12 Things You Should Know About
Setting A Capital Campaign Goal

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 amount needed (the goal), can be readily translated into printed specifications, drawings, slides, photographs, models, etc. These explicit and physical “goals” are fixed and unyielding.

Success or failure of fund-raising campaigns is measured incrementally by how far above or below goal a campaign finishes. Annual fund and endowment campaigns, while having visible and public goals, can fail to meet their objectives, but are able to absorb the losses or diffuse the failures. The annual fund campaign can fall short of its goal and incur a deficit in the current year, but can make up the deficit in the following year. Endowment campaign goals are established in rather uncertain ways. The goals are based upon long-term, not always clearly defined needs and are related to forecasts of investment income which generally are unreliable. Thus, an endowment campaign’s goal can be raised or lowered at almost any time during the drive, and most often without serious notice or concern.

However, the failure to meet a capital campaign goal is a serious matter and is of great concern.

If a capital campaign fails to meet its goal, the loss is clearly visible. A building will not be completed, a renovation will be curtailed and some physical asset desperately needed will not be provided. The volunteer leadership is particularly vulnerable to blame for the defeat and the organization’s credibility suffers. Thus, the goal-setting process for a capital campaign especially needs to be approached with great care.

Too often, the individuals accountable for the final results of capital campaigns are not always afforded the “luxury” of helping to set capital goals early on. A development professional is usually given a goal and told to see to it that the amount of money needed is raised. Capital campaign leadership commonly commits to the paying of architects’ fees and site development costs well before they have any idea their capital campaigns have the potential to succeed. They incur such major expenses before fully evaluating their donor base of support. Some organizations commence construction of new facilities without knowing what their chances are to fully fund their projects.

However, there are a number of things which should be taken into account to measurably benefit the capital campaign goal-setting process and they should be seriously considered in the earliest possible planning stages of the campaign. They are:

  1. A capital expense/goal must be based upon the ability to raise the money to pay for it, not by deciding how much money is needed to be raised based on the expense. It is vitally important not to let “the tail wag the dog.”
  2. The amount of money to be raised must meet with the consensus of the organization’s volunteer and professional leadership. You cannot have, “It’s too much,” or “It’s not enough,” divisive arguments within the organization at the time prospects are being solicited.
  3. The goal should be enlarged, if at all possible, with foresight and planning to meet future capital needs. This will help to avoid subsequent closely recurring additional capital campaigns which could stretch the resources of an organization, antagonize prospects and could possibly have a negative effect on annual fund campaigns.
  4. The final goal amount must be related to viable potential prospects identified and individually rated for their maximum giving potential and by factoring the volunteer leadership’s commitment to personally give to the project and to raise money for it.
  5. The total goal is comprised of trustee, individual, corporate and foundation divisional goals as determined by realistic and appropriate evaluations of their respective potential. Those divisional goal must never be arbitrarily set.
  6. The goal in a capital campaign is more than establishing the final number. The organization should determine other goals in order to have certain amounts of cash in hand at various stages of the project’s development to pay on-going expenses. It is important to solicit prospects capable of providing early and up-front cash to help meet those developing money needs.
  7. The amount decided upon to be raised should be influenced by advance leadership pledges, suggested to represent about one-quarter of the goal as determined by some form of a pre-campaign feasibility effort. As much as possible, the board of trustees’ aggregate contribution should represent at least one-third of the total goal.
  8. The goal should be related to the fewest number of gifts in the largest possible amounts: one-third of the money should be raised from about 15 gifts, the next one-third from an additional 75 to 100 gifts and the last one-third from all other gifts.
  9. Non-cash contributions, such as in-kind goods, products and services, should be factored into the goal as much as possible to help lessen the need for actual cash.
  10. A reasonable “cap” of endowment funds should be added to a capital goal to provide annual income to help pay for future expenses, such as maintenance and replacement. There are always individuals close to any organization who prefer to give to endowment, as well as those who give on an unrestricted basis. At the appropriate time an organization is certain it can pay in full its committed capital expense, those unrestricted funds can be applied later at the organization’s discretion to the endowment component of the campaign.
  11. Planned gifts (deferred gifts) should not be made part of the capital campaign goal since the money being raised needs to be in the form of available cash to pay ongoing expenses. However, offers of such gifts should be readily welcomed and applied to the endowment “cap” component of the campaign, as the income from those future gifts will help to provide additional operating and maintenance money.
  12. Major benefactors recognize that it costs money to raise money. They will support a capital campaign goal which incorporates all reasonable campaign fund-raising expenditures, including professional fund-raising consultants’ fees. While such campaigns are not conducted by employing professional consultants whose fees are initially based upon a percentage of the goal or actual funds raised, it generally works out that total expenses will be in the 5% to 8% range relative to the goal.

