Podcast: Capital Campaign Budgets: How to Plan, Staff, and Fundraise Effectively
Season 5, Episode 6
In this episode, Amy Eisenstein and Andrea Kihlstedt tackle one of the most important and often misunderstood aspects of a successful capital campaign: creating and funding a campaign budget.
Whether your organization is preparing for a $3 million initiative or a $40 million project, this episode will give you a framework for understanding capital campaign budgets and the confidence to explain them to your team and board.
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Amy Eisenstein:
If someone on your leadership team thinks that you can raise capital campaign money without any additional staff or resources, today’s episode is for you.
Hi. I’m Amy Eisenstein. I’m here with my partner and co-founder, Andrea Kihlstedt, and today we are going to be talking about capital campaign budgets. And this is a topic that we talk about a lot here at Capital Campaign Pro, and it’s an important one if you’re thinking about a campaign.
The Importance of Creating a Capital Campaign Budget
So Andrea, kick us off. What are your overall thoughts? Get us started on the idea or the topic, the importance of creating a budget specifically for your capital campaign.
Andrea Kihlstedt:
Yes. Thank you, Amy. This really is an important topic, and let’s start out this way. Let’s all keep in mind that when your organization does a capital campaign, you are likely going to be raising more money than you have ever raised before for your organization or that your organization ever thought was possible.
So this capital campaign is a different scale of fundraising. You’re not raising just five or 10% more. You’re probably raising twice the amount or five times the amount, or 10 times the amount of money you’ve ever raised before. So to think that you can do that with exactly the same staff and exactly the same number of resources is plain old foolish.
Amy Eisenstein:
Unless your board members think or unless you are sitting around twiddling your thumbs with your feet on your desk with nothing to do. But of course that is not the case at any nonprofit. The development director is frantic. You’re doing a million things. Your whole development team, if you’re so lucky to have one, is probably overworked and under resourced already.
So the idea of overlaying a campaign on top of an already stressed, already super busy development office without any additional staff resources, expertise is preposterous.
Key Considerations for Your Campaign Budget
Andrea Kihlstedt:
Okay. So that means that you’re going to need to hire more staff. All right. We know that. But there are also a ton of other things you’re going to need and you’re going to need to budget for them.
- The first thing is that you’re going to raise a ton more money through your capital campaign. The second thing is that a capital campaign is likely to take three, maybe four years, maybe longer. So as you think about a budget, you’re not thinking about one budget year, you’re thinking about three budget years, maybe four budget years. So the idea of having a big capital campaign budget that sounds big, it sounds big because it’s spread over a bunch of years because your campaign is spread over a bunch of years. So number one, your campaign’s going to raise a ton of money and you’re going to need more resources.
- Number two, your campaign is going to take a number of years and your budget needs to cover all of those years.
- And number three, and this is the cool part of budgeting for capital campaigns, you will be able to tuck that money that is spent on the campaign right into your campaign goal. So the campaign itself will be able to raise the money and essentially pay the organization back for its investment in a capital campaign.
Now, once people begin to understand that, then budgeting money to raise money becomes much more palatable than if you said:
“Well, we need to take our organizational operating budget and funnel a big bunch of that into a capital campaign.”
That’s not the case. You may need to find a way to have current money that the campaign is going to pay back, but the campaign itself will be responsible for raising the money that it costs to have that capital campaign.
Other Considerations for Your Campaign Budget
Amy Eisenstein:
All right. So let’s talk about two things we haven’t mentioned yet. One is what are some of the things… We mentioned staff, but what else might go into a capital campaign budget? And then of course we’ll talk about how much.
But first, let’s list a few things that go into a capital campaign budget in addition to staff, and I want to get more specific even on staff. But expertise, right? Number one, expertise. It’s unlikely that anybody at your organization has experience with multiple capital campaigns or leading multiple campaigns from start to finish.
So it is highly likely that you are going to need to work with a campaign consultant who will provide a variety of things, but overall, we’ll tuck it under the category of campaign expertise. Strategy, planning, feasibility study. You’re also going to need to do donor recognition, to pay for donor recognition and campaign materials, whether that’s a brochure or a video or a website or slide deck or branding for the campaign. Probably all of the above. Let’s see. Oh, events. Campaign events.
