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Go to Addendum:  A capital campaign
raises money that will be spent to acquire or improve a physical asset. The
most common use of a capital campaign is for the purchase, construction, or
renovation of a building (commonly referred to as "bricks and
mortar"). However, an organization can conduct a capital campaign to
purchase machinery, equipment, furniture, fixtures, or any physical asset that
can be reflected on its balance sheet.The purpose of a capital
campaign differs from that of an endowment campaign in that the money raised
will not be used to cover ongoing, operational expenses, or to fund special
projects. Capital funds are spent on one-time or seldom recurring expenditures.
The primary difference between capital and endowment funds is that capital
funds are not retained and invested to yield income. However, capital and
endowment campaigns are very similar in their planning and management. Like endowment
campaigns, capital campaigns should be rare. The answer to the question of how
frequently to conduct a capital campaign should lie within the organization's
strategic plan. If an organization has successfully mapped out its growth, it
can anticipate the points at which capital expenses will be incurred. In other
words, need and planned strategy will determine when an organization should
conduct a capital campaign. Frequent capital campaigns can sap the strength of
an organization's annual fund campaign program. Keep going back to supporters
with one special campaign on the heels of another, and sooner or later it will
affect giving to the annual campaign. It is usually best if a number of years
pass between the execution of two capital campaigns or between an endowment
campaign and a capital campaign.Capital campaigns should
always aim to raise a substantial amount of money; the effort required is too
great to justify raising money for an expense that, with a little planning and
extra work, could be covered by annual operating funds. If the item you need to
purchase is relatively low in cost, get the money for it by increasing your
annual campaign goal.Like endowment
campaigns, capital campaigns must be large-giver campaigns. The same rule of
thumb applies: Plan on raising at least one-third of the goal from 10 to 15
donors, a second third from an additional 75 to 100 donors, and the final third
from the rest. All of the arguments against broad-based endowment campaigns are
just as potent when it comes to capital campaigns.
Because they rely
heavily on large gifts to raise a substantial amount of money, capital
campaigns draw their volunteer leadership and solicitors from the upper end of
a community's business and civic leadership. The high visibility of a capital
campaign ups the ante considerably. Few situations are more damaging to the
image of an organization than announcing the planned construction of a new
facility and then failing to raise the money to build. Because of its
substantial goal and small number of large donors, rating and evaluating
prospects is extremely important in a capital campaign, which leads us to the
most common mistake made in capital campaigns: setting a goal that is not
reasonable. The motivating force for a capital campaign is the cost of the
asset to be acquired. All too often, organizations make that cost figure the
goal of the campaign without evaluating their donor base. It does no good to
set a goal of $1 million if your donor base can provide, under the best of
circumstances, only $500,000. You have to make the decision to commit to a
capital expense based on your ability to raise the money to pay for it, not
decide how much you need to raise based on the expense. It is vitally
important not to let the tail wag the dog.
Should my humble words not convince you to be as certain as possible
that you will have
the money to complete your capital campaign before you begin the
project, let the words
of The Gospel, according to Luke, say it for me:
Luke 14:
"Mocking" aside, the reality is that few situations are more damaging
to the image of an
organization, embarrassing to capital campaign leadership, and
disillusioning to the
campaign team, staff and donors---than announcing the planned construction of a new facility
and then failing to raise the money to build.
For which of you, intending to build a tower, sitteth not down first, and counteth the cost, whether he have sufficient to finish it? Lest haply (by chance), after he hath laid the foundation, and is not able to finish it, all that behold it begin to mock him, saying, This man began to build, and was not able to finish. Money To Build It?" Capital campaigns run
longer than annual campaigns. Usually they should be wrapped up within a year,
eliminating the risk of carrying over into successive annual campaigns.
Ideally, the money to pay for a building should be in hand before
ground-breaking. On the other hand, a ground-breaking is a wonderful
fund-raising event, and taking prospective donors to a construction site or
showing them the building to be purchased can be particularly compelling. There
is, however, a very real risk in going too far with construction. If the
building is completed and occupied, and the organization is trying to raise
money to pay off a bridge loan, a campaign will have lost some of its sense of
immediacy. It is also likely that by that time prospects will assume the
campaign is over. After all, the organization has already moved into the
building, hasn't it?Since you are raising
money that needs to be spent now, you will want to encourage cash gifts over
deferred giving. With a deferred gift the organization is either given the
promise of money or an asset to come at some predetermined time in the future,
or it is given money or an asset now, with the understanding that it remain
untouched by the organization so that the asset can earn income or provide some
other benefit for the donor until some future date or event, such as the
donor's demise. While the offer of a deferred gift poses no problem other than
timing to those seeking to build an organization's endowment fund, fund-raisers
seeking cash for capital projects should be ready with a plan for accepting
deferred gifts. Ideally, when a prospect says, "I would love to help, but
I really need the income from these assets to live on at this time," the
solicitor needs to be able to say, "We have a deferred giving program. Let
me show you how it works." At the very least the solicitor needs to be
able to arrange for a meeting with the organization's deferred giving expert.
