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:
- 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."
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- 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.
- The resources must be enlarged to meet a goal equal to the
need.
- 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.
Those
are my views on the subject. What are yours? I welcome your comments and
suggestions. tony@raise-funds.com
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