Remember those great old movies with Mickey Rooney and Judy Garland? The ones in which the “kids” had a money-raising dilemma that perplexed and perplexed them. All of a sudden Mickey would light up with youthful exuberance and optimism. He’d turn to Judy, and say, “I know, let’s put on a show! We can do it!” An hour and a half later, after a liberal dose of movie magic, they’ve put on a production worthy of Broadway, the problem is solved, everybody has had a good time, and Mickey and Judy are in love.
There are non-profit organizations that operate in much the same way. Faced with the dilemma of growing financial need outstripping static resources, officials of those organizations will turn to one another and say, “I know, let’s put on a fund-raising campaign!” Unfortunately there is little movie magic in the nonprofit world. Too often the campaign fails, the problem is still there, nobody has a good time, and love isn’t exactly what the campaign managers are feeling for one another.
It’s not that fund-raising campaigns aren’t the answer to financial need. In the end, where else is a nonprofit organization to turn than to generous givers? The problem is that, unlike Mickey’s and Judy’s show, the current campaign isn’t the first or the only one the organization will put on. It has to fit into the context of an overall development plan. Today’s campaign, follows yesterday’s, and precedes tomorrow’s. The trick is to make sure that each and every one of an organization’s campaigns is successful. That’s the job of a general development plan.
A Fund-Raising Campaign Must Be A Plan Within A Plan
The general development plan identifies how and from what sources an organization will acquire and maximize contributed income. It communicates that information to the organization’s staff, volunteers and supporters. Specific fund-raising campaigns are then planned and carried out in accord with the general development plan.
The paid head of the organization, the board chairperson, key staff members, trustees, volunteers and advisory group members prioritize financial needs and agree to common fund-raising goals. Within the context of the general development plan, they create an environment for achieving those goals and for planning, initiating, and producing annual, endowment, capital, sponsorship, and underwriting campaigns. Each type of campaign has key issues and components that an organization must understand when it considers installing any one of them as a contributed income program.
The Annual Fund Campaign:
Once A Year Every Year
The annual fund campaign is a 365-day-a-year process conducted each and every year to raise money to assist in paying regular and ongoing expenses. It should be an organization’s primary source of contributed income, and it:
- Stimulates the giving of unrestricted funds to allow an organization wide latitude in how funds are applied to meet expenses.
- Increases public awareness and acceptance of the organization, the fact that the organization must raise money to fulfill its mission, and that it is in the process of raising money now.
- Develops a base of knowledgeable and committed volunteers.
- Builds a predictable base of support and provides a pool of proven donors capable of making major gifts.
- Is the campaign to which individual donors usually make their first gifts to the organization.
- Consists principally of individual donors.
- Must never be canceled or deferred for any reason because a campaign deferred is a campaign defeated.
- Must take precedence if the organization does not have the resources to mount other campaigns.
- Is a broad-based appeal for funds directed at a large number of prospective donors.
- Requires that solicitations be made for predetermined specific asking amounts or provides “benchmark” amounts to prospects when it is not possible to rate their giving ability.
- Seeks to increase a donor’s contribution each year to meet the organization’s increasing expenses.
- Can be conducted simultaneously with any other type of fund-raising campaign.
- Features donor memberships, clubs, and societies at various giving levels offering donor benefits, privileges and/or explicit examples of what the donation “buys” for the organization and for the users of its programs and services.
Endowment And Capital Campaigns:
Providing For The Future And Building For Now
Endowment campaigns raise money to invest rather than spend, and the income from those investments is used in many ways. Capital campaigns raise money that is spent to acquire or improve a physical asset.
Both endowment and capital campaigns:
- Require that an organization perform a feasibility study before it commits to carrying out the campaign.
- Are not conducted if the expenses they would raise funds for, can in the short term be covered by annual funds and other gifts and grants.
- Are undertaken when an organization has the resources to do so without diminishing the effort directed toward the annual fund campaign.
- Run no longer than about 16 months from start to finish. There is a point when resources begin to diminish and when leadership’s enthusiasm and energy begin to fade.
- Are usually not announced to the public until at least one-quarter of the goal has already been raised.
- Use challenge and matching grants to stimulate giving, increase the size of gifts, and bolster the energy and commitment of solicitors.
- Are more often successful when major “inside” support from the board of trustees totals at least one-third of the goal.
- Keep costs in line by holding total fund-raising expenses to no more than about 5% of the money raised.
- Have formal, line-item budgets that include all fund-raising expenses and provide a liberal contingency expense amount.
- Are spaced widely enough apart to avoid soliciting prospects who are still making payments of pledges from a prior endowment or capital campaign, to avoid giving the appearance of poor long-range planning, and to avoid negatively affecting annual fund campaigns.
