Some Things to Consider before Launching a Capital Campaign

26 May Some Things to Consider before Launching a Capital Campaign

27 May 2024

By David Allen, Development for Conservation

For whatever reason, land trusts all over the country are exploring the possibility of launching capital campaigns – and most of them for the first time. If you are one of them, and you were to call me for advice, here are a few things I would say to you:

Capital campaigns are useful tools for raising a specific amount of money to accomplish specific goals. For example, a capital campaign can be used to raise the money necessary to buy and perpetually manage a new preserve. In thinking like this, it can be useful to consider what it might cost to conserve land as opposed to what it cost to buy land. The cost of conserving land would include 1) the value of the land (which may or may not be the same thing as the purchase price), 2) any due diligence and closing costs, 3) stewardship endowment, and 4) first day and 5) first year stewardship expenses.

Capital campaigns are not particularly good at raising money for operations because that money needs to be raised every year. Not just once.

You can use capital campaigns to raise money for endowment, but it’s difficult. Some donors know about endowments and love them. Some know about endowment and are more wary (How do I know who will be making decisions about this money 50 or 100 years from now?) For most people however, endowment simply isn’t on their radar as a high priority. A better strategy for building an endowment is to invest in planned giving.

Campaigns aiming to raise $500,000 or less probably do not need a feasibility study. The cost of conducting the study is too significant a percentage of the campaign to justify. And the lead gift – on the order of $100,000-125,000 – shouldn’t be out of reach for someone in your donor base. Most of the other gifts will be in the $10,000-50,000 range.

Campaigns aiming to raise more than $1,000,000 should always conduct a Feasibility Study. Now the campaign’s success will be more dependent on three or four people giving $100,000 and more. In between $500K and $1.0M̅ is a gray area. Feasibility studies will certainly help, but will still be expensive as a percentage of the campaign.

Feasibility Studies are not designed to tell you how much money you will be able to raise. They are designed to test whether a specific goal is feasible. They are also designed to test specific messaging and identify potential volunteer leadership.

There are three back-of-the-envelope tests you can conduct yourself to provide an early read on feasibility – way before you invest in a consultant’s feasibility study.

First, consider your best fundraising year out of the last five. If the campaign goal is 20 times that number or less, your campaign might be OK. If it is more, you might be best advised to cut the campaign up into more manageable chunks or phases.

Consider a number equal to 25 percent of your campaign goal. If you can name at least five donors you could credibly ask for that amount, your campaign might be OK. If not, you might be best advised to consider a lesser goal.

Will everyone on your Board support the campaign both in terms of voting for it and in terms of increasing their own giving to support it? If so, your campaign might be OK. If not, you might be best advised to consider a lesser goal. (If you can’t convince your Board members, how will you convince others?)

The 80/20 rule applies to capital campaigns, too. Eighty percent of the money will come from 20 percent of the donors. And the last 20 percent will come from 80 percent of the donors. This means that after raising the first 80 percent of the money, you still have 80 percent of the work left to do.

Presumably everyone on staff (for staffed land trusts) has a full plate before a campaign comes along. For that reason, many campaigns hire someone just to help manage the campaign: coordinating materials production, timely gift receipting, event logistics, campaign communications, and so on.

All campaign expenses – including the cost of the Feasibility Study, the campaign staff, and events – should be baked into the final campaign goal. I usually end up adding 25 percent of the NET campaign goal. For example: if you need to raise $1,000,000 net, your campaign goal should be $1.25M̅. The extra $250K is used for all campaign expenses, as a hedge against the possibility of unfulfilled pledge payments, and as a hedge against the campaign getting in the way of fundraising for operations. (Note that because of the weird way math works, the $250K ends up being just 20% of the campaign goal [$1.25M̅].) If you end up not needing the two hedges, more money can go to an Opportunity Fund, a Stewardship Endowment, or operations.

Finally, capital campaigns carry an element of risk. Once you announce a goal publicly, raising anything less than that looks like you failed. And failure can take years or even decades to overcome. For that reason, most campaigns won’t even announce a goal until 80% has been raised.

If you are considering launching a capital campaign and have questions about it, feel free to leave a comment or email me directly.

Cheers and Have a Good Week!

-da

PS: Your comments on these posts are welcomed and warmly requested. If you have not posted a comment before, or if you are using a new email address, please know that there may be a delay in seeing your posted comment. That’s my SPAM defense at work. I approve all comments as soon as I am able during the day.

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