FundClass Archives:

Capital Campaigns

Edited Digest of FundClass Topic #11, March 1998

Facilitated by Greg Jakubowicz

Opening Message by Greg Jakubowicz

Greg Jakubowicz has a tremendously strong record of successful capital campaign management having worked as a consultant with a variety of national and local non-profits including religious organizations, colleges and universities, hospitals, drug rehabilitation agencies, and homeless organizations.

He has raised over $400 million for non-profits during his 18 years of fund raising experience. He founded Health Solutions and Funding Solutions in 1994 and 1995 respectively to help meet the fund raising needs of non-profits. Services offered by his companies include Long Distance Rewardsr, a donor sustaining program developed with FicoTel Corp.; fund raising consulting in capital, annual, and endowment campaigns and a special planned giving program.

Definition of a Capital Campaign:

A capital campaign is when a non-profit organization finds a need to either build a building, provide additional funding for program/service needs, create an endowment to fund building maintenance and/or programs, and any other funding needs that have not been met through regular fund raising programs.

An example, your church needs to build a new roof, replace the boiler and do some other renovations to the building. The pastor needs to raise $500,000 to meet these needs. You conduct a capital campaign raising pledges from individual members who fulfill their pledges over a 3 to 5 year period. A school wants to raise an endowment fund to help pay for an education program that is not currently funded. Again, they canvass the parents of the children attending the school for a gift payable over a period of 3 to 5 years.

"Don't let the tail wag the dog"

An early message agreed with facilitator Greg J. on the need to conduct a feasibility study before embarking on a Capital Campaign. "Whether we conduct a feasibility study with outside consultants, do a simpler pre-campaign evaluation with consultants or internally, or conduct an intense internal rating and evaluation exercise ourselves of our major prospects, that effort, in any reasonable form, is critical to the success of any capital campaign, but it is not usually done -- or done correctly. . . All too often, a typical organization will make the cost estimate of its desired capital project the actual goal of the capital campaign, without first evaluating its donor base. (I was once called in as the first consultant an organization hired for its building campaign eight months AFTER ground-breaking!)". The point here is that you don't decide how much money you need to raise based on the expense involved, you decide based on your ability to raise money. . . not letting "the tail wag the dog".

Even Before a Feasibility Study:

Another writer wanted to make the point that while feasibility studies are helpful in campaign planning, even that is not a foregone conclusion, nor is it the beginning of campaign planning. The first step must be to discover whether or not your organization has consensus among the Board and administration on common beliefs and principles, and goals for the future of the organization. Without this, a feasibility study is worthless.

Also, remember that this feasibility study is not like a marketing survey (do you like the red can or the blue one?), but because it is conducted among your top donor prospects, your case must be ready to present. It's important to understand that in order to conduct the feasibility study, you must already have done the work of preparing the campaign for presentation, so studies are expensive. You must have your materials prepared, and then spend time (probably one to two hours) with each top prospect . . . so, long before you begin planning a campaign time-line, writing job descriptions for committee chairmen, etc, you must be absolutely clear about what your organization is, what it does, and what it wants to be. Take a step back from campaign planning, and make sure the basics are in place.

How important is internal consensus in an organization which is contemplating a capital campaign?

Very! If there is not consensus in the organization regarding the proposed capital campaign's reason for being in the first place, and agreement regarding its objectives -- and if there is not a state of internal readiness to provide the resources to support the proposed capital campaign, there is no value whatever in conducting an external feasibility study. --- Committed involvement and total consensus of the campaign team's "getters" and facilitators (Board and administration) is absolutely vital as the first step in any capital campaign.

And, an organization should have no serious developmental, structural, or leadership problems at the point that a capital campaign is undertaken. (One respondent/consultant said he's recommended that an organization not conduct a capital campaign until they clarified their case, reorganized their Board to gain a greater understanding of Board members' role in fundraising, and improved existing development-office structure.)

It's easy to see this point if you think of it this way: when you ask major-donor prospects for a contribution, odds are good that they're going to ask questions like: "is your Board 100% behind this campaign?" "What is your compelling reason for conducting this capital campaign?" "What's the goal of the capital campaign, and how did you arrive at that number?" "Do you have the staff resources to carry out this capital campaign?" --- You can see how important it is to "have your house in order" before you begin even the first steps of a capital campaign. Recovering from a disastrously bad impression on major-donor prospects is not what you want to spend your time and energy doing!

