EDITOR’S NOTE: This article, first published in print during Nov/Dec 2005, has been republished for Nonprofit Quarterly with minor updates.

In our previous two articles, we examined what must be in place to begin an endowment campaign, including setting a goal, creating appropriate policies for accepting gifts and investing money, and pulling together a working committee. When I work with organizations on these elements, a question that is constantly dogging us is, “Do we have enough people to give to this campaign?” Obviously, the board and people close to the group are primary prospects, but they may not have the capacity for the largest gifts and usually more gifts are needed to complete the campaign. (Note: if board members are not the people closest to the organization, then reconsider doing an endowment campaign until your organization solves that problem.) To raise the rest of the funds, we need to identify more prospects.

ENDOWMENT PROSPECTS

In all campaigns, the rule of “top down, inside out” is the way to organize your prospects. Ben Franklin, who was one of America’s earliest and best fundraisers, advised, “Apply to all those whom you know will give something; next to those whom you are uncertain whether they will give anything or not, and show them the list of those who have given; and lastly, do not neglect those who you are sure will give nothing, for in some of them you will be mistaken.”

Franklin’s advice is what we mean by “inside out.” Start with the people closest to the group. Aside from board members, who technically make the actual first gifts to testify to their own commitment, think of other major donors, volunteers, former board members and volunteers (assuming no ill will accompanied their becoming “former”), staff, and so on. Start from the closest to the organization and work your way out.

“Top down” means organizing the list with the people who can make the biggest gifts at the top, then going down the list to smaller and smaller gifts. The first gift, then, is solicited from the person closest to the organization who can give the biggest gift. This person may not be the closest person, or the gift requested may not be the biggest gift you need, but it should be the biggest one you can get right now.

How to Identify a Prospect

A prospect for an endowment gift is someone with three qualifications: he or she has demonstrated a commitment to your group, usually by giving over several years and often through other than just financial involvement; they have the money; and your organization has access to this person. A common mistake is looking for someone with money who cares about a cause similar to yours. That person might be a major donor prospect or may eventually give an endowment gift, but the primary prospects need to be people who think that not only is your cause very important, but that your organization is doing such good work on this cause that they want to ensure your long-term viability.

Many people will say that they have no idea what assets their donors have. If you really have no idea, then you are going to have to find out more about your donors before you go asking them for gifts to your endowment. However, an easy rule to follow in soliciting capital or endowment gifts is to ask for a gift that is ten times the donor’s annual gift amount. (You want to make it clear that this gift is in addition to their annual gift. You don’t want your annual income to decline while you are doing the campaign.)

So, when you think about who might qualify as a prospect, ask yourself whether they could give this amount, even if over a three- to five-year period. When you tell donors that you are asking everyone for the same thing — ten times their annual gift — people are not offended, even if the size of the gift is absolutely out of their range. The real risk in following this formula without other knowledge is of asking someone for too little.

As we pointed out in the first article in this series, the case for endowment is three-fold: the organization currently needs some financial stability, the organization needs to exist indefinitely into the future, and the organization is mature enough or sophisticated enough to handle this kind of money. Finding donors who agree with all three premises and who also have the capacity to give requires thought and some research.

Whom to Ask First

Sometimes it is hard to figure out which of the people closest to the organization you should go to first. You may have a handful of people who are close and able to make a big gift. Think about who is most excited about the endowment. Keep in mind that some major donors who love your organization’s work are not going to support the endowment. There will be some who simply don’t agree that a grassroots organization should have an endowment, others who have given to endowments only to see that money spent on annual needs by a careless board, and still others who wish your endowment effort well but are only interested in funding more immediate needs.

Use common sense in identifying these prospects. What else do you know about the people on your list? For example, a person giving $50 quarterly might be close to the group but is probably far from the biggest donor. However, if her $50 gifts are derived from investment earnings, then she may go to the top of the list — maybe she would just give you the asset that is yielding this $50 each quarter. Someone who ekes out a living as an artist and whose last gift was $25, but then gives you $1,000 that he won in the lottery, is not going to be high on the list, but he may be an excellent solicitor because he actually gave an asset that he could have used himself.

The Role of Research

A number of important details can be learned through prospect research, which has become easier with various search engines and databases on the Internet. (For more on this topic, see Michel Hudson’s excellent article, “An Introduction to Prospect Research,”in the Journal,Vol. 22:1, 2003.) Sometimes just entering a name into Google will give you valuable information on other gifts the prospect has made or more background to help you frame your request.

Another option is to hire a prospect researcher for a few of your top names. For referrals, ask your local chapter of the Association of Fundraising Professionals (www.afpnet.org) or the Association of Professional Researchers for Advancement (www.aprahome.org). Check references to make sure the person is reputable and competent.

In doing prospect research, keep these three things in mind. First, while much can be known about a prospect, not everything should be, and you need to observe a sense of privacy. Ask yourself, “Would I like someone to find this out about me?” Second, prospect research can be procrastination. You are not writing a biography of this person. Think about what you really need to know and find that out. Finally, the tendency in this kind of research is to find out what people have — what they own, what they earn — but what you want to know is what they give. How do they think about their giving? Do they support the idea of endowments? This information will most likely come from people close to the prospects, so the best information tends to be from friends and colleagues of the prospect. If you have been doing your major donor work properly, information will have come from the prospects themselves.

