Is your nonprofit group thinking about a capital campaign to raise funds at a level many times your annual budget? First of all, congratulations on your ambition and the vision you have for your organization. It’s exciting to think about building one or more new facilities and raising money for other critical needs alongside the capital projects. It’s energizing to thinking about what a difference these new assets would make for your organization.

But let’s step back from the vision for a moment and consider whether your group can reasonably carry off a capital campaign, especially if you have never undertaken one.

In this post, I will cover the first of three of the most important considerations the leadership of any group pondering a capital campaign should place front and center:

Investment funding available for the campaign activity
Staff experienced in major gifts fundraising
Organizational history with donors, especially individual major donors and foundations

Investment funding for campaign activity (“overhead”)
Most capital campaigns invest between 5% and 25% of the goal in additional fundraising and other expenses, over a period of multiple years (often 2-4 years for completion).

That range – between 5 and 25% – seems quite large, doesn’t it? What determines how large your investment needs to be? According to campaign experts, it’s all about how many campaign prospects you have and how well you know them:

The 5% figure applies to large, sophisticated non-profit organizations that have conducted successful capital campaigns before;
15% applies to campaigns in which most of the donors are already known and have been giving; and
25% applies to campaigns where most of the donors are yet to be identified and engaged.

So let’s say you want to raise $3 million for a new building and a maintenance fund, but you’ve never had a capital campaign before. How would the above guidelines inform your planning?

If you have a lot of loyal donors giving at least annually, and some of them give occasional major gifts (in the $25,000 to $100,000 range for special projects), then you use the 15% estimate for campaign expenses, and that translates to $450,000. If you haven’t identified or engaged most of your donor prospects, the expense could be as high as $750,000.

Wow, this is sobering. I can hear your sharp intake of breath from here! And your next question will naturally be:

What would we spend all that money ON in campaign activity?
The following are some typical added expenses incurred by capital campaigns:

Extra personnel – contracts, salaries, benefits, insurance
Outside counsel – campaign counsel, financial, legal
Marketing and educational materials – PR, advertising, website development and upkeep, printing, mailing, etc.
Events – planning, coordination, equipment rental, food and beverage, promotion, supplies
Support – computer equipment, software including adequate donor relationship management software, telephone, AV equipment, copying, etc.
Travel
Staff development
Other unanticipated expenses

And how do we come up with those funds?
The answers to how your group comes up with the investment funding to execute a capital campaign are not as cut and dried as what those expenses might be. Ideally, your group has financial reserves at a level to fund it yourselves, on an as-needed basis. But if you are a young and/or small organization, chances are you don’t have reserves at this level.

Here’s my second piece of sobering advice: Consider waiting to launch
Wait to have your campaign until you have at least 80% of the funding you will need to execute the campaign, in reserves. It might take you a year or three to come up with that funding and it could come from a special gift drive for this purpose, among your Board and your other most loyal donors, or from one or more undesignated bequests you might receive, or even from foundations that know your group very well. However, if you can have most of the investment funding in hand when the campaign is launched, you will feel much more secure about being able to complete it successfully. Plus, those one to three years can be spent in enhanced planning and developing more donor engagement and commitment, before the big asks start.

Some of my campaign clients have found other ways to fund the campaign activity – building it into foundation capacity grants, using lots of volunteers, etc. – but in most cases they have found the campaign to be a strain financially and even on their programmatic activity, and they usually find that raising the funds takes much longer than they planned.

Whatever you do in securing the investment funding for your campaign, here is my most important advice:

Secure most of your investment funding ahead of launching the campaign; and
Be transparent to your funders and donors about how you are funding the campaign.

Next month I will discuss the importance of having one or more staff members experienced in major gifts fundraising dedicated entirely to the work of your campaign fundraising.

In the meantime, I’d love to hear from you if you have comments about this post or any of my previous posts.
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[1] Getting Ready for a Major Fundraising Campaign, a presentation by Aggie Sweeney, President and CEO of the Collins Group, September 26, 2012.