Podcast: Setting the Right Capital Campaign Goal: Planning for Success

Season 4, Episode 11

In this episode, Amy Eisenstein and Andrea Kihlstedt dive into one of the most crucial aspects of campaign planning: setting a realistic and effective capital campaign goal. Whether you’re building a new facility, expanding your programs, or establishing an endowment, determining the right working goal is far from simple.

Tune in now to get expert tips on setting a winning capital campaign goal!

Listen Now:

Amy Eisenstein:
One of the first things to do for your campaign is figure out how much your goal is going to be.

Hi, I’m Amy Eisenstein. I’m here with my colleague and co-founder, Andrea Kihlstedt, and today we are talking about working goals or draft goals, you might think of them as.

Setting the Right Goal for your Capital Campaign

So Andrea, why is this such an important topic for people to consider as they start thinking about planning a campaign? Isn’t it obvious how much the construction costs?

Andrea Kihlstedt:
Think it would be obvious, wouldn’t you? But it’s really not. I mean, here’s what your goal should be. Your goal should be this. Here’s the definition of the right goal:

The right goal should be the amount of money that represents how much money, the top end of the money you can raise from your community for the project that you have defined, right? At the upper limit of that.

Amy Eisenstein:
Yeah, that’s so interesting. So we’re going to dig deep into that because what sometimes happens is that organizations will come to us and they believe that a feasibility study will just tell them in a vacuum, how much is the most they can raise. So that’s one piece of it, but they’re missing the project piece.

• What are you trying to accomplish?
• What is the project for your campaign?
• What are the objectives for your campaign?

And that has to be factored in as well. It’s not just how much can you possibly raise, and that’s not what’s tested in a feasibility study, but what’s tested for the specific project or the objectives you have.

Andrea Kihlstedt:
Yeah, so let’s say… Because just simple, a simple example. Let’s say you’re going to build a new building for your organization. You’ve been in a rented building for the last 20 years. The landlord is going to take the building back. There’s no question that you need another building. You can either rent a facility or you can build. And your board has decided to take the plunge and to go ahead and to develop a plan and to build a new facility that is going to serve your organization well for the next bunch of years.

Amy Eisenstein:
Build or buy. Buy property and build or whatever. Yes. I just want to make sure everybody knows we’re using these words, but apply it to your situation of course.

Andrea Kihlstedt:
Yeah. So now the other couple of things you might want to be doing within your project is that you may want to be including also an endowment of some sort, maybe to cover the cost of the caring for the building going forward.

• Maybe you undoubtedly will want to cover the costs of architectural and legal and accounting fees.
• All of the fees you’re going to run into as you develop this project, you’re going to want to include the cost of the land if you’re buying land, right?
• There are all these other costs that go into building projects.
• And you’re going to want to pull together a plan for this whole new facility that your organization is going to have. And then you’re going to want to put some dollar amounts on that plan.

Now, most everybody can do pretty well putting together preliminary dollar amounts and then again and again we see those dollar amounts rise, right? They almost never go down. They almost always go up.

So while putting together a budget, a simple budget for what that’s going to be, how much money that’s going to be is a start. You will want to add some money to cover escalation costs as to cover cost you haven’t yet thought of. You’re probably new to this kind of thing. It’s going to cost you more than you think.

So you put all of those things together, it’s going to give you a preliminary dollar amount. Let’s say it’s $6 million from what you can tell. And you go out and you test a $6 million preliminary goal for this particular project as you do your feasibility study. And the feasibility study comes back, no matter what kind of study you’ve come back… You’ve done, it comes back and it says:

Well, maybe we found a couple of really large gifts, and it may be possible for you to raise more money than that. Maybe possible for you to raise $8 million. Or maybe if you’re really fortunate, it really works, maybe you could raise $10 million for your project.

I mean, there’s going to be some question about it. And how you settle on that goal will depend in part on what the risk tolerance of your organization is for taking on a bigger goal. And it’s going to have something to do with how comfortable people are with the job you’ve done at coming up with the cost estimates that you’ve tested in your feasibility study. And it’s going to have something to do with just general understanding of how campaigns work.

