Podcast: Do You Really Need a Feasibility Study? Yes! Here’s Why

Season 4, Episode 44

In this episode, Amy Eisenstein and Andrea Kihlstedt answer a key question: Do you need a feasibility study before launching a capital campaign? Their answer is a clear yes—and they explain why skipping one can lead to poor decisions, missed opportunities, and campaign failure.

If you’re thinking about a campaign, don’t miss this episode. You’ll come away with two key takeaways: a feasibility study sets you up for a successful campaign, and you should never outsource your donor relationships.

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Andrea Kihlstedt:
Are you planning a capital campaign? Are you wondering if you need a feasibility study? Well, you’ve come to the right place.

Amy Eisenstein:
Hi, I’m Amy Eisenstein. I’m here with my colleague and co-founder, Andrea Kihlstedt, and we are going to talk about the magic of fundraising feasibility studies.

Why a Feasibility Study Matters to a Campaign

So Andrea, as always, go ahead and get us started and tell us what a feasibility study is, what a fundraising feasibility study is, and then we’ll get into why organizations need to care about it.

Andrea Kihlstedt:
Yeah. Well, not only why they need to care about it, why they need to do one. If the question we pose is, “Do you need a feasibility study if you’re planning a capital campaign?”, the answer is simple.

Amy Eisenstein:
Yes.

Andrea Kihlstedt:
Yes, you do. So why do you need a feasibility study?

Amy Eisenstein:
Well, start with what is a feasibility study? And then I think we can get into why they need one.

Andrea Kihlstedt:
All right. These things weave together.

So what is a feasibility study? A feasibility study is a study in which you develop a preliminary plan, which is driving your campaign, and then you test it with your largest potential donors to find out what their response to your plan is and whether or not you have any shot at being able to raise the amount of money you think you’re going to need.

Does that sound important? Yes, of course it’s important, because you don’t want to do a capital campaign with no idea of whether it has the potential to be successful. That’s a really lousy idea.

So in a nutshell, a feasibility study will give you and your boards some sense of what it might be possible for you to raise for the specific plan you have in mind.

Amy Eisenstein:
Yeah. Let’s tease out the difference between the project and the campaign, which is the fundraising, because I think a lot of board members, executive directors, leadership teams don’t want to do a fundraising feasibility study because they think that means that they might not be able to do the project. And really what a fundraising feasibility study tells you is how to do the campaign and approximately how much you can realistically expect to raise, but that really… I mean, it factors into the project, scale and scope, but what it does is gives you data to work with and helps you determine how you’re going to fund your project; part of which might be, or a significant part of which may be, through philanthropy, but there are always other alternative funding sources for big projects. And the truth is that many big projects are not fully funded by philanthropy.

So there might be reserves that you might use, an organization might have reserves. And you may not want to use them, it may not be your first choice, but it’s an option. Financing is an option. There’s lots of different options. I don’t want to go too far down this road.

But the idea that you don’t want to do a feasibility study because you don’t want to know if the project is feasible, or even if the campaign is feasible, to me is sort of a false dichotomy. It’s ridiculous to go into a campaign and not know and use data and have all the information you can to plan the most successful campaign that you can plan. And that’s the point of a feasibility study.

Conducting a Feasibility Study is Like Taking a Temperature

Andrea Kihlstedt:
You know, someone once told me that doing a feasibility study is sort of like taking temperature, and not doing one is like having a doctor who takes your temperature, but who’s not allowed to know what your temperature is. Right? That would be silly. So if you’re testing a campaign, if you’re…

Let’s make it specific here. Let’s say your organization wants to build a new building or add on to the current building, and from the early studies you’ve done, you know it’s likely to cost you around $10 million.

Now your organization may never have raised anything close to $10 million, but that doesn’t mean that you can’t for that particular project. And you would go and do a feasibility study, you would talk to your largest donors to get some notion of whether you’re going to be able to get the big gifts needed in order to raise $10 million.

Now, a number of things might happen:

• You might talk to your donors and find that they are excited, that they are generous, that they are going to be willing to support your project, and that $10 million is a reasonable goal for you, or maybe even 12 million.
• But you may find on the other hand that your donors, for some reason, aren’t hot to trot about your project or not enough of them are hot to trot.
• And then you may have to revise your thinking a bit — either revising the project plans, which sometimes happens, or revising the way you’re going to pay for that project, which Amy was talking about, saying, “Okay, let us look and see if we want to take out of cash reserves or if we want to borrow some money.” Let’s say we can only raise seven million towards our 10 or $12 million project. How are we going to account for the rest of the money?

