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The Campaign Part of "Capital Campaigns"

7/1/2013

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In a conversation the other day with a friend who is a major donor and volunteer working on a capital campaign, she asked me about the efficacy of email versus direct mail. As we talked about the pros and cons of each, I quickly noticed that we weren't really talking about these tactics - or, well, we were, but that wasn't the real issue. The real issue plaguing the progress of my friend's capital campaign was the lack of an overall strategy for the entire effort - the "campaign" part of the equation was missing.

The reason capital campaigns are so named is because raising some factor more than an organization's annual budget (which is generally part of what defines a capital campaign) takes time. Maintaining momentum, knowing where the organization stands as time marches on, and what to do differently in each stage of a campaign is what makes for success. And the key to an effective campaign is a plan.

Someone who has been through a campaign before, someone who knows how to perceive the "lay of land" (in this case, who are the prospects, what do they care about, how much can they give, what will motivate them to do so, etc.) and someone who can galvanize others (in other words, a leader) is needed to develop a plan that will carry the organization through from alpha to omega in the process. Needless to say, this plan must be strategic and visionary - in other words, it must consider the big picture and the long range. It also must be flexible, identifying key indicators that call for this option or that. It must also have milestones so everyone involved can see what progress is being made and that trigger certain activities from specified people.

In my friend's case, the lack of a campaign plan became clear to me because of several things she mentioned: 1) they were moving into "Phase 2" of the campaign, 2) they were beginning the public appeal process, from which they expected to raise $250-500k, and 3) they still needed to raise a third of the total. For starters, most campaigns have three or more fundraising phases, the last of which is the public appeal. This may seem counterintuitive: why wouldn't you want to let as many people know about the campaign as early as possible so you could raise money from as many people as you can? Well, the reason is that most campaigns raise the largest amount of funds from a few major donors. For example, my friend's $15M campaign has already raised $10M, and only about 20 people have committed funds so far. This is pretty typical.

Also, the "public appeal" raises the smallest dollar amount, but involves the largest number of people. Because of this, it signals the time to make a big public announcement of the campaign. And this takes place when the overall success of the campaign is assured. (No organization wants to face the reputation crusher of a campaign announced that doesn't reach its goal or fails altogether!) It is a very important phase, galvanizing the entire community around the cause, but it should not be announced prematurely - whether by email or snail mail or any other tactic.

Finally, when my friend told me her organization still needed to raise a third of their total (~$5 million), but that they were starting the public appeal from which they expected $250-500k, it was clear that the overall logic and sequencing of the campaign had not been worked out. When a campaign plan is weak or missing, a common result will be debates over the merits of tactics, instead of evaluating them based on a common understanding of the campaign's phases and overall momentum. These debates can degenerate into full-on conflict if the organization doesn't address the underlying issue - and fast.

There are plenty of fabulous new ways to raise money these days - and discussing the merits and options among them is a great idea. However, one thing hasn't changed and isn't likely to: raising big money is a big undertaking and requires big leadership with a big-thinking plan. That's why a capital campaign is still just that - a campaign.

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Capital Funding 2.0: The New Approach to Nonprofit Capital Projects

8/28/2012

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Guest Blog Post

By Cherie Kirschbaum

At some point in every nonprofit’s lifecycle, the organization reaches a point where its current facility no longer meets its needs. The organization may consider leasing new space, purchasing a new property, expanding or renovating, or building a new space. In the past, nonprofits thought the only way to finance the project was through a capital campaign. And, nonprofits in this situation typically embarked on a campaign feasibility study to see how much could be raised. 

The feasibility study conclusions typically became the sole instrument to guide leadership throughout planning for the capital project, placing the focus on what could be done for this amount of money.  This approach keeps nonprofits from assessing and addressing comprehensive facility requirements – both immediate and long-term. 

Today, progressive nonprofits approach capital projects by first determining what they need, then by developing a financial plan to fund the project. A financial plan allows nonprofits to develop a diversified approach for funding capital projects, and includes a variety of sources accepted by financial institutions, foundations and donors.

 There are five funding categories available to nonprofits for capital projects:
1. Public funding (local, state and federal)
2. Foundation funding (grants)
3. Bank financing (bonds or commercial loans)
4. Cash reserves
5. Capital campaign

While, each source has advantages and disadvantages, they are not mutually exclusive. Nonprofit capital projects can be funded using a combination of these methods. In many cases, a combined approach allows a nonprofit to leverage the investment among all stakeholder groups. A well developed project and financing plan will not only inspire confidence from potential funding sources, but also encourage participation in the project as an investment. 

Below are a few comments about each of these five funding categories:

Public Funding: While the process to apply for and receive public funding can be daunting, the amount of money that could be granted to the project is well worth the effort. These funding sources include Community Development Block Grants, HOME Funds and others. It is important for a nonprofit to understand the requirements that come with some of these funding sources, such as Davis Bacon Wage requirements or HUD Section 3 compliance. These requirements can have an impact on the cost and schedule of the project. 

Foundation Funding: Most nonprofits are aware of the private and community foundations in their area that provide capital grants. Foundations recognize their role in financing a well-conceived project for a nonprofit with a strong financial track record, qualified leadership and a committed Board of Directors.

Bank Financing: Bank financing can become a bridge between getting a project done now and completing a capital campaign. Some nonprofits may be able to continue to pay the debt service on a bank loan even after the capital campaign is complete. This category of financing is becoming more mainstream, and is frequently accepted by both nonprofit funders and the nonprofits themselves. 
 
Cash Reserves: A nonprofit’s cash on hand or endowment can provide the equity sometimes required by other funding sources, and can be replenished through a capital campaign.

Capital Campaign: Nonprofits that embark on a capital campaign, even in difficult economic times, can be very successful. A well conceived project and financial plan can help to leverage stakeholder support, while also deepening donor commitments. Campaigns can attract new donors, and elevate visibility within the community and beyond. 

Savvy nonprofits consider the full spectrum of funding sources available for capital projects. By doing so, these organizations are often able to open the doors to a new space without sacrificing elements necessary to best meet program needs. They are also able to engage, rather than exhaust, donors, foundations, and community partners in their long-term success.

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Cherie Kirschbaum, President and Founder of City Projects, Inc., is passionate about the power of real estate to affect social change. A recognized community leader, Cherie was named the Denver Business Journals 2011 Outstanding Women in Business and as a Women to Watch by Jewish Women International.

City Projects partners with nonprofits to plan, orchestrate and complete their real estate development projects to transform not only their space but their organization. City Projects’ project management guidance unlocks productivity, unleashes creativity and enhances capacity. City Projects has worked alongside public and private organizations including the Mental Health Center of Denver, Karis Community, Mile High Youth Corps, The GLBT Community Center of Colorado, Pikes Peak Hospice & Palliative Care and others to successfully conceptualize and complete real estate projects. The City Projects team integrates each client’s mission, programs, financing and fundraising strategies into the day-to-day requirements of the project. In addition, the team serves as a translator between the client’s staff, board and project team, facilitating communication and managing implementation through project completion.

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    Rebecca Reynolds, author of Nonprofit-KnowHow,  is the author and editor of Nonprofit Navigator, the Nonprofit-KnowHow blog. Contact us if you'd like your nonprofit to be featured or to be a guest blogger on the Navigator!


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