Amy Eisenstein:
So yes, yes, yes. Let me go back and add to some of the things that you’ve just said. So one is one of the reasons that this topic came up actually, is that we have a client that’s trying to figure out what goal to test. And so it’s not that they raise the amount after the feasibility study, they’re actually talking about raising it before they do the feasibility study. Can we test a higher goal than maybe the costs of the building? And including the first few years of startup programming in that new facility.

So one question is how do you encourage or inspire your board, especially nervous board members or very fiscally conservative board members to be a little more courageous and test high? But I want to say that it’s also true that it’s perfectly possible to raise the goal, as you pointed out, after a feasibility study.

And in fact our research benchmark report that just came out recently points to that. And it actually shows, I can’t remember the exact number, but about 20% of organizations that do a feasibility study, actually raise the goal after they’ve tested their fundraising amounts. So if you’re interested in seeing that research go to capitalcampaignpro.com. Research, and you’ll get the research results. There are a lot of interesting findings that came out, but one of them is that plenty of organizations do raise the goal after the feasibility study.

Some also bring the goal down more in line with what they heard, and most actually are fairly on target with what they can raise. But they’ve probably done a lot of work in advance to test the right goal. Which I think is part of the story that we want to tell today is how do you come up with that right initial working goal.

Now, one of the things that you didn’t mention was three years of programming in that new building and not, of course, everybody’s building a building or buying property. So I just want to throw that out there as well. You need to be able to come up with numbers for what is your project? What is the vision?

Andrea Kihlstedt:
Do you know, Amy? Maybe the way to begin really now that we’re in the middle, is to suggest to people that as they start working on a project like this, that they pull together a small group of capable informed people and say, help us brainstorm all the things that we might want to raise money for as we have this opportunity to really springboard our organization to the next level. And actually spend some time thinking not just about the building that you want, but all the other things you might want to invest in for your organization to do more good in the community you serve.

Amy Eisenstein:
Yes.

Andrea Kihlstedt:
You might start there.

Amy Eisenstein:
I love it.

The Process of Setting Your Capital Campaign Goal

Andrea Kihlstedt:
Let’s put together a big picture, bigger ideas, and then let’s see what those bigger ideas will cost. Let’s test those in a feasibility study. And then we can always adjust our working goal based on what we’ve heard in the study.

Start by Thinking Big

Now, I kind of like that to have a sort of a blue-sky planning process instead of just looking one step ahead. All right, we know we need a new building. Our landlord’s pulling the lease, right? We know we need a new building. Don’t get stuck there. Start by saying, okay, we know we need this — we’re going to have a campaign. A campaign is an opportunity to raise more money than we ever imagined. Let us spend some time thinking big. So that’s, I think, pretty good advice as a way to start thinking.

Test Your Goal

Then number two is test that big goal through a feasibility study. Find out if your donors are going to be willing and interested. If your big donors are going to be willing and interested in support and giving you support at the levels you’ll need to get to that big goal. And from that feasibility study, you’re going to have some clearer idea of what is possible and what is not possible or what might be possible. It’s not going to be definitive, but it’s going to give you important information about your largest prospective donors. Then you can sit down with your consultant and with your small group of smart people and say:

“All right, we now have some additional information. How do we want to rejig our planning to come into alignment with what we heard in the study?”

And as Amy said, you may increase your ideas, you may expand them or you may contract them, but you’re doing it based on something real on these real conversations with your donors.

Establish Your Working Goal

All right. Now we’re starting to hone in on a working goal. You will have other opportunities to change your working goal. That’s why we call it a working goal. And you’re going to be able to do that at the end of the quiet phase of your campaign. Because once you’ve decided on a working goal and you start actually asking people for funds for your campaign, you’re going to see, well, are we really going to get the kind of support that we think… We thought we were going to get? And maybe you will and maybe you won’t. Occasionally you don’t.

Revise Your Goal As Necessary

But before you go to the public phase of your campaign, you have a chance to revise your goal once again. You can push it up a little or you can pull it down so that by the time you actually announce the public goal of your campaign, you’ll be right on the money. Because by that time you are working with real numbers. You know what those largest donors have decided to give.

Amy Eisenstein:
I think that’s such a important and I think confusing concept for people who aren’t extremely experienced in capital campaign fundraising, that you would be able to adjust your goal throughout the process as you move along towards the end of your campaign.