Setting a capital campaign goal means that every organization must first look at the resources it plans to tap to determine the potential to meet the stated goal. The fund-raising resources available to an organization are a reality against which the goal should be measured for feasibility. Those resources consist of the volunteer leadership and solicitors available to work a campaign and a realistically rated and evaluated list of prospective donors. If the resources are insufficient to raise the money which the organization has targeted, there are only two available options.

  1. The resources must be enlarged to meet a goal equal to the need.
  2. The capital project’s expense budget must be reduced to allow the goal to be set lower at a level consistent with available resources.

No contract or other binding agreement should be put into effect until one or the other of those two options is established. 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.

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13 Comments

  1. I am a grant writer for a large non profit organization. We started a Capital Campaign 4 years ago. We completed the building 1.5 years ago. We did not raise enough to complete the building so we borrowed money from our savings with the understanding from Executives and BOD that we were to pay the money back. I have been tasked with writing grants for our Capital Campaign, but I am struggling to find a foundation that would support a Capital Campaign for a building that is complete. My grant goal is 1 million. Any suggestions on where to begin?

    Reply
    • Megan,
      Not only is it difficult to raise money for a new building long already up and running, but you are basically asking for money to pay back a loan of sorts. (Debt elimination.)

      My guess is that few, if any granting foundations, would have giving guidelines in favor of those two realities—especially the latter.

      From my experience, granting foundations are prompted and to give their money to aspiring, inspiring and developing projects, not for something finished and in the distant past.

      I can only counsel that you follow my suggestions from my article:

      —- Debt Elimination Fund-Raising Campaigns
      http://www.raise-funds.com/2007/debt-elimination-fund-raising-campaigns/

      Reply
  2. I am the ED of a small arts organisation. My organisation has been renovating an historic building over 4 phases. We are located in a small town with limited resources. Our capital campaigns for the first couple of phases have been successful and to date we have raised (and spent) roughly 3,000,000. But one of the things our development committee forgets is that these campaigns negatively impact our ability to raise funds for operations for a couple of year’s while people pay off their capital campaign pledges. We are moving into another capital campaign and have concerns. How does one factor in to the campaign these operations losses?

    Reply
    • Caroline,
      I am pleased that you have been successful to date, even though, from my experience, when such capital campaigns are conducted in “phases,” much goes wrong with such a process. When the full project is presented to prospects, you can ask accordingly to the full expense. When the asks are doled out in phases, each phase thus allows for a smaller donation than what could be achieved overall. And the phase pledge payments, to no surprise, will surely back up and clog the process.

      In any event, by coincidence, I have a draft of piece I was going to post some day which addresses the dual solicitation challenge/quandary/opportunity when an organizations seeks a one-time special gift from the same donors to the Annual Fund.

      I feel that from reading the following, you can best determne what to do and when to do it.

      (1) Double Ask
      ((2) Capital & Annual Campaigns Giving Rates

      (1) Double Ask

      It seems that the most common three options used by organizations regarding the solicitation of a prospective donor when seeking an Annual Fund contribution (“once a year, every year”), and a capital or endowment gift (“one-time special”), can be summed up in these ways:

      Say we want to ask anew, or renew, a $10,000 Annual Fund contribution and request a $100,000 capital (or) endowment gift from Mr. & Mrs. Jones.

      1. Absorb – combine the amounts for one $110,000 ask at the same presentation time with only vague reference to the combination of the two campaigns.

      — Advantages are a single solicitation, a more focused case, and less confusion.

      — Disadvantages are that you lose the unique distinction of the Annual Fund’s purpose which is to help pay for basic operations, and you greatly reduce the chance to secure an increased Annual Fund gift while seeking the major endowment or capital gift. You might even find that the Annual Fund gift could be reduced from what was given previously.

      2. Double, separate, ask at the same presentation time for the $10,000 and the $100,000 gifts with presentations of their distinct cases for support.

      — Advantages include a personalized capital (or) endowment and Annual Fund appeal, a more efficient use of volunteer solicitors, and perhaps an easier “sell.”

      — Disadvantages are that donors generally find it hard to appreciate the distinction between the two appeals, and it can be very difficult to train volunteer solicitors to be able to clearly and effectively communicate the important distinctions and unique qualities between the two campaigns.

      3. Separately ask at different times during the fiscal year for the $10,000 Annual Fund gift and for the $100,000 capital (or) endowment contribution.

      — Advantages are that there can be clear distinctions made between the Annual Campaign and the capital (or) the endowment campaign, volunteer solicitor training is much easier when there is focus on one campaign case at a time, and the Annual Fund can stand on its own with a better chance for a renewed and even for an increased gift.

