacramento sometime soon :). 1) What, if any, are the possible pitfalls of an endowment fund, especially for a small, struggling organization? 2) We don't have a large amount to start it with, but I've been told we can start small if we build it up to a substantial amount rather quickly. What do you think about this? |
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Michael |
I'm the executive director, grant writer, public relations, etc. (one-person shop) for a community ministry. We are one of 15 in Jefferson County Kentucky. The South Louisville Community Ministries (SLCM) is supported by 50 faith-based groups - mainly churches. Additional funding comes from local, state, and federal governments; Medicaid; and a very small part from individuals and corporations. We are interested in starting an annual appeal to individuals and an endowment. At some point in the near future we may need a capital campaign to renovate a building we are leasing. |
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Mary |
Thanks to everyone who contributes to this list, and to Kim for a very informative, thought-providing opener. |
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Audra |
Mary, Whew--it does sound like you are in a tight spot! I am also fairly new to development and just two weeks ago completed Principles and Techniques of Fundraising (course 101) at the Indiana University Center on Philanthropy. That said, I am certainly no expert on capital campaigns. However, one thing that sticks out in my mind from the class is that the "experts" in the field suggested that you never enter a capital campaign without a consultant. This came as a bit of a shock to the group as most of the attendees were from small shops similar to your own. However, it was reiterated that although consultant fees may seem too expensive for small shops, they pay for themselves by rolling their fees into the campaign goal. In addition, a consultant would do a feasibility study of your group's situation to determine whether a capital campaign is appropriate. In the course book for the class we also received a basic checklist that determined institutional readiness for a capital campaign. It is nice to have in black and white to take to a board or administration that is all "gung ho" for a project that will inevitably flop. This may be a useful tool for your organization. Good luck, you definitely have your work cut out for you! |
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Thomas |
Thanks to all who participate in this educational forum and especially to Kim, Tom and others who make this a "graduate school" experience. |
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Sandy |
Let me start by saying that I have never done a capital campaign and am looking at the (terrifying) prospect of starting one next year. |
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Tammy |
"As for having a capital campaign that is DONE in less than a year, I would be shocked. Everything I've read and heard says that you need longer and that the first 3/4 is "silent". Help us Kim!" |
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Robin |
Welcome Kim! |
Capital Campaign - Part 2
I am glad you found the first part of what I wrote useful. In this posting, I want to continue with my first posting, and finish telling what you need to have in place before beginning a capital campaign. Then in my next e-mail, I have bunched together some questions from their various postings and want to answer them all at once. Please keep writing--it really helps direct me!
Beyond the case statement and detailed budget, you also need the following:
1) A good database and systems for gathering and entering data. I will not say much more about this but I see too many groups whose database cannot do the job. So, get a decent one (you don't have to pay a fortune). Of course the data entered into the database also has to be good, and a capital campaign has to have adequate systems in place to gather and record information.
2) Gift Acceptance Policies: these are policies that spell out what kind of gifts you will and will not accept. You may be wondering why you would turn down a gift. Consider that organizations have accepted houses only to learn that they were near an EPA SuperFund site, or had basements full of radon. Organizations have accepted art only to be unable to sell it for anything like its market value, angering the artist who felt that the group didn't try hard enough. Organizations have accepted gifts from corporations that were anti-union, accused of covering up sexual harassment or having racist hiring policies and then lost donors who were mad that the group accepted money from the corporation...and I could go on, but I won't.
A Gift Acceptance Policy can be complicated and spell out every type of gift that you will and will not accept. I suggest instead that you have a policy that says, "The board of directors reserves the right to review all gifts and to decline gifts that it feels our organization is unable to handle appropriately or are not in the best interest of our mission." This gives you a lot of flexibility. What is more important than the policy is for the board to have the conversation about gifts. It is much easier to have a theoretical conversation about accepting a gift horse than to look a gift horse in the mouth.
3) Finally, you must have an active, motivated, enthusiastic Board of Directors. They need to understand how serious a capital campaign is and be willing to do their part to raise the money needed. In fact, board members should make the first gifts to the campaign, and to be willing to help ask for money and to find other people to help ask.
As you can see, what you need to have in place for a capital campaign, you need to have in place anyway for a strong annual campaign. The stakes are just much higher with capital. You need to have all these things in place, (case statement, budget, database and good information gathering systems, gift acceptance policy, and strong board of directors). Then you are ready to proceed to think about whether to do a feasibility study, what timeline to set for the campaign, who the lead donors might be and so on. We will take up each of these topics in future postings.
Several of you have posted questions or dilemmas--let me take a crack at answering a few things.
1) Is there a difference between a capital and endowment campaign except for the outcome? Answer: Not really. A capital campaign has a more complicated budget and there is more at stake if you don't raise your goal (i.e. half an endowment is better than none, but half a building is not too helpful). Campaigns are very similar to each other, even major gift campaigns for the annual fund.
2) On hiring a consultant: of course being a consultant, I can see the advantages of hiring one! I do have to say that Tammy's experience of the feasibility study giving very low numbers compared to what could be raised is very common and calls into question the methodology of feasibility studies. I will comment more on this in my posting on feasibility studies. Often consultants are too conservative in what they recommend can be raised, possibly out of not wanting to look foolish if the group doesn't do well. I also agree that a capital campaign lasts more than a year--usually three years. If you can do it in a year, I would wonder if your goal was too low. Why go to all the effort and gear up for something that is over practically before it started?
3) Several people asked questions about endowment, including how a group that struggles to raise annual money can raise endowment money. I would advise that groups having a hard time raising their annual budget figure out what their problem is and solve it before launching an endowment. If you are having a hard time raising $50,000 or $100,000, then how are you going to raise $1,000,000 or $2,000,000, which is what you would need to generate $50,000 or $100,000?
More later.
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Liz |
"I'm interested in what others have to say about this. I'm interested in a checklist too. Hopefully Kim or some classmates can provide these." |
Feasibility Study
I am mixing up the original order of my presentation because several people have asked about feasibility studies, so I thought we would take a look at what they are and when you should use them.
What is a feasibility study?
A feasibility study is a survey of prospective donors, board members, community leaders, program officers at foundations and corporations who might be approached. This is anyone whose agreement and support you would need to succeed. The survey asks them in an anonymous fashion what they think about your capital project and what the level of their support might be. Generally the survey is done in three parts: a written survey sent to all the prospects who will be asked, a phone survey to a smaller number of donors who will probably be asked for lead gifts, and a handful of in-person interviews or a focus group with key leadership.
The written survey is mostly very structured multiple choice questions so that the results can be tabulated. Once those results are in, the consultant looks for any pattern or anything that needs to be clarified. The results of the written survey form the basis for the questions on the phone survey. One the phone, the surveyor can probe a little more, record anecdotes and examples, and even say, "Our written survey showed X. Do you agree or not with that?" The in person surveys are optional and many studies don't include them. They are usually used to help clarify the case or further probe any anomalies found in the phone or written surveys.
