To Build or Not to Build? Is a Capital Campaign Right for Your Nonprofit?

One of the strongest indicators of whether a capital campaign to fund a large project will be successful is the nonprofit organization’s history of successful annual fundraising. There are other factors, such as whether there is a community need for the subject of the campaign (for this article, the subject will be the construction of a new building or campus of buildings), the reputation of the organization raising the funds, and the environment (what else is happening, including social and political factors, as well as other large campaigns currently underway).

The best course of action for a nonprofit that believes itself to be ready for a capital campaign is to contract a professional company to conduct a feasibility study on its behalf. A feasibility study examines internal and external components that not only indicate campaign readiness, but also help to identify appropriate committee leadership and, potentially, lead gift prospects. There is a cost associated with a feasibility study; your nonprofit should budget for that cost.

If you are still in the early consideration phase before a feasibility study, there are a few questions nonprofits, especially new or small organizations, can ask themselves to begin the process. The answers to these questions won’t necessarily prognosticate the success or failure of a campaign should you decide to move forward, but they will help your organization identify what areas might need attention.

The following are sample questions nonprofits can answer to help evaluate their situation in terms of need and/or readiness for a capital campaign to construct a building or campus of buildings:

• What are you planning to build and where?
• What indications do you have that there is a need for this project and from where did those indications come?
• Is this building expansion/replacement documented in a board-approved strategic plan?
• Does the land need to be purchased and, if so, has desired land and its price been identified?
• Have you explored whether building is the only viable option or if refurbishing or renting currently available space is a reasonable alternative?
• Have you met with builders and architects to get an idea for plans and costs, including surveys, underground work, permits, and any required roadway, parking, or water retention requirements?
• Do you have an early estimated campaign budget?
  • Does it include any number of years of future building maintenance, operational funds, or an endowment?
  • Have you factored in the cost to conduct the campaign?
• Do you have initial funds available to conduct a feasibility study?
• How long has your organization been in operation and how long has it been conducting sustained fundraising efforts?
• Have you been using a donor management system (DMS) to track contacts, record giving, create targeted messaging and document relationship-building efforts?
  • How many years of giving data do you have to compare and analyze?
• Have you conducted donor research, or wealth screening, in your database to determine what giving capacity may be held within your current contacts?  
  • Do you have a gauge for what your best target fundraising audience is?
• Are you aware of the industry standard practices of a capital campaign, such as the “quiet phase,” “public launch,” and “public phase,” as well as what a capital campaign committee does?
  • This awareness should include an understanding of linkage, ability, and interest (LAI). LAI is the concept that potential donors must have some connection to your organization or people associated with the organization; the ability to give at the level you are asking; and displayed any indication that they are interested in your mission, organization or the project.
• Do you have at least one paid full-time employee that will be mainly responsible for organizing and managing the campaign process, as well as for being a driving force in fundraising?
• Have you identified individuals who would be appropriate to approach to be part of the Capital Campaign Committee?
  • Does that include a chairperson who is able to give a significant lead gift?

There are many other factors to assess when planning for a capital campaign to construct a building or campus, but these questions are a good way for your organization to become initially aware of its true capability to raise large sums of money through a capital campaign.

Building a new facility is not always the best course of action; renting or purchasing existing space may be the reasonable way to go. If your organization does decide to embark upon a capital campaign, make sure everyone involved is trained in the best practices and industry standards of such a campaign and that they understand the environment in which the campaign will be run.

Identifying needs appropriately, understanding your true starting place and ability to raise funds, and realistic planning will be significant contributors to your campaign’s success.