Last week we began a conversation about capital campaign planning. We defined a capital campaign as an intense effort on behalf of an organization to raise significant dollars to fund a one-time project (or series of projects) during a defined time frame. It typically involves the purchase, building or renovation of a facility or piece of property.
This week I’d like to discuss the development and testing of your campaign goal.
First, let’s review what we learned from my October 2017 blog series about feasibility studies. We considered whether or not nonprofits are spending the time and money necessary to assure their capital projects are feasible before raising dollars and putting shovels in the ground. Unfortunately, many do not take this important step in the planning process.
Typically, a feasibility study is done prior to a capital, endowment or significant major gifts campaign. It is part of the campaign planning process. Feasibility studies are especially critical before embarking upon campaigns to build or renovate facilities or purchase land. They are primarily used to test a fundraising campaign goal, but they can also test how funds should be used, test campaign messaging, provide valuable cultivation opportunities, assess an organization’s philanthropic and organizational readiness to conduct a major fundraising campaign, and identify campaign leaders, volunteers and major donors.
The capital campaign goal to be tested in the study is typically developed in coordination with architects, builders and a long-range planning (or board) committee based on an organization’s goals and needs. The board should review and approve initial goals even prior to the feasibility process. It’s important to consider all possible costs associated with the project before setting the goal, including fundraising and marketing costs, landscaping, contingency funds, long term maintenance of the facility, and the inclusion of endowment funding. To learn more about the development of a capital campaign goal, check out this week’s freebie which provides valuable information about the steps to take to determine your goal.
Most nonprofits engage consultants to lead them through the feasibility process. This is because the consultant can serve as an outside, objective party who is able to function as an unbiased interviewer, listener and observer. Often times, donors and prospects will confide in or provide candid feedback to the consultant; feedback they might not share directly with the nonprofit.
The bottom line is that most nonprofits engage in feasibility planning in order to best understand how much they can raise for a capital campaign project. Far too often, nonprofits bite off more than they can chew when it comes to large fundraising projects. They set budgets based on what they want, not what they are realistically able to raise, which leads to aggravation, unfinished facilities and disappointed donors. So before you get excited about attractive architectural renderings, consider a feasibility study. This does not mean your team should not “think big” about what is hopes to accomplish via the campaign, but these hopes must be tested against the reality of the organization’s fundraising capabilities.
The recommendations section of a feasibility study report will likely include a target campaign goal or goal range. The report itself provides a thorough summary based on study results, synthesizing findings from interviews and ultimately culminating in a recommendation to:
- Proceed toward the campaign goal at the proposed (or higher) project budget, or
- Proceed with the campaign at a lower project budget, or
- Postpone the campaign until specific issues have been addressed
In most feasibility study interviews, we provide a gift range chart (as opposed to soliciting the donor with a specific ask), which should prepare the donor for the solicitation conversation and create interest in a philanthropic investment. Based on the responses to the gift chart, and a consultant (or feasibility team’s) readiness to address either A or B (above), the following methods may be used to predict the campaign goal:
- Lead Gift Analysis
- A campaign lead gift typically ranges from 20 – 40% of the total funds raised.
- Top 10 Gift Analysis
- Historically, for a smaller institution, the top ten gifts identified in a feasibility study total 40% of the campaign goal. For a larger institution, it might be 33% of the campaign goal. (For 40%: Top gifts X 2.5)
- Total Gifts Analysis
- Similar to the “Top 10 Gift Analysis,” research has shown that for smaller institutions, the total amount of gifts identified in the feasibility study ideally represents 40% of total fundraising capacity, or 33% for a larger institution. (For 40%: Total gifts X 2.5)
Next week we’ll take a break for the Thanksgiving holiday but I’ll continue the week of the 30th with information about how to recruit, train and engage your capital campaign leadership team. Until then, enjoy the holiday and please feel free to be in touch with questions or comments!