In any of those cases, doing a feasibility study gives you something more concrete to base your plans on. And that’s important.

Amy Eisenstein:
Right. It’s important to move into a campaign with data so that you and your board members can make good decisions, not go blindly charging ahead and discover two years down the road or halfway to your goal that you’re stuck or that you don’t know what to do next. That’s never a good idea.

So a feasibility study helps you plan for a successful campaign. I would like to make that the quote of the day:

A feasibility study helps you plan for a successful campaign.

And when you say that to your board and leadership team, there’s no excuse not to do one.

Andrea Kihlstedt:
I like that, Amy. So crisp and clean. Very good.

A Different Approach to Feasibility Studies

Amy Eisenstein:
All right, let’s talk about how feasibility studies have been done historically and how we do feasibility studies. Or we reference it the old model and the new model. So what’s the key difference between the old model of feasibility studies? And then we’ll talk about the new model.

Andrea Kihlstedt:
All right. In the old model, and I’ve done a lot of old model feasibility studies over the course of my rather long career, an organization would hire a consultant; the consultant would help put together the planning, the documents, the process, help figure out who to go and interview; and then the consultants would go and conduct confidential interviews with your largest donors. The consultants would then take that information, put it all in a pot, stir it around and come up with a report that makes recommendations as to what it is they think you can raise based on the confidential interviews they had with your largest and best donors.

All right? That’s the way people have done feasibility studies for many years, and for many years it sort of worked. But-

Amy Eisenstein:
I like this “sort of”, Andrea. I mean, one of the reasons that it only sort of worked is that it left organizational leaders sort of scratching their heads wondering what went into the pot and how the results came out the other end.

You know, when you’re handed an aggregated report of four people indicated they might consider a gift of a million dollars plus, you’re left scratching your head wondering, “Who are the four people that indicated they might give gifts of four million dollar plus?” And it’s not that helpful, having these confidential and anonymous interviews is what we’ve discovered.

Andrea Kihlstedt:
Yeah, in fact, it’s super frustrating. I mean, not only do you not know enough in terms of specific information, but you’re left wondering what actually were these conversations that your consultant had with these donors? If there were complaints, will you know about them? If the donors said things that weren’t so supportive, are you going to find out who said what so you can go and follow up with those donors?

And then a traditional model, you won’t know that information, so you can’t follow up. And that frustrated us, so we thought we’d come up with a better model. And we did.

Amy Eisenstein:
Yeah. So I just want to reiterate, the idea was that consultants were going in to talk to donors confidentially, and that they wouldn’t share and that’s how they got donors to open up. They wouldn’t share with the nonprofit leaders what specific donors said. So a report might come back and said, “Donors expressed concern about the plan in this way,” but there was no recourse. The nonprofit leaders, and certainly the consultants, didn’t go back to the donors and say, “Tell us more. This is how we’re dealing with it. Let’s discuss.”

And so that was seriously problematic, which is why you, Andrea, came up with a better model; which now we call the new model, but the truth is we’ve been doing it for seven years and we’ve tested it … Not tested it. We’ve used it with more than a hundred organizations at this point, and it’s not new and it’s not in test mode anymore. We know it’s better.

So let’s talk about the key difference, the key difference, and then we can get into some nuance.

Andrea Kihlstedt:
Before we do that, well, let me …

The key difference is this, that in the new model, in the better model, if I do say so myself, you, the leaders of the organization, go and talk to the donors. We help you set it all up, right? We provide you with the training and the material and the questions and everything you need in order to be able to go and do a great job of having these amazing conversations with your donors. We help you develop a spreadsheet so you know what information you have to capture.

And then when you’ve gone and talked to those donors and given feedback as to what you’ve heard, we help you collate and analyze and make sense of the results, and come up with a report that we then co-present with you to your board.

So we are partners with you in the entire process, but you are the ones who actually go and have conversations with your donors. And that’s a big and important shift. It really is.

Now I have a funny little story to tell, which if you’re thinking … You may wonder how we ever did the first one of these where we really were just making it up and trying to figure it out. And here’s what happened. It’s kind of fun.

