23 Jan Capital Campaigns – considerations for funders
Here at the start of 2018, there are at least twenty capital campaigns underway in Greenville County. Some are in the feasibility study phase and others are nearing completion, some are for $1 million and others in the 8-figure range. But no matter the size or stage, most if not all of these campaigns engage members of the Greenville Partnership for Philanthropy in some way.
A capital campaign can be described as a significant fundraising effort to raise a specific amount of money in a set period of time for a defined project, such as new construction, the purchase of land, or an endowment. This can be one of the most intense endeavors that nonprofit staff and board undertake.
To support local nonprofits in this work, GPP brought international fundraising expert Erik J. Daubert to Greenville on January 11, 2018 for a day-long training on capital campaign readiness. The attendees – who included nonprofit directors, nonprofit development staff, Board members and campaign volunteers, and funders – agreed it was one of (if not the) best development trainings they’d participated in.
Erik shared helpful tips for nonprofit leaders – including staff and volunteers – to plan for and conduct a successful capital campaign.
His guidance should be heeded by funders, as well. After all, if nonprofits’ capital campaigns are successful, then the grants and gifts they’ve received from funders for those campaigns are most likely to have an impact.
So what should funders look for when a nonprofit is conducting a capital campaign?
Has the organization taken a careful and clear-eyed look at the need and whether it recommends the project that is being proposed? Sometimes, a new building isn’t the answer – instead partnerships with other organizations, leasing, or other solutions can address the need.
Has the organization assessed its own readiness to take on a capital campaign? Readiness is indicated by a committed board with real interest, leadership passion for the project, a strong community image, experienced and respected CEO or Executive Director, a committed program base, ongoing strategic planning, a stable financial position, strong and growing annual campaign fundraising, and a compelling case for support. Readiness assessments, such as this one by AFP, can help as a nonprofit makes this evaluation.
Does the organization have adequate fundraising infrastructure, including sufficient staff and donor database? The nonprofit should have demonstrated success with annual giving; even then, a capital campaign is likely to stretch staff and volunteer resources.
Has the organization conducted a PROJECT feasibility study (not a fundraising study) and created a pro-forma operating budget demonstrating sustainability of the proposed capital project? Project decisions should never be based on, “Hey, here’s a piece of land!” but rather, what would allow us to best address this community need. The pro forma answers “if we build it, what’s it going to cost for us to run and sustain this?” Then, the nonprofit should develop program planning and marketing plan – how will we use this space? How many people will be in it? How will people be served there?
Has the organization conducted a fundraising feasibility study? This study, conducted by outside counsel, helps the nonprofit’s leaders set a realistic fundraising goal and identify potential major donors. And if, as a funder, you’re interviewed for a feasibility study, it’s important for you to give a realistic sense of what you might give/invest in support of the project.
Does the nonprofit have a realistic plan for raising the funds, including a plan for lead gifts, major gifts, and smaller contributions? Involving a team of staff and volunteers?
Is the project goal based on what the nonprofit can reasonably expect to raise or based on what an architect said the project should cost? Often, nonprofits make an error by obtaining full architectural drawings prior to beginning fundraising. Instead, before fundraising, the nonprofit’s leaders should obtain a concept drawing, which is a very preliminary initial design. These concept designs are “all depends” ideas, because they are based on how the fundraising phase unfolds. Then, when the fundraising has progressed well into the 70-80% target, the full architectural drawings should be secured.
If the nonprofit plans to take on debt, is this a strategic plan based on what it can repay and reflected in the pro forma (rather than what it can borrow)? Debt should never be used to cover whatever the organization was not able to raise.
Does the nonprofit have plans for a successful opening and start up (or – if it’s early in the campaign – is it planning to plan for this)?
Do you have confidence in the nonprofit’s ability to deliver on the project and fulfill its mission and, thus, the change you want to make with your contribution?
Funders should ask these questions in a spirit of partnership and support. We want nonprofits to be successful, and as Erik Daubert pointed out, success can sometimes come from changing course or pausing to be sure the plans and approach are solid. You can also point nonprofits and your grantees to this blog series based on Erik’s visit to Greenville.