The Nonprofit Leaders Guide a Capital Campaign Vol. 3 of 12:
How to Determine Capital Campaign Goals
Last month in this series, The Nonprofit Leaders Guide to a Capital Campaign, I focused on defining your dream for the campaign. There is no capital campaign that can succeed without a clear understanding of why you are raising money, how it affects your mission, and whether the leadership and community support this vision.
The piece was not an assessment of whether there is financial support to reach your capital campaign goals. There are additional steps that are necessary before you ask that question. Today, we will focus on one of them, how to determine a capital campaign financial goal.
Capital? Endowment? Both?
Some campaigns focus exclusively on raising capital to build/renovate a structure, or on establishing funds to support the programs and costs associated with a building but many campaigns today focus on both. So many, that in fact we might have to make up a new term to easily explain the combination. How about Capowment campaign? Endowital Campaign? CapEndow Campaign?
Silly names aside, when you are setting your campaign’s financial goals make sure it encompasses the full costs, which only start with the estimated construction costs. You must also include:
- The additional projected costs if it takes a year (or more) to raise the funds (also known as the inflation rate) as the cost of construction will increase at least 5% each and every year.
- Soft costs, e.g. fixtures and furnishings.
- Financing for bridge funding to cover the cost of construction while you are waiting for all the pledges to be fulfilled, particularly if you plan on allowing five-year payouts (often employed as a way to help donors give more).
- Contingency funding that could be as much as 10% of the construction costs to allow for the unforeseen.
- Software and systems (if necessary) to ensure donor tracking is effective and efficient and that funds are collected and applied appropriately.
- Staffing to handle the organizational and financial management of the campaign.
- Architects and engineers to cover the costs of design, drawings, renderings and necessary changes as the plan evolves, otherwise nothing happens.
- Fundraising Consultants (like Mersky, Jaffe & Associates) can help you raise more money in a timely, consistent manner but add to the expense—usually in the 3% to 5% range depending upon the size of the campaign—and should be considered as part of the necessary costs of a campaign.
- Marketing or legal help as necessary
Then, there is the endowment portion. Saying you want money to support your nonprofit is not enough. Donors want to know whether the asset-based revenue will be used for current or new programs. Will it help pay for general maintenance, or will it support scholarship opportunities for the preschool? Each dollar that will be earned from the fund should have a clear purpose.
Which do you determine first–the capital campaign goals or the available funding?
Some people believe you should determine what funding is available before setting your goal. That seems logical. Don’t spend what you don’t have, right? But, a larger goal for something that the community supports will raise more money than a generic idea for some future construction project that people will theoretically support. And a larger goal yields larger gifts, because people give in relation to the “big picture.”
There may be a time after a feasibility study that you determine your goal is too high but don’t limit yourself before you even start. It is only when you can offer a case for giving on specific aspects of the campaign to prospective donors that you will understand your community’s will to support it.
Read the rest of the series:
Volume 1: The Overview
Volume 2: Defining your Dream