And there are several opportunities as you just mentioned, to adjust your goal. And we do call it a working goal, or you might think of it as a draft goal through much of the campaign as you see what the… As you get to what are the upper limits of what you can raise for this project that you’re working towards. And that’s what this is all about.

Don’t Fall into This Campaign Goal Trap!

Andrea Kihlstedt:
Amy, there’s a really important point. It’s sort of a trap that some people fall into and I want to be sure that we review it here. There are some people who are naturally risk-averse, right? They’ve built these organizations that are sound, that are financially sound. They’ve done that by pinching every penny and watching the dollars carefully. And my hat’s off for them. That’s fantastic. And it would be perfectly natural for them to say:

“Why don’t we start with a lower goal, see how we do, and then move up if we do well?”

That would be a natural way for someone who is fiscally conservative to want to move. But in the capital campaign business, it doesn’t work well. So why not? Well, capital campaigns are based on a relatively few large gifts, and lot of donors at the highest levels will base the level of their gifts on the size of the goal that they’re asked to give to.

So if you ask a significant donor to give a lead gift on a $5 million campaign, they’re not going to be likely to say, well, I’ll give you $2.5 million, which would be half the goal. It would feel too big to them. But if you were to go to them and say… And ask them for a gift based on a $10 million goal, then a $2.5 million gift will feel much more appropriate. So you want to begin with the goal that is as high as you can get yourself to go reasonably and then be willing to pull it back rather than the other way around. Because your largest donors are not going to give at a higher level if you present a lower goal.

Amy Eisenstein:
I think that’s such an important point. So I just want to make sure, did everybody hear that? Did you zone out for a minute?

Andrea Kihlstedt:
Say it again.

Amy Eisenstein:
Rewind. Go back 30 seconds.

Andrea Kihlstedt:
I thought it was so clear.

Amy Eisenstein:
It was so clear. I don’t think I could say it again. But the point is, if you set a low campaign goal, your biggest donor’s sites will be lower than if you set a high campaign goal. And the example of course, Andrea used was a $5 million goal, then your lead gift is maybe a million dollars, 20%.

As opposed to if you’re doing a $10 million campaign, your lead gift would be 2 to $2.5 million. So really you are inspiring your lead donors to give more or inviting them to give more by setting a higher campaign goal. Thank you for always reminding us and me of that.

A Word About Endowment

Listen, way early in the podcast when you were talking about things that you could include in your goal, of course, you mentioned endowment. And I am sort of on a tear to get people to stop using that word, which I think is highly charged in this field. So I wrote down maintenance fund because you were talking about maintenance for the building, right?

So part of your campaign is a maintenance fund, but do you have to call it an endowment? It may function like an endowment and you may save that money and use the interest and invest the money, and that’s fine. You may have an innovation fund for new ideas and new projects, and that might be part of your campaign. But do you have to call it an endowment? Just like really smart organizations, educational institutions, call it a scholarship fund. They don’t call it an endowment fund. They call it a scholarship fund, but that’s how it functions.

So just as you’re setting your goal, you will include some long-term funds. Campaigns are about long-term projects and building your capacity. And part of that is having funds for the future. And so you’ll include them. I just want us to think about language. Language is important.

Andrea Kihlstedt:
Yes, it is. And I’m so glad you brought that up. I really have to retrain myself, Amy. Old dogs are slow to learn new tricks, but I think that’s a really good new trick to learn. I will do my best to —

Amy Eisenstein:
No, no. And listen, you may or may not meet the goal for the fund portion of your campaign, right? The first dollars in need to go to construction and other shorter-term fiscal needs. And you may do fill your maintenance fund or your innovation fund and your scholarship fund with bequests and plan gifts, and that may take a longer time for those gifts to come in. And that’s actually fine.

It works well that way because that is a long-term fund. So all of these things are good and there’s a method to the madness. So I just want to remind listeners that if you’re planning a campaign, we would love to help.

We would love to coach you and advise you and guide you through your campaign. So visit the Capital Campaign Pro website and sign up to talk to us. (It says start or sign up for a strategy session.)

There’s also tons of free resources, but we’d love to talk to you about your campaign and see if we can help guide you through some of these tricky strategic campaign decisions that you’ll be making in the months and years to come.

So thanks for listening. Talk to you soon.