A feasibility study is complicated and time consuming to conduct, which makes it expensive. The cheapest study will be at least $5,000 and many studies run as high as $75,000. The size of the campaign will not correlate directly to the cost of the study because a campaign with a low goal will not necessarily involve fewer surveys or fewer phone calls. The cost of the study usually means these studies are reserved for large campaigns.
To do or Not to do the study:
There is no need to do a feasibility study:
- If you intend to do the campaign no matter what the study shows. I have known half a dozen organizations that spent money on a study only to conclude that the results were wrong. They proceeded with their campaigns-some succeeded and some failed.
- If you are going to use it simply to find out whether or not you can make your goal. You can discover that easily enough by asking for lead gifts from qualified prospects. If they all say no or give much less than you needed, don't announce your campaign and go back to the drawing board.
- If your goal is under $2 million, the cost of a full scale study is not justified. You can decide to do a written survey only, or a limited phone survey if you have some specific questions, but what you really want is to go to the lead prospects and see what they say.
You will need to do a study:
- If you think that the key leadership in your organization has a mixed reputation. I conducted a study for an organization whose Executive Director had been there 13 years. She was well liked, but as one key prospect said, "The organization has gotten too big for her and neither she nor her board can handle the responsibility of a building." The study showed that unless she made significant changes in staffing, such as hiring an associate director who could handle a lot of the administration and human resource issues she was not good at, no one was going to contribute.
- Your building project may be controversial in some way. A proposed homeless shelter discovered that they would face major neighborhood opposition if they expanded the way they wanted. By slowing the process down, they were able to put education programs in place and address neighborhood concerns. Once that was done, the campaign proceeded successfully.
- You want to raise more than $2 million and you have never done that before.
- You want to know exactly what each person will give. Remember that when you get the results of your study, you don't learn that Sally Jones can give $250,000. You learn that someone has the capacity and willingness to give $250,000. You will need to figure out who it is.
Often feasibility studies predict a lower amount that what actually happens. One reason for this if you are going to err, it is better to underestimate than overestimate the goal. The main reason is because it is impossible to factor in the effect of excitement on the prospects. It is very different to talk on the phone about what theoretically you might do for a campaign, should it be launched, than to be asked in person by someone you admire. On the phone, you are sober and serious, and not wanting to mislead. You name an amount that is perhaps a stretch for you, but that you feel confident you will be able to pay. Later, during the real campaign, a friend or colleague comes with a staff person to ask you for your gift. They are excited and you get excited and wind up giving more than you told the person on the phone. Perhaps on the phone you said you wouldn't give at all, but now you don't want to be left out. Your objections, which seemed so big during the phone call fade in the light of this campaign. This does not mean you should add on a few hundred thousand to whatever the study tells you, but it does mean you can be quite confident that a well done study will give an amount that is at or below what you can really raise.
So, How Can You Know if Your Campaign Will Succeed?
How do you know any plan will succeed? The fact is, you don't. You have a better chance of succeeding if you have a plan than if you don't, and evaluating your success will be easier if you have a plan-in fact a plan is what makes evaluation possible. A feasibility study gives you an added measure of assurance and will help you find define and counter big problems. When raising very large amounts of money, a feasibility study will allow you to discover the capacity of your donors in a way that would be very difficult otherwise since we have a such a strong taboo about talking about how much money a person actually has.
In my experience, grassroots organizations, which are able to raise the first third of their goal from 4-8 people, will raise the rest of the goal, and I advise groups to use that as the most reliable way to tell whether their campaign will succeed. If you want more assurance than that without having to buy the assurance that would come from a feasibility study, you can first talk to the people who would have to take the lead for your campaign to succeed about the possibility of the campaign and ask what they think about it. Tell them you are "testing the waters," or "getting feedback on this idea." Make it very casual but pay close attention to what they say. Make sure your board is on board. If a Board of Directors does not want to work on the campaign, it is going to go nowhere. People look to the board for leadership. Your board may well be made up of people who cannot make big gifts to the capital campaign. That's fine. They need to make some gift, and they need to be involved in the planning of the campaign.
Keep those questions and comments coming. More to follow on Thursday.
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Mary |
I enjoyed your opening remarks about readiness for a capital campaign. Our organization, an independent school, needs just about everything you can name, and being only in its fifth year, the switch from crisis-orientation to planning has not completed itself. I guess I wondered if you would comment about this, and about what is known as "founder's syndrome." Our founder started this school by the seat of his pants. The classroom building was a prefab that arrived two weeks before start of school. So whenever something comes up that we need and the chorus says, we need time to plan this, he reminds everyone of his experience and seems to think that's fine. |
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Tom |
Any of us who've been in the "biz" for any time deal with "founder's syndrome". What exactly is the position of your founder? If he's the E.D., you may be fighting a losing battle. I've never been able to sell a founder on the idea of planning. Unless you're prepared to overthrow this person (which I am constitutionally incapable of doing to someone who's put his heart and soul into an institution), you are really going to have a hard time to get around the problem. |
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Lew |
Tom; I love your post. I have been the founding ED of two groups and honestly a 12 step letting go process would have been a great thing. I did have someone send me (annon.) a piece on training your replacement that helped. |
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Kim |
Dear Mary and everyone else who has ever experienced Founder Syndrome: I think Tom described it very well and described what many people have to do in order to deal with it, which is leave the organization. Short of that, I have two other suggestions: one is to address the problem head on. As we often say in fundraising, "if all else fails, try honesty." SO, you would round up a few other people in your organization and say to the founder, "You are a great and wonderful person and the school couldn't run without you. At the same time, there are some things that must be put into place or we will slide into mediocrity and your work will have been for nothing." Or words to that effect. See what happens. I have had founders burst into tears and admit how insecure they have been feeling. Others have stormed out of the room after calling me all kinds of names, then apologized later. Others have simply smiled their superior smile and nothing has changed. This strategy is called "Assume good intent." The second strategy is called "seek forgiveness, not permission." If you need a Gift Acceptance Policy, create one and ask the Executive Committee of the board to ratify it. Act as if the founder is not a problem and do what needs to be done without asking permission. For example, planning. Delay things until they are planned properly. When challenged by the founder, ask for forgiveness. For those of you thinking that this is a really sneaky underhanded strategy, you are partially right. However, the few times I have seen people use this strategy have resulted in things being so much better that even the founder had to admit that we were right. "Planning does help," or "I am amazed at how smoothly that went. Perhaps we should do it the way you have outlined in the future." Both strategies assume that the founder is, at heart, a reasonable and caring person. Only you know whether that is true of your founder. Good luck. |
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Diane |
Founder Syndrome Observation I really enjoyed Tom King's comments to Mary about the "founder syndrome". I will tell you though, that there are founders who can take the dreaded step of "letting go". Our founders, after 8 years of blood, sweat and tears, and developing the best board (executive and full board), expanding board to include invitation only positions, making the foundation classy, and keeping costs to 18% of total budget, as well as hiring an executive director and now hiring a Development Director, have decided to "let go". In this case it was harder for the board etc. to see them "let go". But the Founders confided in me that they were touched by how the board and others jumped in to see that the foundation survived and thrived even without the founders' complete input. This year the foundation is profitable and thriving and the founders are simply executive board members. So it can happen, and again it is painful and the founders have to be willing. Thought I'd throw in a couple of cents worth. Really enjoying this FUND class btw!!! |
Review of Capital Campaign Phases
Let's do a quick review of the phases of a capital campaign:
The first phase, which I have covered in my first two posts, is called "planning and preparation." It can take any amount of time, usually a year or two. Don't shortchange this phase or you will pay later.