You take what you can
get, and in the case of a bricks-and-mortar campaign, there may be a way to
turn that deferred gift into endowment funds to help with the future expense of
maintaining the building. Building an endowment reduces the pressure on future
annual campaigns to raise the additional operating and maintenance money that
will be needed to maintain the new facility.Bricks-and-mortar
capital campaigns also offer naming opportunities. In fact, naming
opportunities are potentially an even stronger draw here than in endowment
campaigns. Having your name on a building, a research laboratory, a lecture
hall, or a treatment center can be even more gratifying than endowing a
professorship or a chair in an orchestra. Again, as in endowment campaigns, a
donor need not necessarily cover the entire expense of a new facility in order
to be offered a naming opportunity. When a potential donor is considering
making a gift that is far and away the largest donation to a bricks-and-mortar
campaign and when that gift is truly a substantial portion --- probably more
than half --- of the total expense of construction, then offering naming rights
may be both appropriate and persuasive.Another kind of gift
that should be solicited during a bricks-and-mortar campaign is in-kind goods
and services. If you need paint, why not ask a paint company to donate it? The
company is likely to give you more paint than dollars to buy paint. Although
organizations would generally rather have cash than any other kind of gift,
capital campaigns are one of the few instances where there is no difference
between cash and in-kind gifts. Just remember to give public credit for the
cash value of an in-kind gift. The IRS won't let the donor deduct that amount,
but you should publicly acknowledge what the gift was worth to the organization
--- what it would have cost "retail."Those are my views on
the subject. What are yours? I welcome your comments and suggestions:
tony@raise-funds.com Capital Campaign Construction Expense Budget A suggested capital renovation/building expense budget template is provided below. Perhaps this could be a start for you to develop any such budget. If your organization is in a capital building mode, then the architect, project manager, contractor, and other tradespeople, would give you all you need. You might want to simply seek to identify other organizations which would have such capital construction budgets and learn from their building endeavors. If you are looking to format the ultimate budget to be in accord with the requirements of funding sources, you will need to know if those potential funders would be wanting each of the budget/construction components to be rendered in a simple, one-line, fashion, or if they want a "narrative" style, enlarged, description. If the latter, you will need to know how much narrative is wanted. Thinking back over many capital campaigns, I recall foundations requiring budgets on their terms as described being "narrative," or "detailed," or "comprehensive," or "complete," etc. Somewhere, long ago, along the way, we began to submit a "narrative budget" in a fashion we thought to be reasonable, and we continued the practice exclusively without a problem. What was provided in that narrative budget was always accepted (that does not mean we got the money all of the time), and only a few times were we asked to either clarify or amplify a given line item. Here is an example of what I am talking about and which time after time was accepted: Naturally, the line items were presented in a column with their costs stated in an adjacent column just as any such financial document is rendered. And, as appropriate, we presented the budget as "tentative," or "preliminary," or "official." XYZ "Building for the Future" Campaign Budget
Capital Campaign Fund-Raising Expense Budget
In My Article: ... I cited a "typical" 5-8% cost of a capital campaign. From my personal experience with dozens of capital campaigns, and from colleagues who directed and managed other capital campaigns, I want to stress that the percentage number is merely a reference--- what it turns out to be---at campaigns' end---from pre-campaign budgeting based on line items in exacting costs. The percentage reference is more of the ends, not the means. I know this may be confusing, but people almost always ask what campaigns do cost in terms of percentage to goal or money raised. I'll explain why it is not desirable at all for a consultant or for anyone to project/propose a capital campaign cost at the start using a percentage of expenses to goal or money raised. Relative to this issue is my article on that subject.
--- Capital Campaigns: Building For Now Regarding what I believe to be a typical capital campaign budget, here are the line item expenses I have come to know:
$______: Fund-raising counsel The total expenses would be the amount estimated to be spent over the duration of the capital campaign ---usually from twelve to eighteen months. Naturally, there will be differences regarding how much one organization from another spends on any one of the above categories. I've seen emerging over the past several years huge differences, and significantly higher costs than I had seen years ago, for printing, long-term cultivation, the need for a consultant for a longer period of time, etc. Thus, the amount of time required from an outside fund-raising consultant, the type of campaign brochure, etc., can result in significantly different costs from one organization to another. A capital fund-raising campaign (any campaign) is not conducted by employing a professional consultant whose fee is based on a percentage of the goal or actual funds raised. The consultant's fee should be based only on the time expended---by the hour, by the day, or by the month. Never by the project, and never, never, by percentage, bonus, or commission. The overall capital fund-raising expense is as well not arbitrarily set based on a percentage. Real and sensible expenses per line item are determined. (However, it does generally work out that the TOTAL expenses will be in the 5% to 8% range relative to the goal. I've seen some lower to about three percent and I have heard of some even higher than my five-to-eight percent figure. It depends on the money spent according to the variables cited above. A trend of sorts has consultants working a pre-campaign "organization building" program---a way to ensure that the resources are in place. A donor cultivation, "Building Donor Loyalty," program could very well be a prelude to a capital campaign.
--- Building Donor Loyalty Costs can grow with the engagement of a consultant to early on help to perform an assessment of prospect potential. Thus, more and more, pre-campaign activities and programs could actually be phased into the capital campaign budget.
--- Campaign Feasibility Studies: Taking The Time To Find Out Whether The Time Is Right In Consultation With The
President Of The Board Of Trustees, Chair Of The Development Committee,
Campaign Counsel, And The Executive Director, The General Campaign Chairman
Will Serve As The Leader Of The Campaign For Its Duration By:
The Capital Campaign For ABC (Information And Instructions For The Committee Given At The Campaign Kickoff) Thank you again for
agreeing to help the ABC raise $5.0 million to meet our Campaign goal to build
a new and dynamic downtown headquarters and treatment center. The following are
the steps we have developed to assist you to maximize your efforts to secure
contributions from the prospects you will personally select tonight:
What We Will Provide To
You In The Required Quantities Within The Next Several Days So You Can Commence
Your Solicitations To Your Prospects: (** For Your Information And Review At This Meeting)
Note: The following articles on my website provide additional capital campaign resources.
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