Factoring In Donor Recognition Costs
Andrea Kihlstedt:
Stop for a second. Let’s go back to donor recognition. Because it’s like, “Well, what are we going to have to pay for in donor recognition?” Well, let’s pick the most expensive thing first. If you’re going to have plaques recognizing your donors in rooms, or even as part of the architecture, some part of your architectural design costs are going to be tucked into that, right? Because you’re going to have to figure out what the design of these plaques are and how they’re going to fit into the building. You’re going to want to budget for that. You’re going to want to budget for the cost of creating those, of manufacturing, of making the plaques and installing the plaques. That’s not inexpensive for most organizations.
Organizations of any size are going to have plaques that can be quite expensive. If you’re going to have bronze plaques, guess what? Ka-ching, ka-ching. I mean, you don’t have to have bronze plaques, but you have to think about it beforehand and have some sense of what that’s going to cost. So donor recognition costs more than you might imagine that it would cost.
Budgeting Capital Campaign Events
The events. Let’s talk about events.
Campaigns have a bunch of events. I would break those into two kinds of events. One are the simple events where you take donors out to lunch or out to dinner or out to a drink or you meet with them. Donor cultivation events, little donor cultivation events. Remember, this is a multi-year campaign. Over time that adds up. Every lunch you have with a donor adds up. Every little reception you have with donors add up. And then on the other side… So those are little events.
On the other side, you have bigger events. You have a campaign kickoff, for example. You have a final campaign celebration. What they cost depends on the culture of your organization, but they’re going to cost something. On one hand, I’ve worked with a small school where the campaign kickoff was in a tent on a wonderful fall day in the middle of a cornfield where the school was going to be, and they served hot chocolate, hot cider and donuts.
Amy Eisenstein:
That’s it.
Andrea Kihlstedt:
That’s it. Didn’t cost much, but they needed to budget for it. On the other hand, I’ve been in a hospital campaign kickoff where all the bells and whistles were pulled out. Bigger budget, same event, different culture. So you need to think in advance, what kind of organizational culture do you have? How fancy do our events need to be and how do we budget accordingly?
Budgeting the Costs of Capital Campaign Staffing
Amy Eisenstein:
Excellent. So let’s go back to this idea of staff, because I think it’s an important one, and I think sometimes people’s minds jump right to a major gift officer, but that’s actually not usually what we have in mind when we’re talking about staffing up. Most of the organizations that we support with small development shops are adding administrative support, and usually that’s sufficient or that can be sufficient to what they need. Really taking things off the plates of the development director and the executive director or CEO, because that’s who donors want to meet with. You’re not going to be able to magically hire up a major gift officer and send them out and they’re going to magically do the campaign.
Sometimes it’s a campaign manager or a data manager, but it’s often an administrative person. Sometimes it’s outsourcing of grant writing or event planning, something that the development director has been doing but needs to dedicate more time to the campaign. So if you were thinking:
“Oh, we’re not going to staff up for our campaign. That’s never going to happen.”
It doesn’t have to be a huge budget item. It can be some part-time administrative help at first to help with the database, to help with scheduling, to help with all sorts of event planning details. There are a lot of logistics when it comes to campaigns, and it’s important to have that support for the CEO and the development director.
Andrea Kihlstedt:
Amy, a lot of people think about and wonder about whether they need a campaign director or a campaign manager. And you might, but chances are the role of that person is to keep all the trains running on schedule, getting the stops at the right time and the right place. The chances are the role of that person is not talking to the largest donors and is not raising all the money, but is making sure that everything runs smoothly and there’s a ton of stuff that needs to run smoothly.
So if you call them a campaign director, a campaign manager, whatever the language in your organization is, you may want to think that way. If there’s somebody whose job would be specifically around the campaign for the period of the campaign. Now they may end up shifting over after the campaign and having another role and development, which is ideal when you can make that happen. But because the money for the campaign budget is going to be raised during the campaign, it’s really an opportunity for you to bring people in who you probably should have had working with you anyway for a long time. You’ve probably been understaffed until now.