The second phase, which I want to explore a good deal more, is called the "pre-campaign." Once you have decided to proceed with a campaign, or to test the feasibility of a campaign, you now must identify prospects, set firm goals, set the timeline, and decide when and how to launch the campaign. This phase usually doesn't take more than a few months.
The campaign, in a sense, begins, with the next phase: the quiet phase. In this phase you will form any committees you need, solicit the top 8-10 lead gifts, and make any final adjustments to your case. Most groups are able to move through this phase in six to nine months, but it can take a year or more. The point of this phase is to raise 50-60% of the goal before announcing the campaign to the public. Once the campaign is announced, it already has a lot of momentum and there is a great deal of certainty that it will succeed. In a way, the quiet phase is your last chance to get out of the campaign without any egg on your face.
When the quiet phase is completed, we go to the Launch and the Public phase. Most groups have a big party to "launch" their campaign and then take their case to the public at large. Intensive solicitation begins now and lasts up to two years. Don't spend more than two years in the public phase or you will begin to see a toll on your annual fundraising.
Finally, there is the "Wrap-up": making sure all systems are in place to collect pledges, final reports are written, and the campaign is ended. The wrap-up should be able to be completed in two or three months, although pledge collection may take years.
Often groups wonder when you should actually start building or renovating in this process. Of course, the safest thing to do is to wait until all the money is raised, but most groups start building shortly after the launch, or even make the launch the "first shovel" or groundbreaking. Then the end of the campaign can sometimes be the ribbon cutting for the new or upgraded facility. When construction is underway during the campaign, prospects and the community as a whole have a sense of progress being made and their gifts being put right to work.
Prospect ID
I am hoping everyone is familiar with the concept of a gift range chart and how to create one. If ANYONE isn't let me know and I will be happy to explain it. Once you have a chart that shows how many gifts of what size you will need, you are ready to begin identifying prospects. In fact, you have only one job during this pre-campaign phase to start with--identify LEAD prospects. If you cannot identify at least the majority of people who can give you the biggest gifts, you will have a hard time meeting your goal. Deciding who will be asked to be the lead donors is an important process and not to be undertaken lightly. Deciding who is a capital campaign prospect is like deciding who is a major donor prospect, with a couple of additional variables. First, someone in the group or close to the group must know and be respected by the prospect. Among other things, the person who knows the prospect will know whether the prospect believes in the cause and will have some idea about the prospect's ability. To make this process memorable, we call these identifiers ABC:
- Ability
- Belief
- Contact
As part of researching the prospect, you want to have as much useful information about them in relation to your campaign as you can. Toward that end, review any public records about the person. Newsletters or annual reports from groups similar to yours may list the prospect's name as a donor. Newspaper articles may mention the prospect's donation to another group and your own records of gifts by this prospect to your group. You should find other people who know this prospect and see what they can tell you. REMEMBER--you are looking for information a person would tell you in the course of a non-confidential conversation. While it may not be public information--the person does not want to read about it in the newspaper--it is not secret. If someone tells you, "Fred Smith has a large inheritance but doesn't want anyone to know and would be really mad if he found out I told you," that information is almost worthless. You can't go to Fred and tell him you found out from Deep Throat about his situation, so don't write that down. On the other hand, if this person says, "Fred Smith prefers to remain anonymous, but has an advisor named Juan Gonzalez, and I will introduce you to Juan," then write down that Juan Gonzalez works for an anonymous donor. If you don't know the identity of a donor, don't spend time trying to find it out. We have no need to know who it is. We are fundraisers, not the CIA.
In addition to this information, which you would need in order to approach someone for a large gift for any type of campaign, in doing capital campaigns, we usually want to know the following:
- Has this prospect ever made a capital gift before? If yes, to what kind of campaign, in what amount, and does anyone know how the prospect felt about that campaign?
- Does this person have assets that he or she can use for your campaign?
- Will this person be attracted to naming opportunities? Is there someone in their life they might want to honor or memorialize?
- Does the prospect believe in your building campaign or do you have evidence that she or he probably would believe in it if they knew about it?
Make sure you verify information by checking with more than one person. If it sounds to good to be true (i.e. "she inherited a billion dollars in cash and can't wait to give it away"), it probably is. At the same time, this is not a Neilson survey, the beginning of a biography or a police investigation. We are not testing whether the person should run for governor but whether he or she would be asked for a certain amount of money at a certain time.
This is all I will say about prospect identification right now, but encourage others to chime in with your experience and advice.
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Liz |
Kim, for a $100,000 capital campaign, with an existing donor base of 400 people, how would you construct the gift table? How many new prospects would be needed? |
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Cynthia |
I am new to fundraising but not non-profit. I am presently working a gift chart for $500,000 and am trying to understand the whole concept. HELP!!!! |
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Mary |
I am not familiar with what a gift range chart is. Please explain. |
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Diane |
Sounds like a lot of us need help with the gift chart concept. We have one at our foundation, but I'd like to see if we are on track or if improvements could be made to what we already have. Thanks in advance. |
The Gift Range Chart
Several of you have written that you do not know what a gift range chart is, or do not have confidence in your ability to create one. My true confession is that I find gift range charts hard to explain, and so I encourage everybody to chime in with your explanations. Teaching them is like teaching people to drive by correspondence. I am sure it is possible, but not that easy. But, here's my best shot.
A gift range chart is based on the observation that when you analyze any fundraising campaign you will discover that a few people give you your largest gifts, more people give you medium sized gifts and a lot of people give small gifts. Most of the money will be from a handful of donors and most of the gifts will equal the least amount of money. We have observed this since people wrote their pledges on papyrus scrolls (before my time) and now we can plan around it.
If you are doing a major donor drive for an annual campaign, you take your goal and you break it down as follows:
1 gift -- 10% of the goal
2 gifts -- 5% each of the goal (10% when combined)
3-5 gifts -- 10% of the goal when combined
So, 30% or more of the goal will come from 6-8 people.
Going down the chart, you have more gifts at less money. You can bring you chart down in 10% increments. You can make the next layer 20 gifts equaling 10% of the goal. How you decide that depends on how many people are in your community, how many solicitations you want to do, and how big your goal is.
In a capital campaign, we have a much narrower chart.
1 gift -- 20% of the goal
2 gifts -- 10% each or 20% combined
3-5 gifts -- 20% combined
60% of your goal is provided by 6-8 people. The entire campaign may be completed with just 80-100 people.
