Season 2, Episode 20

You’re going to have to spend money before contributions to your capital campaign start to come in. You may need project planning money to purchase a site, hire an architect and go through assorted inspections and approvals. And if you going to get expert advice for your campaign, you’ll need to invest in that early, too.

Join campaign experts Amy Eisenstein and Andrea Kihlstedt and find out your options for accessing early money to help you get started.

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This episode was recorded as part of a live webinar held Monday, January 3, 2022. To participate in future webinars, register at ToolkitTalks.com.

Amy Eisenstein:
Today’s topic is: it takes money to make money – fact or fiction? Does it take money to make money? Well, we are talking about capital campaigns. So, Andrea, let’s talk about why you need money at the beginning, before you start to raise money for capital campaigns. You want to kick us off?

Andrea Kihlstedt:
Sure. You do need money. Most organizations do need money beforehand. There are a whole bunch of expenses that come up and they may start with, if yours is a building campaign, they may start with having to tie down or purchase land, for example. You may need money to hire an architect, or some kind of a planning consultant to help you with that. You may need money to hire a fundraising consultant. You may need money to hire people from the capital campaign toolkit in fact. There are many other things you’re likely to need money for, because in your capital campaign, it may take some significant time for money to actually start coming in.

Spending Money BEFORE Your Campaign

It may be three months, it may be five months, it may be six months or more. During that time, you’re going to have some expenses, either relating to the project itself, depending what your project is, or relating to your campaign plans. What have I left out of that list, Amy?

Amy Eisenstein:
Yeah, I think that’s a good list. I think that it’s important for people to think about this. Because a very frequent discussion, or maybe I’ll go as far to say, as argument at nonprofits is, what’s a good return on investment? Should we spend money with the hopes of making money? There’s no guarantees in fundraising. So, whether you’re actively in a capital campaign or usually before a campaign, the conversation goes something like:

  • Should we hire a professional fundraiser?
  • Should we hire a major gift officer?
  • Should we invest in wealth screening?
  • Should we pay to have a mailing sent?
  • Should we pay for professional advice or consulting?

The list goes on and on.

And I think it’s a difficult discussion and decision for nonprofits to make. But I will tell you that, in my experience, in our experience, those organizations that don’t invest in fundraising and specifically in capital campaigns will not grow and will not make money. Now, is there any guarantee? That’s why it’s a discussion or an argument at your organization, because how much to spend, what’s the return on investment? How long will it take? Will you actually make the money? So, I think that those are things to think about. The last blog post I wrote last year was about courage. And I think it does take courage to come up with the money, to commit to spending the money, to launch into a campaign.

So, Andrea, I don’t know if you want to add anything, but I want to take the conversation in the direction of where does that initial funding come from, especially when you’re thinking about a campaign. Because if you’re not going to see any returns for three months, six months, nine months, and you have to start spending money on campaign before you start raising money, how should people think about doing that?

How to Pay for a Campaign BEFORE You Begin Raising Money

Andrea Kihlstedt:
Right. And there are essentially two places that money comes from to spend before you raise it. One is, it may come from funds that your organization has tucked away. You may have a cash reserve that your organization has been putting away for some time, just in the event that you are ready for a campaign. So, you may have some farsighted people in your organization who have been working to put to put together some money, that they knew full well was going to be invested in the planning for the project and for the campaign. That’s place number one, the bank. The bank.

Place number two is donors. Because you can go to some early, to some of the owners who are closest to you and ask them to front some of the capital you will need to get this project off the ground. Now, I’ve been thinking about this a lot, Amy, because you and I have discussed it and I read the blog post that you wrote yesterday on the subject. And I want to tie into it the idea that finding this front end money is one way of testing an organization’s commitment, and capital campaigns and big projects are all about commitment.

So, it’s interesting to think about the difference between simply going to a bank account and having your treasurer or your finance committee decide, “All right, we’re going to take $50,000 out of our bank account. We’re going to spend it on the campaign.” That’s on one side. On the other side, going to some donors or going to board members, saying, “Would you front end some of the is money.” If you do the ladder and I’m not suggesting that everybody should, but it’s interesting to think that if you do the ladder, if there are some people you would go to early on for commitments, you will have a chance to engage them in the thinking for this process in a pretty serious way early on.

And I think that’s something worth considering, because chances are good, that if someone puts up some early money for a project, if they think it’s a good enough project, that the planning is good enough, if they put up some early money for the project, chances are you can go back to them and they will put up some additional money for the campaign later. So, I like the idea of saying, “All right, this front end money, really no matter where it comes from, requires an organization to get serious.” I mean, even if you’re taking it out of your cash reserves or your quasi-endowment, if the board has to vote on going into money that is serving as endowment, the board has to make an early commitment to do that. They have to be serious about the project. It’s not just off hand, off the cuffs. And I rather like that, I think it’s powerful actually.

A Few People on Your Board Can Lead the Way

Amy Eisenstein:
Yeah. But I think there is something. I want to just take your idea of going to one or two board members or key donors a little bit farther. Because if somebody or two somebodies say we’re going to give $50,000 or a $100,000 to pay an architect, to put a down payment on some land, to hire a campaign consultant and start a feasibility study, whatever it is, they know that it’s early money. But they’re really raising their hand as a leader for your future campaign and saying, “We believe in this enough and we’re willing to take the risk.” Because ultimately, the campaign might not get off the ground. There’s no guarantees. You’re testing the waters. They’re taking a risk with you.

