When should your nonprofit phase its capital project?
You know that the nonprofit capital campaign fundraising process is broken into specific phases, like the quiet phase and the public phase; however, in many points during the life of a capital campaign, a different kind of phasing arises: phasing the construction of the new infrastructure itself.
When should a nonprofit consider phasing construction? There are several scenarios in which phasing makes sense. Most of them circle around fundraising capacity and the need to raise and spend money in a way that is realistic for each unique organization.
Your planning study underperforms
Some nonprofits find during their campaign planning study (also called a feasibility study) that while the project resonates with community leaders on some level, there is not enough financial support discovered during the study to confidently launch the proposed project in its entirety.
By phasing the project, an organization can start with a piece of its ultimate vison and build credibility in the philanthropic community through success with that project. A nonprofit we partnered with envisioned building a campus for individuals with autism that would provide services and programs along with permanent homes with support staff. Based on their campaign planning study, the organization decided to begin with renovating its existing buildings to expand current services. The fundraising and construction of the housing aspect of the project would come in phase two.
Campaign and construction success combined with increased impact on the community builds trust among donors for future efforts. The initial project also allows you to grow your organization’s fundraising skills, capacity and your campaign committee from among those donors that love your organization and its full vision. That extends your reach further into their philanthropic circles in phase two.
You are unknown
If your nonprofit is not well known in the community because you are a new organization or haven’t ever reached out for major-gift ($25,000+) support, you likely have no image or a neutral image among community leaders and philanthropists. A nonprofit’s image is a key piece of motivating major gifts to capital campaigns. If you are in this category, you might need to build a philanthropic base of supporters before launching a big campaign.
For example, a new arts organization with a vision for a $20 million visual and performing arts venue discovered during its campaign planning study that while there was general community interest in supporting the arts, most interviewees were unfamiliar with the nonprofit or hadn’t seen it accomplish anything yet. They couldn’t justify supporting a $20 million campaign with a large gift.
We advised this organization to consider beginning with developing a visual arts space and a campaign about one-third the size of the total venue project. Success at the $6 million level and completion of a significant project would strengthen the organization’s image and credibility with donors, preparing it for a larger campaign in the future.
Your vision doesn’t resonate
In some cases, an organization can be very well known, but its vision is not “seen” by the philanthropic community.
We help many libraries and library foundations with their philanthropic campaigns to expand and enhance these public spaces to make them even more useful and usable than public funds allow. While everyone we talk to during planning studies has some understanding of the library’s role in the community, they may have never considered everything that a library does beyond books. Our work as consultants during the study is to educate interviewees about the importance of the library and its expanded vision.
If, despite the effort to educate, not enough potential donors indicate support at major gift levels, we may advise libraries in these situations to start with a portion of the vision that can be expanded upon in subsequent campaigns. If a new teen room that provides gathering space and activities for teens has been well received in the planning study, consider making that a first phase, by which you can launch the campaign and deliver a desireable outcome, proving your effectiveness and the value of your offerings to donors.
Your campaign stalls
Sometimes your campaign stalls. You’ve raised half of your goal and nothing you do is moving the needle forward. The causes may be external or internal.
Externally, something beyond your control, like a pandemic or an economic blow to your community, can cause the solicitation of new gifts and pledges to be ill-advised. We saw this during the Covid-19 pandemic, when our arts, conservation and athletic campaigns paused because health and human services needs became top of mind for donors.
Internally, your campaign committee may have insufficient reach. If your committee members don’t have a personal relationship with sufficient donors to reach your goal, the campaign stalls. This is why we encourage campaign committees to continuously recruit new members from among donors who have given at capacity to the campaign. This expands the committee’s reach into their networks and to more people on your prospect list.
A museum we worked with had this challenge. With $6 million raised for the $13 million project, the fundraising lost momentum due to the committee’s insufficient reach and lack of recruitment. Located in a mountain town with a short construction window, they realized the importance of acting quickly with what they had and before construction costs rose any further. They developed a plan to build in two phases and cut costs where they could. Keeping their donors well informed, they decreased their phase one construction goal to $9 million. They worked extremely hard over about eight months to raise the additional $3 million needed, a large portion of that being a second gift from a major donor who believed in the vision. Reaching the $9 million meant that they could break ground at the beginning of the construction season and complete about two-thirds of their total vision, putting their donor’s contributions to their intended use to build a new museum.
It was most important that they did not give up. Failure in a capital campaign is unacceptable. It will tarnish your organization’s image for years to come and hurt your relationship with donors and your community. Phasing the project was the clear solution.
When to plan on phasing from the start
Plan on phasing from the start if it makes sense. If your community is growing, the need for your services will grow too. Phasing allows you to meet immediate needs and plan for future needs. For example, a health system expanding into a new community that secures enough land for the initial facility that can serve 10,000 patients but has space to expand to 20,000 patients when necessary.
Flexibility required
Each organization’s unique project, campaign and community will drive decisions and require flexibility as the project progresses. If you’ve gone down one path and decide you need to pivot, recognize that phasing is a tool to help you better align your campaign and your project with your current reality.
If you have a project you’d like to discuss, contact us. We’re always happy to chat.
Melissa Sais is vice president and partner with Campaign Counsel.