Let's look at Cynthia's situation. She has a goal of $500,000. Her chart might look like this:
1 gift -- $100,000 (20%)
2 gifts -- $50,000 each (20% combined)
4 gifts -- $25,000 each (20% total)
10 gifts -- $10,000 each
20 gifts -- $5,000 each
TOTAL
37 gifts -- $500,000
Now, she might not have 20 people who can give $5,000, but does have a fair number who can give $1000-$3,000. She could then give her chart more layers.
How about:
10 gifts -- $5,000 each
10 gifts -- $2,500 each
25 gifts -- $1,000 each
Supposing she has someone who will give her $200,000 as a lead gift. Should she send $100,000 to another group? Absolutely not! She is a lucky person who has one gift equaling 40%. The chart doesn't have to be a perfect triangle, but without the top gifts, your campaign is going to have a much harder time being successful.
Let me end here and so what questions I have stirred up.
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Gordon |
For someone who worries about the ability to teach correspondence driving, Kim has done a wonderful job in her gift-chart post. I'd like to add to her note because it is a hobbyhorse (a limited means of transportation, I admit) that I ride. As Kim shows, it's perfectly possible to complete a good-sized campaign with fewer than 40 donors. Of these, perhaps just 7 will make up 60 percent of the goal. That's a dollars-to-donor ratio of 60/18. Larger institutions often find the ratio rising to 90/10 or even, gulp, 95/5. My hobbyhorse is that the general way of drawing a gift-range chart -- a pyramid -- gives the visual emphasis to the 30 smaller gifts, not the 7 large ones that will make or break the campaign (in Kim's example). This is compounded by the fact that it often takes most of the energy and effort of the campaign (in man-hours, campaign time, and, especially, in dollars expended on materials and services, such as communications and special events) to raise the 30 smaller gifts. So we enter the campaign with our sights, perhaps subconsciously, on the bottom rather than the top. Now, there are many reasons to include smaller donors in campaigns and to expend extra effort to get their gifts. But we need to realize that if the campaign is urgent and essential to our institutions, the few large gifts are the vital ones. They make it happen! That's why I've come to draw the chart as a fat "T" with a thin top bar. The solid base -- the few donors contributing the largest dollar amount -- is the foundation on which the campaign is built. The smaller gifts are supported by them and spread thinner. You can see a visualization of both styles of chart on my web site: www.rgtalley.com. Click on "Resources" and download the "Tailored Case" PowerPoint presentation. It also includes an example of how gift ranges worked out in terms of real final results for a college campaign. Of course, my comment is merely playing with pretty pictures. The important point is that a gift-range chart is a tool to help you have pre-campaign understanding of how your gifts are likely to come in. This allows you to strategize on how to get them and organize your people and resources in the way that will be most effective for your specific campaign. Just remember to focus enough energy on your top donors. |
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Liz |
Thanks Gordon for the alternative visual. Enjoyed a brief visit to your site. |
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Vivian |
I echo the comments of Liz, Gordon. I appreciated your T graphic versus the traditional gift pyramid. I have enjoyed your site resources in the past and thank you for your samples and kindness in making both available to the fundraising community at large - including me! |
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Tammy |
To add to Kim's lesson on Prospect ID, during our capital campaign, we came up with an interesting system that has proved to be effective a majority of the time. We used our mailing list and acquired the mailing lists of other organizations through contacts and broke those lists out into towns. Then we asked a committee of well-known and connected people in each town to sit with us over dinner and to review all of the names on the list. They were then asked to rate each person on the list with the following codes based on Giving Ability (A-F) and Giving Inclination (1-5). Of course, not at all scientific, these codes are perceived and have not always proven to be correct, but I would venture to say that in 80% of cases, the perception proved to be reality. The codes broke out as follows: A: $500,000+ B: 100,000 - $499,999 C: $25,000 - $99,000 D: $10,000 - $24,999 E: $5,000 - $9,000 and F: <$5,000 1. Highly Inclined 2: Somewhat Inclined 3: Possibly Inclined 4: No Inclination 5: Don't Know Based on the rating of each prospect, they were divided into categories: Leader Gifts (A,B), Major Gifts (C,D), Community Gifts (E,F). Then they were assigned to teams of volunteer solicitors who represented each town (roughly). So far, it has worked. In 111 gifts, we have raised $5.4 million in a small town. |
Thinking Too Small
I thought a couple of stories from some capital campaigns might brighten your day and make the theory more real. The following two stories illustrate what I think is a VERY common problem with small groups--thinking too small. We forget that we are in the fund RAISING business and not the fund SQUEEZING business.
1. An environmental advocacy group in one of the big western states had faced a series of fights with timber companies, oil companies, and mining companies. Every time they tried to protect some forest from drilling, clear cutting or mining, they had to raise thousands of dollars and sometimes they weren't able to raise enough money or raise it in time. SO, they launched a capital campaign for a reserve fund. Their plan was to get $150,000 in the bank to use in these big fights. They went to a donor who had given them $5,000 a year and asked her for $15,000 as a lead gift for this reserve fund. She said, "You make me sick. You think you can save the environment of this state with $150,000 in the bank? You think so small. If I were a bear, and the whole future of my species rested with you people, I would kill myself." They took her answer for a "NO" and left very dejected. However, after much discussion, they realized she was saying, "Think bigger." They reconceptualized what they were thinking and decided to raise $1,000,000 (one million). They looked through their donor list and realized they could probably do it, if she were to make a lead gift. They asked her for $150,000 as the lead gift on the $1,000,000 campaign and she said; "Now that's a number I can wrap my mind around." She gave it, and helped them raise the rest. In 9 months, they had $850,000 and in 14 months, the entire million.
In another example, I asked a woman for a gift of $30,000. She had given $3,000 a year for several years and I asked her for a gift that was 10 times her annual gift. She said, "Really, Kim, sometimes you go too far. Where am I going to get this money? You know I don't have this kind of money." I left, feeling that I had crossed the line and possibly ruined our friendship. I pondered what to do and had decided to call her and apologize and ask her to consider a much smaller gift. Fortunately, I hadn't gotten around to that when she called me first. She was very excited, "Kim, I figured out how to give that $30,000. In fact, it will be more than $30,000--a lot more!" "How?" I asked. She explained that her husband had left her several years before for a younger woman. They had owned a cabin at Tahoe (a ski resort in eastern California) because he loved to ski. "I hate snow," she explained, "but I was so angry with him when we divorced that I insisted on getting the cabin. I have never used it. I rent it from time to time, but now I want to give it to you for the capital campaign." She did, and we sold it for $150,000. To think I had almost called to apologize for my request, when her seeming irritation at me was really a feeling of frustration at not being able to think immediately about how she could make the gift I had requested.
People want to help and they want to give big gifts. Keep that in mind as you are soliciting.