Amy Eisenstein:
Well, that’s the beauty of a campaign actually. It is for capacity building for your organization, whatever you’re doing. If you’re expanding programs, services, building a building, growing your endowment, that’s capacity building. And at the same time you’re going to be building the capacity of your fundraising office and infrastructure, and a campaign is a beautiful excuse, opportunity to build your development team, and you should plan for it and take advantage of it.
So we have a wonderful blog post on the Capital Campaign Pro blog called Creating a Capital Campaign Budget That Works: A Quick Guide. So if you’re looking to share this with anybody on your team, your board, your leadership team, hop on over, or just creating a capital campaign budget that works, a quick guide and it’ll bring you to that post. You can also share this podcast, of course. We’d love for you to do that as well.
A Simple Rule of Thumb for Your Campaign Budget
All right. Let’s talk about an amount. We haven’t talked about amount yet for setting a budget. So you have a beautiful rule of thumb. We do have some easy guidelines, so why don’t you share that?
Andrea Kihlstedt:
What I’ve come to understand about many things in this world is that if you can make them simple, people understand them better. They stick better. So we often say, you really should budget about 10% of your campaign goal for campaign expenses. Now, that’s not actually a real number. It is a rule of thumb. It is a nice simple number. Even people who are a math challenged can do 10% of most anything.
Amy Eisenstein:
Excellent.
Andrea Kihlstedt:
It’s really easy. So if you say:
“We should look at our campaign goal at what we want to accomplish and what our working goal is, assume that our campaign budget is going to be 10% of that, and let’s add that to what our working goal was.”
Then you’re heading in the right direction.
An Example of a Campaign Budget
Amy Eisenstein:
Okay. So let’s give a specific example just to paint the picture. So you have a working goal of $10 million because you’re anticipating your new building construction costs are about seven million, and you’ve got a million dollars in for endowment or maintenance fund, and you’ve got $2 million in for programs and other things. So you land on $10 million as your campaign goal. Well, if you’re using the 10% guidelines, you’re going to have a million dollar campaign budget over three years, and that’s going to cover everything we’ve discussed. Staffing, campaign consulting, feasibility study, donor recognition, campaign materials and campaign events, and probably —
Andrea Kihlstedt:
Website. I’m coming up with other things.
Amy Eisenstein:
Right. There’s more.
Andrea Kihlstedt:
Website videos. I mean, all kinds of other things.
Amy Eisenstein:
Over three years. Over three or four years. So some of it’s front-loaded. There are more expenses up front, so it’s not going to be spaced exactly evenly, but you’re going to have that million dollars over approximately three or four years. So you’re not going to have a $10 million working goal. Now you have an $11 million working goal for your campaign because as Andrea said, you’re going to tuck it into the campaign and the campaign is going to raise the money for it and pay it back.
But the truth is that as this idea of simplicity, everybody understands 10%, people also understand that that is amazing ROI, return on investment. Any business that’s investing 10% and sees 90% growth is going to … I don’t know. That’d be the best business on the stock market.
And so it’s also the best return on investment for all types of fundraising. I mean, how often can you spend just 10 cents and raise a dollar? So as long as you’re talking to your board members about it, you’re explaining it to them, they should and can understand and really get on board.
Andrea Kihlstedt:
So Amy, a couple of other things to say about this number, about this 10% number. It is, as I said, a rule of thumb. It’ll get people’s eyes open wide. 10%. A million dollars?
Amy Eisenstein:
Yes.
Andrea Kihlstedt:
So it will take some doing to explain to your board and to your executive director where that number comes from. If your campaign is a bigger campaign, in actuality, the number, the percentage is likely to be smaller. If you’re doing a $3 million campaign, it may well be that the percentage is going to be a little bit higher because some of the costs that you’re going to be calculating are fixed costs no matter how big your campaign is.
So remember, okay, 10% is just something to start the conversation. If you’re talking a $3 million campaign, maybe you’re having 12 or even 15%. If you’re talking a $40 million campaign, maybe you’re talking 4% or 5% of your campaign goal.
Now, the way to really start figuring that out is not, of course, with just a simple straight percentage, but actually by developing your campaign budget and you develop the campaign budget in two ways. The first way is to do that percentage take off.