      — Disadvantages are not so prevalent, even though you solicit the same prospect at two different times during the year in this special instance. That’s because they know the asks for special capital (or) endowment gifts are usually widely spaced between years. However, recruiting and training more volunteers to do both jobs could be more challenging.
      Summary:

      Whatever method you use should avoid overlapping and conflicting solicitations and confusion among your volunteers and constituencies. Whatever works for you is what counts. I have personally used and I suggest only no. 3, though many others with success and experience in the fund-raising profession have employed the other methods.

      Early on, regarding the “double ask,” explain as best we could, donors simply found it difficult to to appreciate the distinction between the two requests in the same breath as made by the solicitors. It was difficult as well to train volunteer solicitors to clearly and effectively communicate the the distinctions between the two campaigns. And while asking for a major, additional, gift for capital (or) endowment, we could not reasonably expect the donor to give an increased Annual Fund gift asked that same time — especially a meaningful increased Annual Fund Gift.

      Our donors — with “breathing room,” were more receptive to giving Annual Fund gifts (with increases) when we made the separate (different times) asks. Yes, we needed more volunteers and the extra effort to make the separate asks, but over many years of such campaigns, the same givers to capital (or) endowment campaigns collectively gave more money to the Annual Fund than in the previous year. I am sure this would not have happened if we conducted the double ask.

      Another, and I believe a most critical point in any event, is that it is relatively easy to communicate to Annual Fund donors who can give large capital (or) endowment gifts that their Annual Fund contributions are for “now,” while their one-time capital (or) endowment gifts are for the “future.” These individuals are usually the “investors” in an organization and they understand and endorse that an organization needs annual operating money to carry out the mission every day, and that the organization needs special and large amounts of money to carry out the organization’s vision to the future. It is much harder to make that same point with the givers of smaller donations, and they will, more times than not, opt to give one way or the other — not both ways.

      (2) Capital AND Annual Campaigns

      One key — maybe the most important — aspect of any capital campaign is that it must be a major-giver campaign. And when that is so, the old tried and true formula usually applies — that about 90% of the money comes from about 10% of the donors, or something along that line.

      The point here?

      That when I have worked many, many capital campaigns, and from what I have seen of those worked by others, the most successful were those meeting the formula cited above, or somewhere in that “ball park.” That meant we were dealing with a relatively small group of annual fund donors who were personally contacted to be asked for their ADDITIONAL major capital gift.

      Since we were not seeking to raise capital funds from our broad-base of annual fund donors who were not potential major-givers to the capital campaign, they simply were not involved in any way — thus we never needed to take into account any projections or accommodations when the capital campaign was concluded.

      I’ve simply never heard of this being done.

      The only way there could be issues with the annual fund to address when a capital campaign is concluded, is when a great deal of time and effort was expended to smaller annual fund donors to give as well, or instead, to the special capital effort when those annual fund donors were asked for small capital gifts.

      Smaller donors of annual funds, those not capable of giving major capital gifts, would not be personally talked to regarding the rationale for both asks, thus attempts to say so in letters and such, would be confusing and misunderstood. In that instance, I would guess that the smaller donors to the annual fund would most likely choose to give but one gift, but ask that it go into the capital campaign coffers. Such results usually mean very little to help meet a large capital goal in the first place. Worse, is that when that happens, there is a problem the next year getting them back on board as usual for the annual fund gift.

      In my 20 years as Director of Development for the Cleveland Orchestra, we ran endowment and capital campaigns a number of times, without ever interfering with the annual campaign. Thus, any annual fund projections for the next year were not influenced in any way by the capital results. And the collective amount given to the annual campaign by those donors — who also contributed the most money to an endowment or capital campaign — always increased.

      Annual fund donors will give major capital and endowment gifts as ADDITIONAL support when they understand and accept the need an organization has to raise annual operating funds for “today,” and the need for larger and special capital funds to build and endowment funds to invest for “tomorrow.” That’s done when major donor prospects are given those separate cases for support in-person so they can readily comprehend the argument for both types of support. Under those circumstances the understand and they comply.

      The annual fund donor giving say, $5,000 this year for the annual fund, will give that amount the next year at the least, even though he or she gave $100,000 to the capital campaign. I know, I’ve experienced this many times.

      Reply
  3. hey I do wanted to get sum information about starting fundraising capital campaign for starting a sports and jazz saloon restaurant
    here in augusta ga area

    Reply
  4. I was recently elected to the Board of a small nonprofit as their Development Director (I’m doing this in a volunteer capacity). I was quickly handed the reigns to a Capital Campaign that has been in limbo for about two years. The Board is pressuring me to start the campaign in December and yet I feel uncertain about the whole thing. First, the Capital Campaign is to raise funds for equipment they purchased last year and now have to pay off. Second, they never conducted a feasibility study and aren’t willing to pause the campaign until I conduct one. My gut says this isn’t going to work but I understand their frustration at seeing no movement on the campaign over the past two years. Any tips on what I can do in this situation? Thanks!