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Joel |
Excellent stories and it certainly does show how we all seem to think to small when we are raising funds for our causes. People give to the cause (not a building or an endowment fund). They want to be given the opportunity to make a difference and we are simply giving them what they want. The YWCA of Topeka recently completed a successful 3.5 million campaign and we realized quite early that the amount was easily attainable. A story I can add to your stories in regards to asking too little money is when I approached a very generous donor (although one we didn't think had the funds necessary to give a lead gift) for $15,000. Her response was, "Oh Joel, I'll give at least that amount. We ended up with a gift of $115,000 and a pledge for much more. It just shows that all the research in the world isn't worth much, unless you look at the passion of who you are asking. |
Middle Phase
I hope you all had a great holiday and are looking forward to the New Year. We have a lot of work to do, and it is clear that nonprofits are going to be kept very busy!
Wanted to continue the discussion of capital campaigns. Once you launch your campaign publicly, you enter this middle phase, which is the MOST difficult part of the campaign. First of all, your biggest donors generally don't want to give right now. They either want to be first, or help put you over the top at the end of the campaign. You can imagine saying, "We'd like you to set the pace" and you can imagine saying, "Your gift would mean a successful end to the campaign," or "Your gift will put us over the top," but it is the rare person who is excited by, "Your gift will bring up the middle." So, now the excitement is created by having a lot of people asking a lot of people. In one campaign I worked on, ten volunteers asked 90 people in a weekend! We told people that we were in an "asking marathon" and that the campaign was moving forward in a great way.
As the coordinator of the campaign, your job is to keep your volunteers supplied with names and stay on top of them to keep asking. Have weekly check-ins. They only need to last 15-30 minutes. Give everyone on the team a chance to say how many people they have ASKED since the last check-in. Don't focus on how much money was raised, or you will give the same applause to the person who asked one prospect who said yes, as the person who asked five prospects, three of whom are thinking about it and one who said no, and one who said yes. At this point, volume is crucial. At the end of the call, you can tally how much money has been committed and add that to the total. See what problems people are having, what questions the donors are asking and so on. If your volunteers are taking names and not asking, deal with that right away. "Eric, you have had three prospects for two weeks and haven't asked any of them. What's happening?" If he says he tried, make him define TRY. If he has called and gotten answering machines or if he had the flu and hasn't felt well enough to ask that's fine. But if he has one poor excuse after another, ask him to TRY to pick up his coffee cup. Then ask him to actually pick it up. In fundraising, there is no such thing as trying. There is asking, and there is not asking.
As the coordinator, you must set a good example too. You will have prospects to ask or people to accompany on asks. The more you do it, the easier it gets. Every day you should have a certain number of people you are going to call. One colleague of mine calls everyone first thing in the morning so she can get it over with.
You are also going to have a lot of people who say they need to think about their gift. They may need to talk with their partner, or they may be watching to see if the market is going to recover a little, or they may not know exactly how to make such a big decision. Check in with these people every couple of weeks. Tell them how the campaign is coming and see if they have more questions. Don't push them for an answer, but don't leave them alone to decide, or your request may go off their radar altogether. Send out biweekly or monthly reports to the people who have already donated and those have been asked but have not decided. These are not fancy reports - simply nice looking memos or letters.
Anything you can do to give the sense of forward motion will help during this time. That's why people use those thermometers. Post information on your website, have graphic displays in your office, send your board members e-mail with up to the minute information.
The Purpose of Fundraising
I am using my great authority as the facilitator of this class to go slightly off topic. I am hoping you will see that I am not so much OFF topic as "before the topic"--reminding people what must be in place before you can have any kind of effective fundraising program. I am sharing the following thoughts with you because several organizations that commit the sins I am about to describe have asked me to help them either do a capital campaign or start an endowment. I want to scream, "NO. STOP. DO NOT PASS GO." Maybe I am being too harsh. Let me know. Please let me know what else you want to know about capital campaigns, including any questions you sent that I didn't respond to. Remember there was a period of time early on when I wasn't getting your responses.
2001 ended with a lot of very bad solicitations. Here is a small sampling of personal notes or phone messages to me from board members or staff people who are part of groups that I actually like:
Left on voice mail: "I'm just trying to find out what you are going to give by the end of the year. Call me." (I'll get right on it.)
By letter: "Kim-I am just doing what you taught me-asking." (It is all, my fault, after all.)
Note attached to direct mail: "You have it and you know we need it." (Tell me what else you know.)
Handwritten note on a personal letter asking for $500: "I know I should call but I don't have time. Be a good friend and send the money." (When you put it that way…)
As a thank you for a $200 gift: "Every little bit helps." (Tell me about it.)
Then there is a strategy that I think it is outrageous. Five groups that I have never given to wrote personal letters asking me to renew my gift. One wrote, "You haven't given since 1997." In fact, I haven't given since I was born. Another wrote, "Hope we can have lunch again sometime," signed by a person I have never met, let alone eaten with. Finally, there was the Invasion of the Body Snatchers approach, "Kim, please join me. Together we are unstoppable." (That may be true-who are you again?)
In talking with friends and colleagues, I discovered a number of people had had similar experiences. One colleague told me that a caller said, "You better give some stock before it tanks altogether." Another told me that when she asked about future plans of the group, the solicitor replied, "We haven't had time to make any because we are so busy visiting donors." I have known for some time that common courtesy is not at all common and even sensible people lose their balance when it comes to asking for money. However, these approaches define a new low in fundraising. Personal appeals are degenerating into demands, complaints, accusations, prophecies, guilt-trips-anything but results. And lack of results is the real problem here. People are not raising more money with these strategies. Otherwise we would have a slew of articles on "The Subtle Threat - Key to the Big Gift," or "Guilt Works Every Time," or "Donors Need Less Attention Than Previously Thought."
It is important to return to the purpose of fundraising, which is building relationships. At the risk of sounding like a pop psychologist, we have to remind ourselves that relationships take time. If you don't have to time to build relationships with donors, you don't have the time to have money. Further, I don't really think it takes that much more time to write, "Thank you so much for your generous gift. It means a lot," than "Thanks, every little bit helps."
Amaran Tarnoff, a management consultant and trainer, teaches that what gets people off track in their work is that they focus on the wrong results because they start with the wrong questions. For example, prior to writing a personal note or making a phone call to request a gift, many people consciously or unconsciously ask, "How can I get money from this person?" Or, when in a hurry, "What should this note say?" To insure that you, your board members, and volunteers don't slip into any negative or guilt tripping language, you need to reframe your question to, "What result do I want from this interaction with this person?" You may find yourself saying, "Money," but you are likely to catch the problem with that. What you most want from a donor is that he or she feels good about your group and about his or her interactions with the group. This feeling will lead the person to give, to give again, and also to talk to friends about the group, and to be open to other kinds of requests-for time, for advice, for contacts. Focussing on results also means that you will think more clearly about who the person is, what they might want to know about your group, or even what the best approach might be.
Here are a few do's and don'ts that will help your fundraising immensely.
DO: Invite donors to things you do anyway.
--One organization with 10 staff does a 30 minute in-service at every staff meeting on a topic related to the work of the group. They have started inviting 4-5 donors to each staff meeting. Sometimes all of them come and sometimes none, but donors have expressed appreciation at being invited.
