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.