FundRaiser Blog
Capital Campaigns: Building for Now
A capital campaign raises money that will be spent to acquire or improve a physical asset. The most common use of a capital campaign is for the purchase, construction, or renovation of a building (commonly referred to as “bricks and mortar”). However, an organization can conduct a capital campaign to purchase machinery, equipment, furniture, fixtures, or any physical asset that can be reflected on its balance sheet.
The purpose of a capital campaign differs from that of an endowment campaign in that the money raised will not be used to cover ongoing, operational expenses, or to fund special projects. Capital funds are spent on one-time or seldom recurring expenditures. The primary difference between capital and endowment funds is that capital funds are not retained and invested to yield income. However, capital and endowment campaigns are very similar in their planning and management.
“One-Time Only” Campaigns — Somehow They Keep Coming Back!
Like endowment campaigns, capital campaigns should be rare. The answer to the question of how frequently to conduct a capital campaign should lie within the organization’s strategic plan. If an organization has successfully mapped out its growth, it can anticipate the points at which capital expenses will be incurred. In other words, need and planned strategy will determine when an organization should conduct a capital campaign. Frequent capital campaigns can sap the strength of an organization’s annual fund campaign program. Keep going back to supporters with one special campaign on the heels of another, and sooner or later it will affect giving to the annual campaign. It is usually best if a number of years pass between the execution of two capital campaigns or between an endowment campaign and a capital campaign.
Capital campaigns should always aim to raise a substantial amount of money; the effort required is too great to justify raising money for an expense that, with a little planning and extra work, could be covered by annual operating funds. If the item you need to purchase is relatively low in cost, get the money for it by increasing your annual campaign goal.
Capital Campaigns Must Be Large-Giver Campaigns
Like endowment campaigns, capital campaigns must be large-giver campaigns. The same rule of thumb applies: Plan on raising at least one-third of the goal from 10 to 15 donors, a second third from an additional 75 to 100 donors, and the final third from the rest. All of the arguments against broad-based endowment campaigns are just as potent when it comes to capital campaigns.
Because they rely heavily on large gifts to raise a substantial amount of money, capital campaigns draw their volunteer leadership and solicitors from the upper end of a community’s business and civic leadership. The high visibility of a capital campaign ups the ante considerably. Few situations are more damaging to the image of an organization than announcing the planned construction of a new facility and then failing to raise the money to build.
Before You Excavate—Rate & Evaluate!
Because of its substantial goal and small number of large donors, rating and evaluating prospects is extremely important in a capital campaign, which leads us to the most common mistake made in capital campaigns: setting a goal that is not reasonable. The motivating force for a capital campaign is the cost of the asset to be acquired. All too often, organizations make that cost figure the goal of the campaign without evaluating their donor base. It does no good to set a goal of $1 million if your donor base can provide, under the best of circumstances, only $500,000. You have to make the decision to commit to a capital expense based on your ability to raise the money to pay for it, not decide how much you need to raise based on the expense. It is vitally important not to let the tail wag the dog.
Heed The Good Word From “The Good Book”
Should my humble words not convince you to be as certain as possible that you will have the money to complete your capital campaign before you begin the project, let the words of The Gospel, according to Luke, say it for me:
Luke 14:
For which of you, intending to build a tower, siteth not down first, and counteth the cost, whether he have sufficient to finish it?
Lest haply (by chance), after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him, saying, This man began to build, and was not able to finish.
“Mocking” aside, the reality is that few situations are more damaging to the image of an organization, embarrassing to capital campaign leadership, and disillusioning to the campaign team, staff and donors—than announcing the planned construction of a new facility and then failing to raise the money to build.
To learn how FundRaiser can help you evaluate your donor base for a capital campaign