-- And having clear goals, which can be effectively communicated to potential donors, is important as well. One writer's situation: his organization found a wonderful site at which to permanently locate several of their programs which are currently scattered about at various, rented, sites. With this site in mind, they began to think about a capital campaign, and are ready to conduct a feasibility study . . . and just found out that they are in competition for that site with other agencies. So, proceed with the feasibility study without having a specific location in mind? -- The response from facilitator Greg J.: It's important that you are clear in what your needs are before you approach potential donors and leaders in a feasibility study. Prospects want to know in advance that your organization has reviewed your options, and are good stewards of the gifts you receive. Having firm options to present would be best.

Fundraising's Golden Rule

"Fund raising is from the top down, and from the inside out" -- meaning that we begin to fundraise with largest gifts first, and from "family" (meaning Board, staff, etc) first, then working outward. If your Board and staff are not keen on giving, how can they encourage others to do so?

How should an organization evaluate a private consulting firm during a campaign?

In response to a question put by a FundClass participant (who'd had the experience of being told by a consultant that his organization couldn't raise $50, then rejecting that advice, going ahead, and successfully raising the entire amount), facilitator Greg J. agreed that checking into the background and experience of consulting firms/consultants is important. He suggests: calling past clients; interview the consultant who will be assigned to your project; asking the principals in any consulting company about their own experience and their willingness to be hands-on involved. If an individual consultant doesn't seem to 'fit' into your organization, ask for another, or try another firm.

Working with volunteer leaders

Several participants had questions and comments about working with the volunteers and volunteer-leaders in a capital campaign. To avoid/postpone volunteer burnout, it is important to give volunteers a specific job which has a beginning point and ending point. (After their project is ended, they can always be asked to do something else, or may volunteer to do so, precisely because they are not "burned out".) Some fundraisers have actually gone so far as to have a written contract with key committee chairpeople, to ensure that once a capital campaign is begun, it will continue, and not trickle out in the middle. When people understand, before agreeing, just what is needed/expected of them, once they do agree to do a job, your chances of that job being completed and done well go way up!

What happens when you run an Annual Fund appeal simultaneously with a Capital Campaign?

One writer is concerned about the Annual Fund giving falling while her school is running a capital campaign. Facilitator Greg J. reassured her that the two types of campaigns are often run concurrently. The key is to make it clear what the differences are . . . if this is done effectively, there should not be much change in the annual appeal. . . . When you have a donor who indicated that s/he will give to one or the other, it is suggested that s/he give to the Annual Fund, thus showing the donor how important their annual support is. In some cases, that donor will get caught up in the excitement and participate in the capital campaign later.

A capital campaign will frequently help uncover new donors, and prospects for larger gifts from current donors . . . "filling the pipeline" of future campaigns.

Where does planned giving come into a capital campaign?

One question concerned the solicitation of planned gifts during a capital campaign, one issue being that the point of a capital campaign is to raise money for use now; planned gifts may decrease the capital campaign gift, but on the other hand, no fundraiser wants to turn away any gift. . . . Responses to this question:

"It is not a wise thing to forsake the future for the present" . . . planned gifts SHOULD be actively solicited during any campaign. . . . most of the time, planned giving does not interfere with outright giving, but enhances it.

Another response agreed, that ignoring the future isn't wise, that paying for the upkeep and operations of whatever project the capital campaign is to fund will take future gifts. . . . a motto for a capital campaign might be: "help meet our needs today and in the future". Every prospectus (solicitation brochure) should include: naming opportunities, a solicitation letter, a gift plan, and sample planned giving opportunities.

How to begin the "public phase" of a capital campaign?

A participant asked how to successfully launch the public phase of a capital campaign. Facilitator Greg J.'s response reminded us that the purpose of the public phase is to announce the capital campaign to the public, but more importantly to use the occasion to stress the success of the campaign, with at least one-third of the funds already raised. . . it is an ideal time to announce a "challenge grant", and to have a fundraising dinner/event for those prospects you could not reach during the major-gift phase . . . plan a press conference with the leadership of the organization promoting the campaign . . . include publicity on the capital campaign in all newsletters and publications.

Which led to the question "Why are capital campaigns set up with a "quiet phase" and "public phase"?