--A small school, a group home for people with developmental disabilities and program that works with juvenile offenders invites a few donors once a week to join the students for lunch. The secret is introducing the donors as friends and only having a few at a time.
DO: Spread out your contact with donors over the year. If you jam all your personal notes into an end-of-year appeal or a spring campaign, you are tempted to cut corners.
--One organization has 1500 donors, and the development staff person has divided these names over 12 months and writes or calls 100-150 people a month. "That's 5-10 letters or phone calls every working day. I do them first thing in the morning-it takes 45 minutes and then I move on," explains the development director.
--Give each reliable board member a "portfolio" of donors-not more than a dozen. Their job is to be in touch with these donors 2-3 times a year. This can be a note, a phone call, a visit, or three notes, or two phone calls and a visit, or whatever seems appropriate. These donors become the "buddies" of those board members.
DON'T: promise on the front end what you cannot deliver on the back end.
If you are warm and friendly when you get your first gift from someone, they will expect you to be that way for all their subsequent gifts. If you send nice personal thank you notes once, you will need to keep doing that.
DON'T: write letters or make phone calls to donors when you are tired, resentful, have a headache, or have already written dozens of letters. Go home instead and take a hot bath or play with your cat if you have a cat, or sit in your back yard if you have a back yard.
Donors are people who like your group and share their resources with you. Dealing with them should be interesting and something to look forward to. Donors are people your group has a relationship with and the result we want from our dealings with them is to deepen that relationship.
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Mary |
Thanks for all your thoughts on capital campaigns and donor cultivation. I was relieved to find that I haven't done any of the don'ts on your list. Whew! I'm sure I'm not alone in being a development director who wishes the development committee was stronger, or that the board didn't behave as if development existed in another universe. There are always organizational issues that have to be addressed in order for fundraising to work. This class on capital campaigns fueled me to urge my board to put together an interim plan until they have revamped what is a fairly useless strategic plan, and to convince them not to pursue funding a new building considering that our campaign to fund a new program (classical music study at the high school level) is basically dead in the water. I appreciate the energy you've invested in enlightening me/us. |
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Michael |
Well, this is a bit of a different situation from what I would actually think of as a capital campaign, but here goes. I direct a small animal protection organization. We focus on one area specifically. However, we are trying to support an activist who works in a different area. What we have done is registered to function under an additional organizational name, as well as our original name. We will be sending out entirely separate mailings in addition to our own usual mailings. This other entity will be listed as a "project of" our organization. It will have different letterhead, different focus, etc. Typically we mail to our in-house list 6 times per year (every other month). We usually have about a 16 - 20% return with an average donation of around $20. Our intention is to mail for this project on the "off months" when not mailing to our in-house list normally. And we will likely mail to it about 3 times per year. My questions: Is the right way to do this? Any suggestions or other things we are missing? Do you think this will have a major impact on our other fundraising? Mainly, just give me your opinion of how this will work. And if anyone else on the list has done something similar, please feel free to comment. |
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Kim |
Michael--I think the way you have outlined approaching this new project is very good. You will be able to tell very quickly whether the project is invading your fundraising efforts, and then can take corrective measures. You are getting a remarkable response--16-20% each time for 6 mailings a year is superb and speaks to the loyalty your donors have to you. You may want to pull out a few donors and ask them to become major donors to this project as well as continuing their support for you. Good luck. |
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Pam |
We are a mid-sized non-profit with services for people with developmental disabilities. I would like to know your opinion of combining a capital campaign with a campaign for endowment. The capital drive will raise funds for a new building. Our plans for the endowment are to support our advocacy efforts. |
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Amy |
The organization that I work for is in the planning stages of a capital campaign for a new Building. We are looking at a 3-5 year plan. At the same time we have no endowment fund and need to build that as well. We are a very small organization in a small town with two other museums, both of which are currently in the middle of capital campaigns. My questions are: 1. Do we embark on a capital campaign for the new building and the endowment at the same time, if not what is the best approach? and 2. Is there a better time to start a campaign considering that the two other museums are currently in the process? (All three museums pull from basically the same donors, give or take a few). |
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Simhes |
Is it true that until you have secured almost 60% of the capital needed for a project, publicity should be held up? |
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Diane |
Yes, it is a good idea to do this because sometimes the organization runs into difficulty in raising the funds and it begins to appear tot he public that it is not a good cause to fund. AND, that it is always a better sell to give to something that has a proven track record isn't it? Sort of like the golden rule....banks loan to those who have a golden reputation already. Hope this helps. |
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Joel |
I usually see the numbers 66-75%, but there are always exceptions. |
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Kim |
Generally, a capital campaign is not announced until you have raised at least 30% of the goal. More recently, many organizations are waiting until they have raised 60% (and sometimes more). I would not announce a campaign until I had at least 30%, but how much longer you wait will depend on a number of things, such as: 1. How confident you are of being able to raise the rest. The point of getting 30-60% in hand before announcing is to create momentum, but also it is a chance for you to quietly test whether this campaign is going to be successful. If you can't find the big gifts, you are probably not going to succeed. 2. How long people have been waiting for you to make a public announcement. 3. How you are thinking about the building part of the campaign. If you intend to break ground during the campaign (not wait until you have all the money raised), then you will want to announce a little sooner than if you are waiting. Breaking ground is exciting and tends to attract donations. Although there are many guidelines in fundraising, they have to always be considered in the context of your group. |
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Simhes |
I am always a believer of not announcing a campaign before we get 60% of the donations. But at the back of my mind I also do have my doubts if we are gonna meet the big guy ever who would come in to take the task. Getting the big guy is really gonna be difficult. Especially when we are building a religious purpose institution it narrows down the purpose to give compared to humanitarian purposes. I have seen in my place, Malaysia, that almost all religious institutions do not wait for any big donations to come in first. As soon as they get some land, bang, they announce the project and like you said a ground breaking and at that instant also raise some funds. I am chairing a temple building project now and my boar4d members are into making flyers, leaflets, etc. to publicize the project. We have a local festival coming up and where about 200,000 people gather at one place. The board members want to print leaflets/cards mentioning a little of the project and distribute in thousands and collect some donations from that. I opposed the idea and instead am asking that they do not give cards but take contact cards of interested people after 10-15 minutes cultivating them. In other words I am asking my members to have a goal of collecting X number of contacts per board member during the festival. >From there I intend to make further relationships with the contacts and then start some different levels of donations requests. Our project is in two phases, one for a community hall and another for a temple proper. Each of the phases is going to cost us (US) 0.75 million. Both together may take about 4-5 years to finish though we are targeting 3 years. Our idea is to finish off the community facility first since we can move in and do all our activities and then while we are already functioning start campaign for the annex temple project. We are taking this approach. I hope you get a picture of what I am speaking of. If you would like to comment. |
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Liz |
Kim, I would love to have your comments on this scenario: |
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Jennifer |
I think if part of getting ready for this campaign would involve a feasibility study and strategic approach to raising the funds, then this project has the potential to teach the organization a great deal about how they are perceived in the community and their base of support. I was involved with an organization whose senior management thought feasibility studies were a waste of money and proceeded to launch two back to back major capital campaigns in less than three years. Neither of these campaigns reached their goals and the foundation board was totally fried out by the experience. |
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Kim |
Liz poses a very interesting question: can a capital campaign teach the organization about development, and launch it on an ongoing program? The answer is "yes, it can" and in fact, this is how many groups have launched their annual fund drive. I learned to ride a bike much this way. I had ridden a two wheeler with training wheels a few times when I got a bicycle for my birthday. My dad said he would help me. I got on it. My feet did not touch the ground when I was in the seat, and it seemed a long way to the ground. I told my dad, "Don't let go of me," and for a minute or two he didn't. Then he said, "You can do it," and pushed me off down the street. I pedaled and concentrated on sitting up straight and soon I was riding. It was scary but effective. I don't know that I would teach a child that way, but I am not sorry that I learned that way. For any number of reasons, it is not unusual for a group to need to raise capital before having a need to raise annual income. Land trusts, groups wanting to preserve a historic building, public libraries funded by taxes but needing a new building that must be funded privately, often find themselves thrust into capital campaigns with little or no previous experience. Further, people who don't want to raise money year in and year out are sometimes fascinated and excited by the challenge of doing a capital campaign. The problems with this approach are obvious. You still have to identify the biggest donors, but you have no current donors to work with. You have to make the case for your capital campaign to people who have not bought in annually. You will need to get your infrastructure in place, such as a good database, materials, policies, etc. None of these things are insurmountable if you have a good case for raising money for your physical plant. Just be sure to take enough time to do good planning before you launch. Good luck. |
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Liz |
Thanks, Kim for your comments on my question about backing into development through a capital campaign. You reminded me that MY father tried to teach me to swim by rowing me out on a lake and tossing me overboard! |
Including an Endowment Component
Let's look at the question of whether a capital campaign should include an endowment component. The answer is YES. I could stop here but then my e-mail would be too short, so let's look at why.