How Many Prospects You Need

Because half of your prospects will say no and half of the group that says yes will give you less than what you ask for, you need about three times as many prospects as the number of gifts you seek. You don’t need all the prospects right at the start, but you do need at least half of the prospects for the biggest gifts right from the beginning.

In the last issue, we noted that for a million-dollar endowment campaign, an organization would need about 186 prospects for gifts between $2,500 and $200,000 (and another 75 prospects for gifts of $1,000 or less). You would be ill advised to launch such a campaign with fewer than 100 prospects for the gifts of $2,500 or more. Far worse than no endowment at all is an endowment campaign that splutters and moves slowly. The energy of the campaign is part of what makes it successful or not. “Our campaign is going so well” makes people want to give. “Our campaign is getting off to a slow start, “ or “We asked a bunch of people who said no” is not as appealing.

THE FEASIBILITY STUDY

To find out whether that many prospects are within your realm, consider doing a feasibility study. A feasibility study is a survey of people most likely to donate to the endowment to assess whether the goal the group has set is reachable, or to see what goal could be achieved and in what period of time. Such a study usually focuses on donors, board members, staff, key members of the community, foundation staff, and so on. It is often a lengthy process, involving written surveys, phone surveys, focus groups and in-person interviews. Nevertheless, such studies are important because they allow you to set realistic goals and avoid mistakes or public embarrassment.

There are firms that specialize in these kinds of studies, but because working with such a firm can be expensive, it is not an option for most grassroots groups. However, you can put together a reasonable effort for much less cost using a graduate student or perhaps a consultant wanting to learn more about feasibility studies.

Get Help

To be as accurate as possible, a feasibility study needs to be conducted by a person outside the organization, and the responses need to be kept confidential. This method confers several benefits: people being interviewed will be more honest when speaking to someone not affiliated with the group; the person conducting the interview will not color their questions or interpret the answer with their own sense of what is right or wrong with the organization; the interviewer can probe responses without reaction to them; the interviewee need not censor a response to spare the interviewer’s feelings; and the anonymity of the responses allows the donors to be as honest as possible without immediately committing themselves to give a specific amount. The survey report will not reveal who might give what amounts, simply what donors as a group are able and willing to give.

There are people who will disagree with me on the need for an objective survey. However, I have seen groups get visions of sugar plums by using information gathered from a survey they did themselves and, more important, not get critical feedback that could have helped strengthen the organization. Here is an example:

The development director of an organization sent a written survey to donors asking about what would make them give a large gift to an endowment. Many answers came back with rather veiled references to “concern about leadership,” or “not sure all the leaders are competent,” or the even more obtuse, “fundraising has become too important.” While people seemed to favor the idea of an endowment, overall the study showed that the organization was “not ready,” but gave little indication of what that meant.

Since the development director and the executive director both felt that the board was weak and the chair of the board incompetent, they interpreted the survey to show that the donors agreed with them. The development director shared his findings with the board and in a fairly diplomatic way suggested that board weakness was a problem. Fortunately, the board (who had not been interviewed because all agreed that the board was “in favor” of the endowment campaign idea) decided to postpone the campaign for a couple of years.

Two years later, a few new board members were able to insist on a new study, this one done by an outsider. This study revealed that the real problems were with the development director himself. Donors felt he did not listen, that his letters and reports were poorly done and embarrassing to the agency. Several noted that he was a gossip, sharing information that donors had given him in confidence and revealing the identity of an anonymous donor. Some of this information had been brought to the attention of the director, who had merely reprimanded him. These organizational problems became clear in an anonymous survey.

The Written Survey

Organizations using an outside consultant to conduct their endowment feasibility survey can sometimes save money by creating the survey questions they want the consultant to ask. The consultant should have input into the study, and the group should look for someone who has done this kind of thing before, but there are standard questions to ask and it is not necessary to pay someone to think them up for you (see box).

You will always get more surveys back and have more comparable and honest information if you give people mostly multiple-choice questions, with answers expressed as a range.

The Phone Survey

The written survey is sent to people who are close to the group, but those who are closest to the group should be interviewed on the phone. Most of the multiple-choice or yes/no questions are the same on the phone as in the written survey. In addition, the caller can ask other, more open-ended questions, such as these:

  • Do you think there is a clear case for an endowment for this organization?
  • What important facts must this organization communicate in order to succeed in raising an endowment?
  • Would you be willing to influence others to participate financially in an endowment campaign for this organization?
  • Can you think of other people who should be interviewed about this campaign?
  • Are there major weaknesses you see in the organization or any of the people involved in it that might weaken an endowment campaign?

Obviously, you also want to ask about levels of support, as in the written survey. It is important that the phone surveyor have good active listening skills and that he or she be willing to ask questions for clarification without conveying judgment about what the prospect is saying. For example, to say, “It sounds like that incident made you really angry,” shows that you heard the person but don’t agree or disagree; voicing agreement by saying, “I can see why you were so mad,” or questioning the prospect’s judgment with, “No one else has expressed anger about that. I wonder why it bugged you so much” are not objective responses.

