Planning Considerations Before Launching a Capital Campaign or Building a New Endowment Fund
Having a vision for the future with aspirations for growth and new major efforts is exciting and can spark energy and enhance a culture of vitality for your organization. Capital campaigns and building an endowment fund can be game-changing tactics, but they come with a whole new set of challenges and risks. It is easy to get excited about these types of funding but hard to have success, especially for nonprofits who have no experience raising these kinds of funds and managing their use.
Exploring and understanding the key “why” drivers is a good starting point. The purpose, planning and goals for these funds comes way before the “how much can we raise” question. I wish I had a nickel for every time a Board member has suggested starting a capital campaign or building an endowment. Intentions are usually focused on the big dollars that could be raised without considering the many consequences of going after these funds.
For the “why” drivers, focus your attention on the programs, infrastructure, or other game-changers you want to add in the future. For capital campaigns, the “why” drivers are often based on infrastructure and capacity, such as acquiring a building, renovating or expanding your current building, seed funding to launch a new regional or international expansion, or some other similar large one-time effort. For building an endowment the “why” drivers are usually based on expectations that donors will be attracted to naming opportunities to permanently fund a scholarship, fellowship, award program, research support, or other similar efforts.
Next you need to consider in detail how these efforts will impact your current mission delivery and expectations and vision for the future. Examine whether these new “why” drivers are in alignment with your current strategic plan and whether they are in alignment with member, donor and constituent expectations for your organization.
Finally, take a hard look at implementation challenges and whether your organization is well-positioned from both financial health and capacity points of view.
Implementation challenges include answering the difficult questions such as:
Do we have the staff to handle these efforts?
Do we have the expertise required to be successful?
Do we have the management and accounting systems to track performance and compliance efforts over a long period of time?
Financial health considerations include questions such as:
Do we have adequate operating reserves to front-end the costs?
Can the organization withstand donor/funder fatigue (which often occurs when attention is re-directed to new efforts from traditional funding support)?
Capacity considerations include questions such as:
Do we have the right governance structure and Board leadership to steward these efforts?
Will these efforts steer the organization from its core mission?
What are the fallback positions if the funding targets are not met and the intended purpose must be changed or scaled down?
This discussion is not intended to discourage you from considering a capital campaign or seeking to build an endowment fund. However, I want to highlight that success is in proportion to how much time, planning and, exploration of the variables you directly invest on the front-end.
This brings me to one last consideration: the timing. Everything discussed above around “why” drivers, mission delivery and expectations, and even around financial health and capacity involves elements we can control. The changing economy, crises, elections, public opinion, and even the weather are out of our control. As you go through the many planning and action steps ahead, you must build into your model and tactics an element of flexibility to read and react to the changing environment around your organization so you will be in the best position to hit the start button when the time is right.
Planning Tip – Because these efforts are large and non-traditional, establishing a special task force or working group will be most beneficial. Look beyond just Board members when seating this group. It is helpful to include staff members, lay leaders with professional expertise, and people from the community at-large who will be impacted or served.
Planning and timing are hard to separate. Stay flexible in approach, open-minded to new information and expect the unexpected. This will be your safety net.
