An Endowment Is a Cornerstone of Nonprofit Financial Stability
If your nonprofit is like most, you’re probably under so much pressure to generate needed funds for current operations that the thought of raising money for your endowment is a “luxury” left for another day or year.
Yet, during these challenging economic times, charities that placed a premium on raising endowment gifts are now benefiting from the fund’s existence. The annual interest from their endowment
is helping them to survive, even prosper, during lean times.
Of all the types of nonprofit organizations that exist, colleges and universities have achieved the most success in raising endowment funds, with Harvard University topping the list at a whopping $30 billion at the end of fiscal year 2012.
For those not all that familiar with the endowments and how they work, think of a nonprofit’s endowment as a savings account which can never be touched. Only the annual interest from the fund, or in some cases only a portion of the annual interest, can be used to fund programs. That permanent savings account can ease the financial burden during tough times and help an organization flourish during more prosperous times.
Whether times are good or not so good, there’s no reason to put off raising funds to either start or build your endowment. But don’t go after the nickel and dime stuff; focus on five- and six- and seven-figure gifts – both outright gifts and planned gifts (those that will be realized
after the donor’s lifetime).
If you’re just getting started building an endowment, make it a long-term goal to have at least three times your annual operating budget as a minimum endowment.
How to get started building your endowment:
- Get endowment buy-in from your key stakeholders. Sell your board on the value of endowment. Show them some examples of other nonprofits that have built sizable endowment funds. Illustrate the positive impact those funds are having on people and programs.
- Get board-approved policies that make endowment a priority. Many boards will make policy decisions such as, “all unrestricted bequests shall be earmarked for endowment” or “any annual funds received throughout the current fiscal year in excess of $X will be directed to the endowment.”
- Incorporate quantitative goals into your yearly fundraising plans:–To identify no less that XX prospects who have the capability of establishing named endowment funds.
–To call on and cultivate relationships with no less than XX prospects with the goal of convincing them to establish named endowment funds.
–To coordinate one special event during the fiscal year, the net proceeds from which will be directed to our endowment.
- Establish an endowment committee. Begin a long-term process of involving key individuals (board members, financially-capable donors) to help manage and promote support of your endowment. This committee can assume an ongoing role in identifying endowment prospects, cultivating relationships, assisting in solicitation calls and more. The committee can also assist in recognizing and stewarding those who establish named endowment funds over time.
- Develop marketing materials you can use when making face-to-face calls. You can produce inexpensive handouts as a way of introducing endowment gift opportunities to would-be donors. The ancillary material(s) should cover:–an explanation of what an endowment is and how it works
–a menu of named endowment gift opportunities (e.g. scholarships, endowed chairs, facilities or equipment endowment, endowed internships)
–brief descriptions of any existing named endowment funds
–compelling messages about how a growing endowment will positively impact your organization and those you serve
–a call to action and contact information.
- Work to educate your entire constituency about endowment and its value. Take every available opportunity to educate people on various aspects of endowment (e.g. how it works, how it’s invested, what types of giving opportunities exist), and to regularly share news and features about endowment through every means possible – through your website, in your newsletter/magazine, in publicizing major gifts, and when making remarks to various groups.
Ultimately, the growth of your nonprofit’s endowment is a result of the amount of time and effort you and your organization’s stakeholders put into it. More ways to market your endowment to donors.