For many organizations that already struggle just to match last year’s fundraising revenue, the capital campaign is simply a pipedream.
Capital campaigns can often be a temptation for nonprofits wishing to grow their budgets quickly. Because they generally come with very high monetary goals, capital campaigns satisfy the psychological desire for a way to bring in immense revenue; because they are campaigns, often lasting several months, if not years, we convince ourselves that the high goals we set are realistic, because the deadlines are so far away. If our annual revenue is $1,000,000, and we tell ourselves that we need to raise an additional $1,000,000 in the next three months, we will likely step back and say it is unrealistic. If we project it out over two years, however, it suddenly seems more realistic, even though it still represents a 50% growth in our budget spread out over two years. For some organizations, a 50% growth in budget may indeed be realistic. But for many organizations that already struggle just to match last year’s fundraising revenue, the capital campaign is simply a pipedream.
The sequence of thought often goes:
1. We need a lot more money now.
2. Capital campaigns are supposed to bring in a lot of money.
3. Let’s create a capital campaign.
The flaw in the thinking here is that simply because you have set a campaign goal, you will inevitably meet it. But to be successful, a capital campaign needs to come with a well-thought-out plan.
Here are the key questions to ask before starting a capital campaign:
1. Why are we undertaking a capital campaign?
If there is a unique need, such as purchasing a theatre for performances or expanding or adding a new program, a capital campaign may be the way to find the start-up funding for a one-time, extraordinary cost. But if the hope is simply to grow the budget more generally, a capital campaign is a bad idea. That time would be better spent implementing a strategic development plan with the goal of improving your development department more generally.
2. How much do we actually need?
With grant proposals, it can be tempting to simply pick a number to ask the foundation for and make up a budget based on the ask amount. But if we can come up with a budget for our need beforehand, and show the foundation why we need the exact amount we are asking for, we make a much more compelling ask. Similarly, with a campaign, it is important to avoid the temptation to say “Let’s set the goal at $2,000,000, because we need a lot of money for our project and $2,000,000 is a lot of money.” Take the time to project, even in just a rough manner, what the new project will likely cost to launch, and include that budget in the campaign collateral materials. It will make the campaign look much more well thought out and more appealing to contribute to.
3. Can we identify supporters who could cover a large portion of the campaign goal right off the bat?
Typically, it is advisable to identify where 80% of your funding will come from before starting the campaign. The rule of thumb for capital campaigns is 80/20; expect 80% of the goal to come from current donors, and 20% from outside givers. Can an anchor donor, or a collection of your top donors and board members, pledge at least 50% of your goal right off the bat? If not, you may have trouble convincing donors to contribute to a campaign that is, say, six months deep but has only achieved a third of its goal.
4. Do we have an end date?
It is important to set a definitive end date to a capital campaign. Having a definitive date by which the organization will either make or not make its goal keeps staffers motivated to work towards success. Letting the campaign date remain fluid not only causes employees to lose steam, but ultimately looks bad to supporters.
5. Can we commit?
A capital campaign is just that—a campaign. It takes hard work and a financial investment. If we want to raise several million dollars, do we have the time to devote to donor meetings and asks, over and above the work being done for regular fundraising efforts? Do we have the budget for travel, mail appeals, collateral materials, and general campaign infrastructure? Do we have the stamina to continually feature and advertise the campaign in our written materials, website, etc. and stay on message? A capital campaign will not raise money just by existing, and an organization should be prepared to devote time and energy to meeting its fundraising goals.
6. What will this do to our donors?
Often, committed donors will be happy to contribute to a capital campaign, to the extent that they are not already giving you as much as they can or want to. But the goal with first-time donors should be to turn them into long-term donors. A regular solicitation schedule consisting of housefile letters, meetings, and non-solicitation touches is designed to ask donors for contributions multiple times over the course of a year and cultivate them, over time, into regular major donors. Asking a wealthy donor prospect for a special, one-time gift may be a good way to get them in the door immediately, but it hurts your prospects for developing a longer-term donor relationship in which regular asks are a part of the routine.
Overall, organizations should be hesitant about undertaking capital campaigns. A much safer investment of time, money, and energy would be to work on a two to three year strategic plan focused on improving your development program. The strategic plan should focus on four or five core areas where your development department could afford to improve, and then outline concrete, realistic goals and steps for boosting revenue gradually over time. Strategic planning allows organizations to assess shortcomings and areas of growth, such as whether they need to devote more time on task to specific activities. With a successful development plan, an organization can show, at the end of two or three years, that they set realistic goals to grow their development operation and successfully met them. With a track record of success under their belt, that organization is now in a much better position to launch a capital campaign, should they need to, since they can demonstrate to donors the ability to set goals and accomplish them.
American Philanthropic provides strategic consulting and fundraising services for nonprofits. Whether capital, endowment, annual, or otherwise, they plan and execute fundraising campaigns that are as varied and as complex as the needs of its nonprofit clients. Learn more at AmericanPhilanthropic.com.