1. If your capital campaign is for any kind of building project, an endowment will allow you to maintain the building properly into the future. Sometimes people add just enough for a "maintenance fund" as part of the budget for their campaign.
2. Your building project will probably allow your programs to grow, thus growing your annual budget. Building an endowment component into your campaign will give you some additional annual income to offset the new money you will need to raise for your increased program.
3. It takes a lot of energy and planning to do a capital campaign, and there is definitely an economy of scale involved. It takes about the same amount of work to raise $2 million as to raise $1 million. This is even truer as you get into higher numbers. That extra $50,000 or $100,000 that you may able to earn from your endowment and roll into your annual income can really make the annual fundraising task much easier.
4. You will be able to ask for bigger gifts when you have a bigger campaign. Someone who can give you $500,000 will be less likely to do that on a $2,000,000 campaign than a $5,000,000.
On the other hand, before you start having visions of sugarplums, if you don't have the prospects for a bigger campaign, then you can't do one. So you will have to look at the overall feasibility of the campaign in order to decide how much of an endowment component to add.
Remember that you can also do an "endowment campaign." An endowment campaign is structured like a capital campaign only the goal is endowment instead of a building or renovation.
Two related endowment questions are: when should a group start an endowment and how much should they try to raise? I am going to give brief answers to these and hope my answers encourage more specific questions from you.
Generally, you should not start an endowment until your organization is a least five years old. You need to have track record, a donor base, leadership in place on the board and staff before people will give you money for endowment. Many older groups decide to do endowment in order to make their fundraising easier. They find it hard to raise $250,000 or $300,000 and think, "if we only had an endowment we wouldn't have to raise all this money." The income from an endowment is generally 5% of the principal. In good years, you can take more, but you will never be pulling out more than 10%. So, to have $250,000 a year from endowment, you would need $5 million. Believe me, if you are having trouble raising $250,000, you will not find it easier to raise $5 million. So, you are ready to start an endowment when raising your annual income has become fairly routine. When you feel that all your systems are in place, you are using a wide variety of strategies, and you have solid support from the Board, other volunteers and staff, then you are ready to start thinking about endowment.
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Simhes |
I am sorry to budge in with, probably a beginner's question. |
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Kim |
Please don't worry about asking what may appear to be a "beginner's question." I had spent several years in fundraising before I really knew what an endowment was! An endowment is where an organization invests some amount of money and uses part of the interest from the investment for part of their annual income. As much as possible, the principal of the investment is never touched, and in fact, is added to, so that every year it can yield more money. Simhes--you will want to have some kind of endowment to support your magnificent temples that you are raising money to build now. Does this answer your question adequately? If anyone else wants to come in with another way of explaining endowment, please feel free. |
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Gordon |
Well, you might think of endowment, as a nonprofit's inheritance. It's often created through bequests or other large gifts from your organization's closest relatives -- that is, trustees and members who feel very strongly about you and the work you do. So, it functions about the same, as does a trust fund that is left by a parent to provide for a child. An endowment is money that's permanently out of reach -- the capital can't be spent -- but the income is secure and comes in steadily to provide for your living expenses. |
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Lisa |
Yet another way to explain "endowments" is simply this. A large donation or "major gift" is given to your organization, however the donor places a restriction on the gift. It must be invested by your organization in what is considered to be a "safe" investment account, perhaps a bond or Treasury no. The original sum of money "the gift" is now called the "principal" and it earns interest each year. Your organization may ONLY use that interest to supplement its annual budget, provide new programs or for whatever need they have at that time. The principal may never be touched, only the interest earned may be spent. You may of course, add funds to the account whenever possible, which will hopefully give you even more interest in the coming years. |
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Mona |
Aloha everyone! I feel like Simhes. I too am a beginner although I have some business sense but have never sat in a non-profit status. I am currently the chair of the fund raising committee. I have some ideas and know that the first step is to meet with staff and get outside interest, which I can do as far as the staff is concerned. I have access to a real estate owner who is very desperately trying to lease store space (over 50,000 sq. ft.) to anyone who is interested for only $.50 a sq. feet. The reason why it is so cheap is because we are in a deprived economic zone. Being a business owner the possibility of our agency utilizing my expertise is at an advantage and they are telling me to just go for it but with nooooooo money. I feel like I am all alone and don't know where to go next and I know that there is more to it than that. I searched the internet and read about you Kim and tried to look for your book at Border's here at Kapolei, Hawaii but they didn't have it. Can you help me with what I need to get started in a "Non-restrictive funding source"? |
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Simhes |
Dear Kim, Lisa and all other wonderful souls, |
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Brigitte |
I've been reading your postings faithfully and appreciate your tremendous knowledge on fundraising. I wonder if you could point me to an Internet site where I might find a comprehensive and well-written endowment/capital campaign plan? |
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Kim |
Brigitte, I don't know of such a site, but this probably reflects my general ignorance of what is available on the web. I open your question up to everyone else. Also, thanks everyone, for your explanations of endowment. They were excellent. |
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Jeanne |
The sites below, for the Minnesota Medical Foundation at the University of Minnesota, provides a comprehensive plan for a $1.3 billion university-wide campaign (capital, endowment, etc. all seemingly rolled into one), with all the trimmings available through the site index. It's about as comprehensive as one can get, with information about the campaign, and for donors, alumni, students, faculty, financial advisors and attorneys. I think that exploring it can give an idea of approaches that can be used on much smaller scales. Good luck! |
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Brigitte |
Jeanne, |
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MacClurg |
This is a reality check. I am essentially a good grant writer, with occasional forays into direct mail letters. I have run one Capital Campaign for $364,000 and it was successful. I essentially managed the work of the solicitors/fundraising committee, helped set the $ goals, contributed to the Case statement, outsourced the development of the campaign literature to a local bank as an in-kind contribution, wrote any proposals (my forte) and other solicitation letters, helped id the giving levels and gifts, set up a Recognition committee to honor the donors at a special event, got the organization to secure an artist to create a permanent plaque to honor big donors, etc. |
