Month: March 2015

Capital Campaign Feasibility Studies: Yay or Nay?

You’re planning a capital campaign.  Then it’s time for a feasibility study — or is it?

For years, nonprofits have retained consultants to visit with potential campaign donors to learn how they feel about the organization and its proposed project. The consultant typically poses hypotheticals (if nonprofit ABC were to conduct such campaign how much might you hypothetically be willing to give) to better understand the donor’s willingness to make a gift. The study results are used to refine the project’s case for support, assess how realistic the campaign goal is, and determine if there will be adequate campaign leadership. The practice of conducting feasibility studies is being called into question. Let’s take a look.

Feasibility Studies: The nay-sayers

James LaRose’s forthcoming book will have a chapter titled, “Feasibility Studies: the Crack Cocaine of Nonprofit Consulting,” reports Holly Hall in a March 17, 2015 Chronicle of Philanthropy article. Mr. LaRose is quoted as saying: “Eighty percent of nonprofits don’t need to spend $25,000 to $50,000 to find out what they already know, that they aren’t ready.” He also points out that the consultants conducting the feasibility study stand to earn hundreds of thousands of dollars if the campaign moves forward. He recommends using different consultants for the study and campaign.

A November 6, 2012 blog post by Tom Suddes on the website is titled: “No More Feasibility Studies.” Mr. Suddes focuses on the failure of such studies to involve and engage donors. Instead, as he puts it, internal leaders enlist external consultants for “justification, CYA and backup.”

Feasibility Studies: The Advocates

Most of the capital campaign consulting industry.

Rationale for Feasibility Studies:

  1. You don’t know your donors very well… and truly have no idea how they will respond to the campaign.
  2. Prospective donors are more likely to tell outside consultants what they really think. How do people feel about the organization? Do they care about his project? Do they have pent-up frustrations or specific concerns?
  3. Being included in the study is part of the donor cultivation process. Donors are flattered to be asked. The conversation gets them thinking about making a gift.
  4. The prospect of a campaign falling flat is scary. Well done feasibility studies provide a measure of assurance about how much you can raise—and from whom.
  5. You’ll find out if the necessary volunteer leadership in place—is the board ready and are there campaign co-chairs in the wings?
  6. You may learn about external events that should be taken into consideration, e.g., a competing campaign.

Rationale Against Feasibility Studies:

  1. You already know the answer, in which case the study is a waste of money.
  2. Involve your donors early on and you will find out what they think, engage them more deeply and have no need have an outsider “study” them.
  3. In this day and age, a small number of donors typically account for 90-95% of the campaign.  If you have them lined up, then you are good to go.
  4. Beware consultant bias: If the consultant knows that a lucrative campaign gig is riding on a positive outcome, there may be unconscious bias in play. Think of the studies of physicians who have financial ties to test facilities compared to those that don’t. Physicians with the ties order more tests. Their patients do not have better health outcomes.

My take:

To Mr. LaRose’s point, it is ridiculous to spend $25,000-$50,000 if you already know the answer—and the answer is: “not ready.” If you answer “no” to the questions on the Capital Campaign Readiness Litmus Test™ below, then you don’t need a feasibility study. You need to build your board and/or donor base or get a handle on the project.

  • You can’t name at least three donors with the potential to give 10-20% of the campaign goal. (You’ll likely need four or five, but can you name three right now?)
  • You don’t have at least 20 qualified prospects you could send a capital campaign consultant to talk to if you were to do a study.
  • You don’t have a campaign goal (estimated project cost along with endowment or other components, if applicable) .
  • Your board doesn’t have at least two members who can make an impact gift—a gift would situate them among the top 10-15 donors on your campaign gift chart.
  • You can’t identify two volunteer campaign co-chairs who are well-known in your community and would likely commit to making a campaign gift and picking up the phone on your behalf.

Feasibility studies and deep donor engagement need to work hand-in-hand.

  • Mr. Suddes is right—it makes sense to involve your donors early on. Include key stakeholders in the preliminary conversations about the need, the project and the messaging—a “leadership consensus building” model he calls it.
  • Skip the feasibility study and go for it if you know your donors well; have multiple potential donors for each of the top spots on the gift chart or have lined up the top three gifts; have engaged a core group in “leadership consensus building;” and witness enthusiasm for the project.
  • Otherwise, use “leadership consensus building” to get key stakeholders involved and to refine your messaging and case. Then, get ready for the campaign by visiting a wider group of donors as part of a feasibility study.

Even if you ordinarily might forgo a feasibility study, re-consider if your donors have a particular reason to want to vent or be re-assured, e.g., the organization has:

  • Shifted direction or leadership;
  • Endured recent financial struggles; or
  • Been embroiled in controversy.

Feasibility studies are likely to be helpful if this is your first capital campaign; the campaign goal is unprecedented; or the project is unusual or unexpected for your organization.

Confidence matters. There is value to the board and senior leadership in a research-based report from an experienced consultant that answers the question: “Can we reasonably expect to attain the campaign goal?”

Author’s note: focuses on non-capital major gift revenue streams and campaign readiness for small-to-mid-sized nonprofits. This post was edited on April 7, 2015.

Major Gifts: It’s All About Donor Impact

Donors don’t care what you need. They care about their impact.

I had just finished presenting a workshop titled, “Opportunity Knocks: Major Gift Fundraising for Smaller Nonprofits.” It covered the topics you’d expect: how to use donor research, setting up the visit, the case for support, making the “ask” and responding to, “Let me think about it.” But I always add a segment about emotion driving individual giving, the power of storytelling to convey emotion and what donors want: to know they are having an impact.

The workshop ended. A participant came up to me and described her situation: Her nonprofit recently lost one of its larger grants. She was about to go out and meet with individual donors (that’s good!) and make the case around the need to replace the lost grant with individual gifts.

I just started to say, “No…. ” when another participant waiting to speak with me said, “I have to tell you this story.”

And here’s the gist of what she said:

We were near the end of a multi-million dollar campaign. Our Chief Development Officer went to a long-standing supporter and asked if he would donate $1 million to close out the campaign. The donor said, “no.”

Shortly thereafter, the Chief Development Officer discovered that the donor had just made a $2 million dollar gift to the American Cancer Society. He calls the donor to see “what gives” (more politely than that, of course).

Here’s what the donor told him: You asked me to close out a campaign. They asked me to help cure cancer.

And there you have it! Need vs. Impact. Impact wins, every time.