- Have convincing cases for support to explain the need for this “special” fund-raising effort.
- Must be large giver campaigns with one-third of the money coming from about 15 donors and the second third from about 75 additional donors.
- Should avoid broad-based approaches such as soliciting only $1,000 gifts for a $1-million campaign. In that case an organization would need to solicit successfully 1,000 donors from approximately 3,000 prospects –a daunting set of numbers.
- Must rate and then solicit prospects at their maximum giving potential, keeping in mind that some donors will surely give substantially beneath their capability and the organization’s expectations.
- Should offer many “named” gift opportunities as “sales tools” for solicitors.
Providing For The Future
An endowment campaign raises money that the organization invests in income producing assets. Endowment is a wonderful thing for a nonprofit organization. Every dollar earned by an endowment is one less dollar that needs to be raised in an annual fund campaign. Endowment funds provide money for daily operations and extraordinary expenses, including capital expenditures.
An endowment campaign:
- Is most feasible when an organization has been around long enough to have a past that reassures prospective donors of its potential for a future. After all, an endowment gift is one that is made in perpetuity.
- Presents a more credible case for support of the future when there is current financial stability.
- Is produced only when the effort put into it is justified by the ability of endowment funds to earn substantial income.
- Is one in which achievement of the goal is difficult to validate. Future income rates are uncertain and payment schedules cannot be guaranteed.
- Should have a goal which has a realistic chance of being raised.
- Should solicit and encourage deferred gifts, especially when prospects are not able or willing to give up current income.
- Can be slowed, even suspended, when problems in the production of material such as the campaign brochure occur.
- Can be seriously impeded when named gift opportunities are interpreted so literally that the gift must actually cover the cost of the naming opportunity. They should be symbolic or commemorative in nature with the naming amount based upon the availability of prospective donors able to give at leadership levels.
Building For Now
A capital campaign raises money to cover the cost of capital assets that cannot and should not be part of a nonprofit organization’s annual operating budget. Probably the best known form of capital campaign is one that raises money for a new building or improvements to an existing one. However, capital campaigns are not limited to bricks-and-mortar fund-raising efforts. Capital campaigns are commonly used to raise money for equipment or any other depreciable good.
A capital campaign:
- Should, if possible, be yoked to an associated, but substantially smaller, endowment campaign that raises money to help defray operating costs for the asset that will be purchased with funds raised by the capital campaign.
- Has a goal that is not based simply upon the actual capital expense. The potential that can be raised is the most important governing factor in goal setting.
- Should have intermediary goals for cash-in-hand at scheduled points when a payment must be made on the capital asset being acquired. The most obvious example is when a building is being constructed.
- Does not, in a campaign for a building in which the building has been completed and occupied before the campaign closes, allow prospective donors to think that because the building is in use that their money is any less needed.
- Does not actively solicit deferred gifts since cash is needed for the current acquisition expenses, but accepts them, often applying them to an associated endowment campaign. The income they provide in the future will help offset operating expense of the new capital acquisition.
- Seeks in-kind gifts and always publicizes the donations with “market value” credits to the donors.
Sponsorship and Underwriting Campaigns:
Would You Please Fund Our ________?
Sponsorship and underwriting campaigns raise funds to pay for projects, programs, events, initiatives, and activities. Like capital campaigns, the money they raise is used for a specific purpose, but it is for a purpose other than acquisition of a capital asset.
Sponsorship and underwriting campaigns:
- Can be aimed at corporations, foundations, and individuals.
- Are a way of obtaining additional funds from annual donors above and beyond their gifts to the annual campaign.
- Should also solicit prospective donors who have not given to the annual campaign.
- Can include a package of benefits for donors that include real out-of-pocket-expense for the organization, but the organization must resist a sponsor’s desire for an excessively expensive benefit.
- Can be used to guarantee funding for proposed and new initiatives before the organization enters into the new venture.
- Offer great networking opportunities to a sponsor’s customers and executives and their spouses.
- Require that the same specific project not be offered to more than one prospect at a time.
- Must not compromise or tarnish an organization’s image by being overly commercial or inappropriate.
- Must not embarrass a sponsor or underwriter because of the content it funds.
- Should be positioned so that corporations see their support in a philanthropic sense rather than as a quid pro quo value received relationship.
The different types of fund-raising campaigns each have their own key elements, but they share two important objectives. They are there to raise money and make friends for an organization. Just like those old Mickey Rooney and Judy Garland movies fund-raising campaigns need to leave everybody whistling a happy tune and feeling good about themselves. After all we want them to come back for the next show . . .
I mean campaign.
Note: Additional resources are available on this website to help you understand how and when your fund-raising campaigns will work better for your organization.