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Gordon |
Wow, MacClurg, did you touch a nerve! You ask us for advice and we all want to see what you've done and how you do it. Why not just send the document to the list? |
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MacClurg |
Wow I am overwhelmed by the requests for my CC doc! Naive as I am I offered to send it to Kim for a look over, not realizing everyone considered that an invitation. It doesn't seem that sending it to the list makes sense (but if it does someone tell me). So I will honor my blunder and get it out to the many who asked. Providing it does not turn into the hundreds! |
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MacClurg |
My three educational documents concerning Capital Campaigns will be posted on the FundClass webpages soon (by Monday or so), and Gene Weinbeck will post a message when they are there. |
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Mary |
MacClurg was kind enough to email the documents to me and encouraged me to submit my response to the entire group for feedback. Here it is: |
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Gene |
The 3 documents mentioned by MacClurg are now posted on the FundClass webpages. To get to these, follow these steps: 2) The top-most topic is "Selected Recess Discussions". Click on that. Then you will see the "Capital Campaign" recess discussion - click on that. |
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Kelley |
I have a donor who wants to donate the cost of their plane ticket to get to a meeting they attended on our behalf. Problem: Ticket was "purchased" with frequent flyer miles. Can we issue a tax receipt? If so, how do we estimate a value for our internal records? The meeting happened several months ago. |
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Kim |
This is a topic to take up with an accountant for a final ruling, but my understanding is that you cannot issue a tax receipt for something upon which people pay no taxes. Those of us who are frequent fliers have meltdowns when the government suggests taxing frequent flier miles as part of our income (as they do every so often) and so the price we pay for free miles is no tax deduction. Because the miles cannot be sold, they do not have market value. As I say, see an accountant before taking my word for it. |
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Kim |
Simhesvara Dasa had posted sometime ago a description of their exciting temple project in Malaysia and noted that the board members are into making leaflets and fliers to help raise the money. In particular, the board members wanted to pass out 200,000 fliers at a local festival, along with reply cards of some sort asking for donations. As I read this post, I thought, "How did so many board members I know get over to Malaysia?" Simhes-I just want to reassure you that board members (including me when I have my board member hat on) have a tendency to default to what seems to be the easiest (i.e. most impersonal) way of raising money. To raise $75 million is, as you know, going to require some very heavy duty asking for very large gifts. You are going to need a lead gift of at least $15 million. While someone might give this in response to a flier, I have never heard of it happening. The fliers would of course raise awareness, but you may not want that just yet. I spend time on Simhesvara's question because it is CRITICAL that board members understand the nature of a capital campaign, the steps involved, and their role. Too often, board members act as the High School Pep Club, cheering on the team from the sidelines. They need to understand that they are an integral part of the team and cannot sit on the bench. Much about fundraising can be understood in this old Buddhist saying, "We have so little time, we must proceed very slowly." In other words, we don't have time to make mistakes. This is truer in capital and endowment campaigns than even in annual fundraising. Take whatever time it takes to get the Board on board. |
Closing Remarks
As my final posting for this class, I want to share with you a great way to raise capital and endowment, which is to do a large campaign with two or three other related organizations. For example, a homeless shelter might join with a low-income housing group and a homeless advocacy program to build a new shelter, more homes and new office space. Rather than have three campaigns that will draw on a lot of the same people, go together and do it as one large campaign. You will be able to solicit much larger lead gifts, you will be able to address the criticism that "so many groups are working on the same thing," and you will be able to educate the community at large about the difference between direct service, long term solutions and advocacy. Plus, there is an economy of scale that makes running a large campaign much cheaper than three smaller campaigns.
A collaborative effort will only work where the organizations like and respect each other; the board members are all willing to do their share, and there is clear, firm agreement about how the money will be divided up. To test the waters, you may want to do a special event together or something much smaller than the commitment required for a campaign. You will want to start with a feasibility study for something like this, because you are testing three variables: first, can the coalition raise the goal, second, are all the organizations in the coalition equally well respected, and third, do the donors like the idea of a collaborative effort. I once worked on a campaign with three organizations. Everything seemed fine until the study surfaced that one of the organizations had a very bad reputation among a small group of influential donors. This had to be addressed before we could proceed. The organization in question offered to drop out of the campaign, but the other two organizations felt that the accusations that were being made were unfair and unfounded, and elected to lend their weight and credibility to change the reputation of this group with these donors. Honest and sometimes difficult conversations were required, but in the end, this effort exceeded its goal by about $200,000.
It is also very helpful to have two or three influential donors to chair the campaign. These should be people who can talk about all the groups in the collaborative as well as be passionate about working together. They need to make lead gifts and encourage others to do so. They help dispel parochialism and pettiness that often plagues these efforts.
The largest collaborative campaign I worked on was a $10,000,000 three year effort for the Funding Exchange, which is a network of 14 community foundations funding social justice work all over the United States. These foundations are public foundations, meaning that they have to raise all the money they give away. We decided to build an endowment of $10 million and divide the interest income evenly every year. The principal has grown since the campaign ended in 1992, and now each of the 14 foundations gets around $65,000 a year. Several of them have gone on to raise their own endowment and now have two sources of endowment income-the joint endowment and their own. It took two years just to get agreements among the 14 funds about how the campaign would work and how the money would be divided, but the outcome made that investment of time worth it. With so many organizations involved, it was difficult to make sure that everyone pulled their weight, and there was a fair amount of staff turnover during the three years. However, we had strong co-chairs, a strong core committee and firm commitment to the outcome. I worked full time on this campaign, traveled most of the time, and in many ways have never worked harder. My intent was to prove that it could be done. I learned that people like big ideas and respond to big plans and that caution often hinders groups. I was also constantly reminded that fundraising is 10% planning and 90% follow-up, as much of my job was staying on top of volunteers to do their solicitations.
As my final words for this Fundclass, I just want to encourage all of you to imagine what you want, and to know that it is quite possible, with enough planning and forethought, to raise the all the money you need.