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.
“One-Time Only” Campaigns — Somehow They Keep Coming Back!
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.
Capital Campaigns Must Be Large-Giver Campaigns
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.
Projected Divisional Goals to Reach A $3.6 Million Goal
Projected Scale of Capital Gifts Required to Reach $3.6-Million Goal
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.
Before You Excavate—Rate & Evaluate!
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.
Heed The Good Word From “The Good Book”
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:
For which of you, intending to build a tower, siteth 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.
“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.
“Your New Building Is Up And Running,
So Why Do You Still Need 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?
Ask For Cash To Pay The Bills For Now
But Look As Well To The Future
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.
Named Gift Opportunities Abound In Capital Campaigns
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.
In-Kind Gifts As Good As Cash
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.”
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
- General Conditions and Contractor’s fee, including surveys, permits, insurance, rubbish removal, testing and inspection, security services, project manager, etc.
- Site Work, including sewer and water lines, earthwork, caissons, curbs and gutters, paving, fencing and irrigation.
- Concrete, including slab on grade and footing pre-stressed concrete, etc.
- Steel and other metals
- Carpentry, including rough and finish carpentry, millwork, trusses, etc.
- Doors: frames and hardware, windows and glass
- Drywall and metal studs
- Acoustical ceiling
- Wall finishes
- Specialties: appliances, etc.
- Plumbing, including sprinkler system
- Heating, ventilating and air conditioning
- Electrical, including electrical rough and finish, site lighting, security, etc.
- Furniture and loose equipment
- Parking lot: paving and landscaping
- Professional fees, including architect, legal, civil, mechanical, structural engineering, and landscape architecture; survey, soils engineering, environmental analysis, etc.
- Fund-raising expenses, including professional counsel, printing of brochure, stationery, pledge cards, etc., cultivation events, donor recognition plaques, meetings, postage, telephone, clerical support, contingency.
Capital Campaign Fund-Raising Expense Budget
In My Article 12 Things You Should Know About Setting A Capital Campaign Goal, 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.
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
$______: Counsel expenses: travel, phone, fax, etc.
$______: Printing: brochure, support exhibits
$______: Pledge cards, letterhead, etc.
$______: Donor plaques – recognition
$______: Special events – cultivation
$______: Postage, telephone, clerical support
$______: Contingency (10% of total expenses)
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 a 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 3% and I have heard of some even higher than my 5 to 8% 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.
Costs can grow when you engagement of a consultant to early on help perform an assessment of prospect potential. Thus, more and more, pre-campaign activities and programs could actually be phased into the capital campaign budget. My article Campaign Feasibility Studies: Taking The Time To Find Out Whether The Time Is Right
discuss feasibility studies.
Major Duties For the Capital Campaign Chairman
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:
- Recruiting Volunteer Solicitors To Raise Funds From The Following Campaign Divisions:
- Assisting in the process to fine – tune the final major prospect listing
- Personally soliciting each Trustee to his/her giving potential
- Presiding over campaign – related meetings
- Serving as chief spokesman for the campaign
- Soliciting and guiding the solicitation of major prospects
- Soliciting and overseeing the solicitation of Campaign Committee members
- Being the first to make a generous personal pledge
- Obtaining own company’s gift
- Participating in select prospect cultivation and entertainment events
- Providing regular campaign progress reports to the Board of Trustees
Duties For Members Of The Campaign Committee
- Be responsive to the direction and counsel of the Campaign Chair
- Attend the campaign kickoff meeting, if at all possible
- Make a personal leadership gift and solicit your company’s gift, if applicable
- Support and articulate the case for support of the project and campaign
- Personally select and personally solicit approximately five major prospects
- Schedule cultivation meetings, site visits, etc., as desired with your prospects
- Attend periodic progress report and campaign tracking meetings called by the Chair
- Complete all solicitations according to the campaign timeline
The Capital Campaign for ABC
(Information & Instructions for the Committee Given at 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:
- This meeting is intended to give you a thorough orientation regarding the project, our campaign organization and the fund-raising plan.
- You will shortly select several prospects from a listing to be provided to you. Seek partners from the committee to join you where you can maximize potential giving of particular prospects.
- Please study all of the information and instruction materials supplied to you before you make your first call.
During this meeting we will review tools, data, and handouts that you will be receiving in sufficient quantities within the next several days so that you can begin solicitation of your prospects. They include:
- Prospect Profiles: Name, address & other contact information for each of your prospects; their link to ABC; amount of contribution to ask for; means to record your contacts, progress, comments, and final result
- Campaign brochure for each prospect
- Press release for each prospect
- Project drawings for your information and for your prospects to examine
- Fact sheet for each prospect
- Capital budget for each prospect
- Suggested letter you can use verbatim, or revise to suit you. If at all possible, use your company’s or your own stationery, as such a personal communication usually is accorded attention over that of a non-profit organization’s mailing. (If this is not possible, use the campaign stationery and envelopes provided)
- “Named” gift opportunities for you to use to “sell” donation amounts to your prospects
- Pledge card for each prospect
Note: The following articles on this website provide additional capital campaign resources.
- Fitting Annual, Endowment, Capital, & Sponsorship & Underwriting Campaigns into Your Organization’s Plans & Making Them “Sing”
- The Name Is the Game: Memberships and Named Gift Opportunities
- 12 Things You Should Know About Setting A Capital Campaign Goal
Additional resources are available on this website relating to endowment campaigns:
Those are my views on the subject. What are yours? I welcome your comments and suggestions.