So say, “Okay. 10% of $10 million is a million dollars. Let’s see if we can build up a campaign budget over three years of a million dollars. Let’s see how far it goes. Let’s build it up piece by piece.” Staffing, communications, special events, all the things you know have to go into that. Then let’s go the other way around too. Let’s look at the list of things. Let’s not start with our 10%. Let’s start with the list of things that we know we need to cover, and let’s do some homework to figure out what they’re going to be. And let’s see how close those two things come. The top down and the bottom up approach. I always like that way of thinking about actually putting pen to paper.
Amy Eisenstein:
Right. Right. Exactly.
- How much would a campaign consultant cost?
- How much do they charge for a feasibility study? Actually interview three consultants and get some real numbers.
- If you want to hire an administrative person, how much are people paying in your community?
- How much can you get an awesome administrative person for in your community?
- How much do real donor walls and plaques cost?
Price some things out and figure out if you’re close and then start talking to your board about it.
I want to just tell a really quick story. We were working with a women’s shelter recently, and the development director was pretty anxious about needing some systems and resources and money for these things and thinking:
“Oh, the board’s never going to approve this stuff because we’re a pretty scrappy organization and we do things very leanly.”
But she was feeling overwhelmed and really worried about this added responsibility of this campaign at this pretty lean, mean organization, this wonderful little women’s shelter.
But they desperately needed to expand, so they were planning for a campaign and she started working with our team at Capital Campaign Pro, and we had a couple of meetings with the committee and the board and talked about this budgeting process and the importance of it and why it mattered and what the needs for a successful campaign were going to be. And after a couple of meetings, the board voted to fund the budget for the campaign at 10%. And the relief for this development director was significant and palpable. She could access the resources she needed. She could hire some administrative support. She felt like she didn’t have to go back to the board nickel and dime for every little thing that she needed, but she could hire campaign expertise, someone to coach her through the process and help her with a plan and the strategy and coach her through the major gifts ask.
So it’s not impossible. They took a little bit. They had very small reserve. They were willing to use that. Two board members stepped up with some initial money for this campaign budget as part of their early initial campaign gifts. And it wasn’t as hard as she imagined because everybody was excited about the project and wanted to make it happen. And I think that’s the magic of campaigns.
Final Thoughts
Andrea Kihlstedt:
Amy, I think people are often afraid to talk about campaign expense. Staff always is afraid. They’re afraid the board will say no. So they try to hide it. And that always comes back around and bites them. If they can inform their board, talk to their board, get their executive director and board chair on board, campaign chair, the leaders of their board on board, and get them to bring the rest of the board along so that they have an approved campaign budget, everything goes much more smoothly. Everything. It eliminates all kinds of anxiety and stress.
Every board has on it, at least one, and probably two or three people who if left to their own devices would say, “Oh, we can’t raise money for overhead.” No donor wants to give to overhead. Of course, that’s utter nonsense. But if you let those board members have a strong voice, it’s going to cause problems throughout.
So you need to get ahead of it. You need to get other board members getting them in line to understand how this business works, so that you will have the resources you need. You will be able to spend the money you need in order to have a successful campaign. And what’s going to happen if you do that is that you’re going to get to the end of the campaign and you’re going to tally up how much money you actually spend, how much money was raised in the campaign, and if you’ve done your job, you probably will find that you’ve spent less than you budgeted, and your board is going to think you’re brilliant because you raised all this money and you spent less than they approved, and the rest of that money went into other projects for the campaign.
Amy Eisenstein:
You are brilliant.
Andrea Kihlstedt:
You are brilliant. Yes. Exactly.
Amy Eisenstein:
You are brilliant. All right.
Andrea Kihlstedt:
They will think that. They will know that.
Amy Eisenstein:
They will know that, and it will be true.
So listen, if this was helpful to you, would you do us a favor and share it with your team? Send this podcast out to anybody at your organization that needs to listen to this and to understand this information. Also, help us spread the word by liking and following this podcast. If you’re not already, if you could rate and give us five stars that would help other people who need to hear it, hear it. We would appreciate that so much.
So thank you for joining us, and we’ll see you next time.
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