But once they do, it’s much more likely that you’ll have a successful campaign, because you’ve got some early leaders saying, “Yep, this is important enough that we’re going to put literally our money where our mouth is.” And Andrea is right, that’s not their full campaign gift. You’re going to them to say, “Listen, we need $50,000 or a $100,000 to pay an architect, to do some design work, to make sure that we have a down payment, to be able to snatch up land when it comes along, or we have an opportunity to buy this property and hire an initial campaign consultant, just to see how we can do this and make the plan.” It’s a really exciting opportunity. So, I think that it’s critical. You have to spend some money to make some money. So, I started by asking fact or fiction — you know what? Fact. You need to spend some money to make some money.

Andrea Kihlstedt:
Yeah. So, let me go a little farther with this idea of using the need for early money as a way to get people to become more committed. Most of us don’t jump into commitment. We don’t meet somebody one day and say we’re going to marry them the next. That’s just not likely what happens or it’s not likely to be successful if it does happen. And the same thing is true of these big projects that an organization is taking on, that people step their way into commitment, that if you ask someone to give an upfront gift, to help tie down a piece of land, for example, to help get an agreement on a piece of land to see if it’s viable. And someone puts up, I don’t know, $25,000 is one of two or three or four donors that does that, then they watch and see how the organization functions, how the organization treats them, if they’re well informed, if they’re well thanked, if they feel like insiders.

And if they feel comfortable with that process, that moves them into a place where they might make a deeper commitment. So, if you think about commitment, I mean, generally, how we as humans become committed, and you think about it as a step by step process, the opportunity to involve people early by making gifts that would be significant in the early stage, but will be small relative to what they will do later is something powerfully important. And you have to be careful to do it well. You don’t want to just grab someone’s money and then not tell them what’s going on, not involve them in the process, because they’re making commitment.

In fact, one of those people might end up as your campaign chair if they’re treated properly, if they feel comfortable and confident enough in the process that they’re willing to step up into a leadership position. So, there’s a lot to unpack about this process that’s about much more than money. The money in a way is simpler than anything else. But even though that’s what presents as the most pressing in a most pressing way. I should say that I’ve had a client that early on wanted to tie down the piece. They wanted to build a building. They wanted to tie down the piece of property. They needed something like $250,000. They did not have it available in the bank.

They knew they had a limited window to tie down the piece of property, because it was valuable property in a good part of town, and they needed to get the money now. So, they went to four or five donors. Each one of them contributed a certain amount. Now, fast forward several years, they have actually done their campaign, the building plans are done, they’re going to go into construction. Each one of those donors stepped up with a much more significant gift to the campaign proper, and their initial gift to the land counted as a part of their campaign gift. So, I like that structure. I mean, of course, it doesn’t have to be one or the other. You can take some money from the bank and some money from donors. You can mix and match.

Early Money as a Sign of Potential Donor Engagement

Amy Eisenstein:
Yeah. I think that’s so important. We’re always looking for engagement tools, ways to engage some key donors. And I can’t think of a better way to engage your top two, three, five donors than getting them involved and literally, and figuratively invested in your campaign upfront before the campaign is even really real. They’re committing to make the campaign real in essence, by doing these early gifts.

Andrea Kihlstedt:
So, just one more thing to say about this, Amy. And then is that it’s interesting to think about the conversation you should have with your board about how to get this early money. Just that conversation about where the money would come from and how to go about getting it is going to be good for your board to have a robust conversation about how committed they are to this project. And there are many ways the board might go about coming up with that money. So, keep in mind that the entire process of a capital campaign through one lens is the process of gradually deepening people’s commitment to this project, so that they will give larger gifts more happily because they’re excited about being part of something extraordinary.

Amy Eisenstein:
All right. So, if you want to learn more about this topic, how to think about getting the early money to start planning for your campaign, we would love to talk to you at the Capital Campaign Toolkit. So, visit us at capitalcampaigntoolkit.com, sign up for a free strategy session. And you will talk to either me or Andrea about how to think about and strategize about getting some of this early money so that you can start planning for a campaign. Honestly, the topic of it takes money to make money, generally, a campaign costs about 10%, some often less than your campaign goal. So, just imagine, you’re going to raise $10 for every dollar you invest in a capital campaign. It’s the best return on investment there is in fundraising. So, we’re excited to talk to you.

Andrea Kihlstedt:
Amy, should we end with just giving two very practical tips that somebody might do? What’s a tip you would give to somebody that has a need for early money, early campaign money?

Amy Eisenstein:
So, I think, sitting down with your executive committee and your executive director, your development director, and strategizing who are the three people in your universe that could potentially, and might realistically give you this early money. And make appointments to talk to those three people about your plans, your ideas, and see if they’re interested in helping. Tell them what your needs are and ask them how they would get started, and if they’re willing to help and do this. So, really, I think the first step to me is brainstorm who are the three people that you could have this very serious conversation about early money with. What’s your tip, Andrea?

Andrea Kihlstedt:
Well, I think that’s a great tip, Amy. I don’t want to dilute it, so I’m going to leave it there. I think this has been a great discussion today, and I hope everyone finds it useful.

Amy Eisenstein:
And we’ll see you next week.

Andrea Kihlstedt:
See you next week.

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