    Reply
    • Nicole,
      First, the bad news—as I see it.

      This is not a capital campaign at this stage. The “Campaign” is not in Limbo after two years, it is dead. No restart, in the conventional way, will allow for the typical Capital Campaign process to work since the capital asset to be purchased—the equipment—has been acquired and in use,up and running for a year.

      You need to raise funds to pay off a debt; the payment of vendors’ invoices.

      Giving the Board the facts and the realities of the situation is the first step to having any chance of raising the money.

      I see nothing but confusion at best, and severe criticism at worst, in trying to “sell” such a venture. A capital campaign raises money that will be spent to acquire or improve a physical asset. Since the asset has been acquired a year ago, you cannot come up with a compelling case for support in the classic Capital Campaign style.

      The organization has already acquired the asset, so it now needs to find the best way available to it to go about raising the money.

      I think that the “good” news is that you can put together a campaign of sorts to do just that.

      See if you can put together the plan, the prospects and the Board solicitors to go where the money must be—certainly not a general public effort—because only those very close to your organization will have the best chance to be understanding, sympathetic, and generous.

      —Debt Elimination Fund-Raising Campaigns
      http://www.raise-funds.com/2007/debt-elimination-fund-raising-campaigns/

      Reply
  5. Tony, I am spearheading a capital funds campaign that has just started and we encountered an unusual problem. Within two days of opening up the campaign, an anonymous donor donated the full amount of the campaign goal. We’re not sure what to do now. How do we keep the campaign going to encourage others donors and not offend the anonymous donor?

    Reply
    • Craig,
      Congratulations.

      The high regard the donor has for the good things your organization does is obvious.

      Having equally high regard for the donor is absolutely necessary. You must comply with the donor’s wishes.

      The only alternative I can see, from being distant to the inner workings of your campaign, and not knowing the temperament of the donor, is that possibly the donor would agree to have his/her gift used to endow the capital project. That way, you could go on with your campaign as planned.

      Even so, should the word get out about the initial intent, you would likely have problems explaining the switch. So, action now is critically important if you feel this is a viable alternative.

      You must think this idea through and know the donor well enough to avoid any resentment, the donor feeling his/her gift was not good enough for you, and that what they want is not important.

      If you go this way, do so with care.

      I expect that you have exacting materials in use for the campaign, such as, the project description, the case for support, named opportunities, the campaign team, project budget, etc. Therefore, no one there must push for making alterations to change in mid-stream to fund anything else, for example, a “Phase 2,” or other such capital need.

      Of course, the donor’s money cannot be used as a matching challenge because you have the pledge and more money than is needed will be raised beyond what is called for in the budget—which cannot be justified.

      Since the donor is giving all of the goal, it is important to know when cash would be in hand to pay the on-going capital expenses. Were his/her payments to be far enough into the future that such costs could not be met, I guess you could still go public for the “bridge funding” you would need to pay for construction expenses.

      Otherwise, depending on the donor’s wishes, it could be that you have no campaign to conduct.

      Reply
  6. I am interviewing for VP of Development for a large social service organization. I have raised $$ via workplace giving, disaster relief, corporate partnerships, foundations and matching gifts and major gifts. I have not essentially spearheaded a capital campaign.
    How should I approach this?

    Reply
    • Best of all good luck with the interview.

      As you gather information and confidence to manage a Capital Campaign, I feel certain that a reading and application of the material we have provided on our website will go a long way to help make your efforts successful.

      Simply work with the following resources:

      — Campaign Feasibility Studies: Taking The Time To Find Out Whether The Time Is Right
      http://www.raise-funds.com/2002/campaign-feasibility-studies-taking-the-time-to-find-out-whether-the-time-is-right/

      — Capital Campaigns: Building For Now
      http://www.raise-funds.com/1999/capital-campaigns-building-for-now/
      (See the Addendum, related links to other articles and links of related worksheets & forms)

      By the way, another useful resource will have you review all 42 campaign-readiness affirmations in the following article. The affirmations cover fund-raising campaign components found in any type of campaign, be they for annual, endowment, or capital funds.

      — Check Out Your Organization’s Fund-Raising Readiness and Learn the Secret Of Fund-Raising Success
      http://www.raise-funds.com/1998/check-out-your-organizations-fund-raising-readiness-and-learn-the-secret-of-fund-raising-success/

      Getting a sound familiarity and comfort-level with those components will have you up and running to be able to manage and direct a capital fund-raising campaign.

      But, remember, one cannot just plow ahead to go into a capital campaign without first knowing if such an effort is feasible. That’s the value of conducting an official Feasibility Study or performing a sound in-house assessment of true potential. One or the other must be done before committing any expense to produce a capital asset.

      Again, best of all good luck.

      Reply

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