Who Should Be Surveyed

Everyone who is a “stakeholder,” that is, anyone with a high degree of commitment to an organization, should be surveyed. Stakeholders are people who care that the group exists and have opinions about and some investment in its work. The biggest group of stakeholders is, of course, people who give money or time; those who give more of both, or have given one or both for many years, should be surveyed by phone.

Ideally, all donors should be surveyed. If you have thousands of donors, at least survey all donors giving $50 or more, and all donors giving any amount for more than three years in a row. In addition, former staff and former board may be sent a modified survey or phoned. Others who have a relationship with the organization or whose opinion about your campaign will be sought by others should also get some form of the survey. These people may include staff at foundations, corporations, and volunteers with the organization.

Some groups also survey clients and former clients, politicians, vendors, and the like with questions about the reputation of the group and to get a better sense of how the group is perceived by others beyond the immediate stakeholders. This is not necessary unless you have reason to think that your donors’ and volunteers’ perceptions are going to be significantly different from those in the rest of the community.

How To Decide Whom To Phone

At least 15 people should be phoned, but usually not more than 25. Your decision will depend in part on how may phone surveys you want to have to tally; your consultant will help you with this. You can always decide to call more people if your responses are wildly inconsistent or you want to seek clarity on a particular point.

Definitely call donors giving the most money in terms of size of gift, those who you know give significantly to other groups and give generously to you but may not be your largest donors, and those whose gifts are both large and a stretch for them. Include a random sample of those who have given consecutively for three years or more regardless of the size of their gift. If there are people you think would make endowment gifts or who have encouraged you to begin an endowment but do not fall into these categories, interview them by phone as well.

Analyzing the Data

In doing this kind of simplified feasibility study, the idea is to learn what you need without having too much data to sort through. That’s why I recommend against convening in-person focus groups and producing several versions of your written survey.

The type of survey outlined here will reveal what people who care about your group think of endowments, whether they would give to one for your group, and in what range. You will surface serious problems or misperceptions about your group, and you will have a sense of what would be good timing for beginning an endowment campaign.

You will also get sense of how much money your donors give elsewhere and whether you have strong, loyal donors for whom you are their top giving priority (which is what you need for an endowment campaign).

What Other Groups Have Learned

Here are three examples of what grassroots groups learned from their feasibility studies.

A social service organization serving twenty rural southern counties learned that, while the organization was well liked by people close to it, the balance of people responding had no opinion. Many felt the organization concentrated too specifically on local, topical issues rather than seeking broader social impact. They questioned whether the group needed an endowment to let it keep fighting brushfires. Though nearly half felt the organization’s programs were “outstanding” or “above average,” the bulk of the other half replied, “Don’t know.” The organization concluded from their study that they need to be better known and understood before they can expect people to give to an endowment.

A church in a decaying urban neighborhood, where church members are increasingly drawn from outside the immediate area, had embarked on a renovation program and wanted to see how much money it could raise for an endowment at the same time. The consultant interviewed church members, foundation officials and nearby corporations that had funded social service projects housed at the church. He learned that many in the congregation did not agree with the scope of the renovation campaign and would resist any increase in the campaign goal to accommodate an endowment. Others believed that the church should not tie up money in an endowment that should be used to feed, clothe, house, and take care of poor neighbors. He recommended both rethinking the scale of the renovation and not undertaking an endowment at that time. Despite this negative assessment, the church went ahead with both the renovation and endowment projects. After three years, the group had been unable to raise more than half their goal, leaving it without enough money to complete the renovation or begin the endowment.

A community foundation wished to expand its endowment by $1 million. The consultant discovered widespread support of the foundation, with more than half the respondents reporting that the foundation was already named as a beneficiary in their will. Criticisms of the foundation focused on donors’ desires to do more: “They have asked me for the same gift three years in a row. While I am grateful that they are not constantly asking for more, I think they could be more assertive.” “They need to do more planned giving education. I set up a charitable remainder trust at my college, which I don’t care as much about as this foundation, but the college showed me exactly what to do and where to sign.” When the consultant asked in phone interviews about the highest gift these donors would consider to an endowment campaign, three people said they would give $250,000, a few named $100,000, and several suggested $50,000. These were much higher than the foundation had expected. The consultant concluded that the foundation should raise its three-year goal for the endowment campaign to $3 million. After one year, the group had raised $2 million.

CONCLUSION

Feasibility studies for an endowment can be extremely valuable if they are done well, analyzed properly and acted on judiciously. They should be undertaken by groups not afraid of finding out what people think about them and willing to correct misimpressions or fix problems. Groups determined to launch an endowment campaign no matter what need not bother commissioning a study. However, groups that do a feasibility study would be well advised to heed its results. If an endowment campaign is supported by the results of the study, finding willing prospects should not be difficult.

KIM KLEIN IS THE PUBLISHER OF THE GRASSROOTS FUNDRAISING JOURNAL.