In all my years of doing feasibility study interviews, I had always wondered why executive directors or development directors weren’t more nervous about me or any consultant going out and talking to their donors. It always struck me that, “You should be nervous. These are conversations you don’t know about. It would be anxiety producing for the best executive director.”

And just as I was working on coming up with these ideas for this new way, I got a call, someone who had been referred to me by someone else, saying, “I hear you’re thinking about a new way of doing feasibility studies. My organization needs to do a feasibility study and I’ll be darned if I want a strange consultant to go out and talk to my donors. I hear you would help me if I wanted to go and talk.”

So I actually got a call from someone who understood the anxiety and the reason that he shouldn’t have an outside consultant go and talk to his donors. His thought was those relationships are precious, the ones between the executive director and the donors, and why in heaven’s name should he pass them off to an outside consultant? So when he talked to me, I thought, “Oh, we have a Guinea pig.”

Amy Eisenstein:
A beta test.

Andrea Kihlstedt:
A Beta test is just what he did. It was fantastic. And so this whole process got started.

Amy Eisenstein:
It was so successful that we’ve never looked back.

You know, the truth is that this opportunity for nonprofit leaders to talk to their biggest potential donors to their campaigns is a completely unique and important opportunity to build relationships with the biggest potential funders of your campaign that should not be missed. It shouldn’t be outsourced to a consultant.

And often we hear, “Oh my goodness, we’re too busy, overwhelmed, overworked. We couldn’t possibly spend the time.” But this is the main thing that you should be doing internally as you prepare for a campaign.

Now, a good consultant will be by your side every step of the way supporting you through the process. There are plenty of other things to outsource as you head into a campaign; grant writing or event planning or data management. I mean, honestly, the list is endless. But building relationships with your biggest donors is not one of them. So I just-

Andrea Kihlstedt:
Right.

Amy Eisenstein:
So Andrea, we have so many great stories of clients that we’ve worked with; like I mentioned, a hundred over the last seven years that have done this model.

So one I want to bring up is, it’s a technical college, and the executive director decided to do this feasibility study model with us at Capital Campaign Pro. And she went and she talked to her donors, and there was one that she thought might be the biggest donor to her campaign. And she went and talked to him and came back super disappointed because he indicated that he probably wasn’t interested. This wasn’t going to be a campaign that he was going to support in a big way.

But she stayed in touch with him over the duration of the campaign based on that initial conversation. She kept him updated, she checked in with him, she asked his advice as she went along. And ultimately, he came in with a gift of over a million dollars, which was the biggest gift that that campaign got. And what she said was that if she had sent in a consultant to do the interviews in the first place and they had said, “He’s not interested,” she would never have followed up with him. She would not have had a relationship with him, and of course she wouldn’t have gotten the gift.

So does every conversation turn into the biggest gift your campaign’s going to get? No, but I think it’s a really important example of using the opportunity to build relationships and really start to get to know people. And what she was able to do was say, “Okay, he’s not interested in this aspect of the campaign, but how can I tailor the future conversations and updates and questions and conversations?”, that she wouldn’t have had the insight or the ability to do had she sent in a consultant to have that initial conversation.

So just such an important reminder, I think.

Andrea Kihlstedt:
You know, Amy, before you gave a wonderful soundbite about what a feasibility study is, I think there’s another wonderful soundbite here, which is do not outsource your relationship with your largest donors.

Period. Do not do that. It’s a bad idea to do that. Hold that tight. Build on those relationships. There’s nothing more important for you to be doing. And the feasibility study is a fantastic way to build and strengthen those relationships.

Amy Eisenstein:
We have a wonderful resource on the Capital Campaign Pro website. It’s called the Feasibility Study Ultimate Guide, and it can be found at capitalcampaignpro.com if you search the blog in our resources section for Feasibility Study Ultimate Guide. We also found it by Googling Capital Campaign Feasibility Study Ultimate Guide. And if you scroll past the sponsored websites, you’ll quickly find our Feasibility Study Ultimate Guide at Capital Campaign Pro.

Okay. I just wanted to make sure that people had that free resource to learn all the ins and outs of a feasibility study, how it works. You can share it with your board members and your leadership team and really talk about the importance of doing a feasibility study and how you might think of doing a feasibility study.

Questions and Answers About Feasibility Studies

Andrea Kihlstedt:
Amy, let’s go over some really specific things about feasibility studies quickly. I’m going to ask you some quick questions.