Every capital campaign has peaks and valleys -- it's a natural rhythm. But, the public's perception of the valleys can be devastating and stop a campaign dead in the water . . . so, the two-part phase system is a way to deal with that problem: typically, before a capital campaign is announced to the public, the "quiet phase" of major-gift solicitation takes place. Since these donations are always solicited from major donors, Board members, volunteers, friends and others close to an organization, and by personal visits, phone calls, , or letters, the general public won't hear much about it. Then, the public phase is kicked off with great fanfare and publicity, and an announcement that "One-third of our goal of $xx,xxx has already been raised" . . . which lends an immediate air of success to the project, and motivates people to join in. The announcement of the public phase is also a time of revitalization of a capital campaign, getting everyone involved re-energized for the big public push. -- Usage of the quiet phase is not a given; too many organizations ignore it. But when you announce a capital campaign effort, and then have several months of quiet-phase type work and little publicity, it can leave the impression of failure in peoples' minds -- and few donors get excited about giving to a cause which seems to be failing.

The Kresge Foundation Challenge Grants

In the discussion of the question of quiet and public phases of capital campaign, facilitator Greg J. offered info about the Kresge Foundation, which is good at encouraging the public phase of capital campaign, with their "Kresge Challenge" grants:

The address is: Kresge Foundation, 3215 West Big Beaver Road, Troy MI 48084 ; phone: 248-643-9630, fax: 248-643-0588

Request an application form and annual report. Review the application form, and past nonprofits who have received support; discuss the criteria with your Board before sending in the application. A visit to Kresge before you apply is also a highly-recommended procedure.

If you do an Internet search using "Kresge Foundation" for your search engine entry, you will see how some colleges are acknowledging the Kresge grant, which is a requirement by Kresge. Their requirement to publicize also involves using the grant in your pitch to prospective donors. When you submit a proposal, it must include a plan and timetable for completing your campaign, and an explanation of how you will use the Kresge Challenge Grant both to ensure the success of the campaign and to broaden your donor pool for future fundraising. So, you should have in place an aggressive but realistic plan for each of your constituencies -- corporations, foundations, individuals -- that specifies how you will use the Kresge Challenge to increase both donor numbers and dollars from each group. They'll also want to see projections from each constituency and the timeline, proposed committees, and other vehicles you'll use to match the Kresge grant.

In further discussions of this issue, several questions were raised:

Just how do these challenge grants work? The history of the Kresge Challenge grant is that the community matches, dollar for dollar, the grant Kresge gives. Sometimes, with other foundation matching grant programs, the community is asked to give a 2:1 ratio. --- It is possible to use other foundation grants to match the Kresge Challenge grant . . . many foundations are quite enthusiastic about giving when they learn that your nonprofit has received a Kresge grant, as they know how thorough Kresge is, which gives them confidence to follow Kresge's lead.

Will Kresge work with small organizations/campaigns? Yes, the majority of the grants received for clients of facilitator Greg J. were for smaller organizations. "As evidence in their large grant publication, Kresge is interested in large and small organizations." Key factors: the organization has sufficient funding in place to finance the construction and maintenance of the new building. (This is why having an endowment component to your plan is favored by Kresge. . . an endowment will help insure that the new building will be maintained and not strain the current budget.) You'll also need to show Kresge that a local bank or gov't entity will help underwrite or secure your construction loan . . . if there is no financing, they will look at your reserves to make sure that you have enough funds to proceed with the construction project. If you do not have that, Kresge will insist that you get some type of funding to assure completion of the project. If you depend on fundraising alone to fund construction, you will need to demonstrate to Kresge that you have sufficient funds on hand to complete the project and maintain the facility for at least three years. (If you cannot demonstrate this, it may not be wise to send an application to Kresge.)

At what point should I submit a proposal? Late in the campaign, which is what Kresge prefers. Kresge insists that the np family (Board, staff, volunteers, current donors) are solicited first, before the public campaign is announced. They also want to see a campaign timetable projecting which public constituencies (corporations, foundations, individuals) are approached in your campaign. -- Timing is important; Kresge has a review process which can take four months or more. They typically award grants in Spring and Fall. -- A personal visit to Kresge is extremely helpful (Greg J.'s clients each went, and each was awarded a grant). Kresge Foundation personnel are happy to answer questions about the application; they like the idea that a nonprofit has retained a fundraising consultant; they will ask for a table of gifts, projected fundraising goals, and fundraising strategy in reaching all donors in your region to achieve your goal with or without Kresge Challenge Grant money. -- Once you've applied, keep Kresge informed of your capital campaign progress; send a report to them prior to their decision date so that they know you're working diligently, and hopefully successfully, on your capital campaign.

Should I go to visit Kresge alone, or should the President of the Board go too? By all means, take a member of the Board . . . if Kresge sees that level of committment, it can only help.

How upfront should I be with Kresge? We've had some well-publicized problems (now solved), and I think they'll probably hear about them. -- Be very upfront. They may already have heard! Have answers to all possible questions, and be as straightforward as possible.