How Long Does a Feasibility Study Take?

So, how long does a feasibility study take usually?

Amy Eisenstein:
That is an excellent question.

So the preparation for a feasibility study can take longer or shorter depending on how many details you already have about your project and the vision for the campaign. You’re going to develop your case for support and identify the donors that you want to interview. So that process of getting ready for the interviews can take a couple months to up to a year if the planning’s going to take that long, and it takes time to research and identify potential donors to be interviewed and who might make the biggest gifts to your campaign.

But the interview process itself can go also quickly or take a long time. I would say that our average campaign interviews 25 to 30 donors. And so my question, when somebody’s asking, “How long will a feasibility study take?”, is, “How many interviews a week can you realistically do; to prepare for them, to execute them, to schedule them, and to document them?” So are you going to do two interviews a week or 10 interviews a week? It can go as fast as a month, it might stretch out over two or three months. It really depends on how many interviews your team can handle every week.

Andrea Kihlstedt:
So here’s another question for you, Amy.

What Should We Ask Our Donors?

If I’m an executive director or a development director and you’re telling me that I have to go out and do these interviews, my initial response is panic. Right? It’s like, “I don’t know what to say, I don’t know what to ask them for. I don’t know how I’m going to have these conversations. Am I going to blow it? These are my most important people. Am I going to do it wrong?” What do you do at Capital Campaign Pro to help me,

the executive director, make sure these are wins and not losses?

Amy Eisenstein:
Yes, absolutely.

So I would say that, first of all, our team is highly skilled in coaching you every step of the way, being there by your side and preparing you for these conversations. We outline the arc of the conversation. We provide training and opportunities for role playing and for practicing and preparing for these conversations. Because they are really important strategic conversations.

Now that being said, they really are an opportunity for you to listen and learn. So what you have to be really good at is prompting some questions, but also really sitting back and listening and not jumping in to provide answers. You can just say, “Tell me more. Tell me why you feel that way.” So lots of prompting questions and listening.

And let me tell you, if you’re nervous about these pre-ask conversations, you’re not going to be any less nervous when you go ask. So this is a wonderful opportunity for you to get comfortable having strategic conversations with your biggest potential donors that actually makes the ask that much easier because you’ve already had this pre-ask conversation and prepared for it. And then you get to debrief with our team about it and then go into the next one feeling more confident.

And that’s what we find. The first two or three are nerve wracking, and then, ah, you find, “Oh my gosh, I’m really good at this. I like this. This is amazing and interesting and thought-provoking. I’ve never had conversations like these with donors before.” So it’s a wonderful learning opportunity for your leadership team.

Andrea Kihlstedt:
Yeah. You know, Amy, I think we’ve learned a lot as we’ve done these, as we’ve developed this model. It really took some developing and some wisdom and some thought to make it work, and we’ve done that. And one of the biggest learnings that I hadn’t expected is just what you’ve pointed at, which is what a big transformation it’s been for many of our executive directors and development directors as they become more comfortable talking to their donors.

And for many of them, that process is not going to stop at the end of a feasibility study. They’ve learned how to have conversations with their donors that aren’t just about asking for gifts, but are really about developing partnerships with them. And that’s what you want those relationships to be.

So I think there’s really a more profound result than just the feasibility study process itself in the transformation we see from people who aren’t comfortable with their donors as partners to people who are. And what a change that makes in an organization.

Amy Eisenstein:
Amazing. It really has been transformational for so many of the leaders that we’ve worked with. It’s remarkable.

Okay.

Andrea Kihlstedt:
All right, Amy, have we done it?

Amy Eisenstein:
I think we’ve done it.

All right, so if you want to explore the possibility of doing this new model, we call it a Guided Feasibility Study with our team, we hope you will visit us at capitalcampaignpro.com and sign up to talk to us. And bring your whole leadership team. We’d love to talk to them about this model and what your needs are and why it might work for you, and we’ll explore the possibilities.

Andrea Kihlstedt:
Two soundbites for you. Let me see if I can get them right. One is a feasibility study will set you up for a successful campaign.

Amy Eisenstein:
Yes.

Andrea Kihlstedt:
Other is don’t outsource your relationship with your largest donors.

Amy Eisenstein:
Yes, yes.

All right. Thanks for listening. We’ll see you next time.