When you invest in the stock market, you’re probably looking for a return on your investment, and you almost certainly think about that return in financial terms.
Return on investment is a metric that measures the profitability of an investment, giving you a way to compare the yields of investments and make more effective financial decisions. ROI is usually shown as a percentage calculated by dividing the net profit or loss by the initial cost.
Often, in fundraising, people would like to know the ROI of various ways of raising money. What’s the ROI, for example, of your annual gala? Or of your spring appeal? Or how about your capital campaign?
Dataro has written a clear and effective post on calculating ROI for fundraising campaigns. They point out that if you calculate your ROI for an annual fundraising program the same way every year, you will have an effective comparative way to evaluate its effectiveness. And, with that sort of analysis, you’ll be able to tinker with your model and see what works over time.
Capital Campaigns and ROI
How do you determine your capital campaign’s ROI? Let’s say your organization raises $5 million through a campaign. You calculate the campaign’s overall expenses (including consultants, events, communications, materials, staffing, etc.) to be $500,000 or 10% of your campaign goal. Your ROI would be 900%.
($5,000,000 – $500,000) / $500,000 = 9 x 100 = 900%
That’s a remarkable ROI! It’s quite common for campaign expenses to amount to about 10% of the campaign goal. By most people’s tally, capital campaigns are the most cost-effective form of fundraising.
Why? Capital campaigns are laser focused on the top-level gifts. In most campaigns, the top ten gifts account for half or more of the campaign goal. That laser focus has several consequences because major gift fundraising is relatively inexpensive. You’ve got to develop a compelling case for support, identify your top 30 to 50 prospects, and engage and solicit those donors one at a time.
Of course, that’s a gross simplification, but when you peel away all of the other “stuff” of a campaign, that’s what’s left—identifying prospects and having conversations—and it’s not expensive.
The Nuance of Capital Campaign ROI
Calculating ROI of capital campaigns is an important way to measure the effectiveness of your fundraising and the performance of your strategies. However, keep in mind that it’s a less straightforward metric in the case of capital campaigns than it is for annual campaigns you might host.
For starters, capital campaigns don’t occur year after year. Most organizations conduct a capital campaign every 10 or 15 or even 20 years. So the usefulness of ROI to compare one campaign to another is somewhat limited given the substantial changes that can take place within an organization or a fundraising marketplace over that extended period.
Additionally, looking solely at the remarkable financial ROI of your capital campaign can leave out a very important calculation that’s worth understanding.
Capital campaigns expand the capacity of an organization in three other ways that are at least as important as the money they raise. These are the campaign’s non-financial returns.
1. Capital campaigns lift an organization’s sights.
Nonprofit organizations get used to thinking from scarcity rather than abundance mindsets. They often plan year to year on the assumption that they will be hard-pressed to raise much more money than they’ve raised in the past. They then increase their programs incrementally rather than exponentially, which puts a serious hamper on their growth.
Then, something happens to push them to think bigger. Perhaps they outgrow their facilities. Perhaps the numbers of people in need of their services suddenly doubles or even triples because of an external stimulus. Or, perhaps they get new, visionary leadership that isn’t, or hasn’t yet been, worn down to incremental scarcity thinking.
Out of these changes often grows a capital campaign, and the organization that had never before raised more than $500,000 raises an eye-popping $12,000,000! And, even more amazing, the bulk of the money raised came from the very same donors who’ve supported the organization with smaller gifts in years past.
For this organization, a very real return on investment of their capital campaign is the realization that the success of their fundraising is tied to the ability of the leadership to set inspiring goals.
(To clarify, we’re not suggesting that an organization that raises $500,000 annually can suddenly raise $12 million every year—that’s unrealistic. But with some innovative and exciting plans and effective major gift fundraising, might they be able to raise $1 million for their program one year? Yes!)
Bigger, more exciting ideas and dynamic thinking really do raise more money. Capital campaigns often serve as the catalysts to kickstart this kind of paradigm shift.
2. Capital campaigns build stronger relationships with major donors.
Unlike broad base forms of fundraising, capital campaigns are based on developing relationships with people who can give top level gifts. When motivated and disciplined by the capital campaign process, organizations become far closer to their major donors.
In many cases, the relationships built during a campaign endure. People who give large gifts typically stay involved, interested, and committed when they’re intentionally kept in the loop. And those relationships are not one-and-done. In fact, the best predictor that a donor will make a large gift to your organization is whether or not they have made a large gift to you before.
If someone has given your organization a large gift before and you have treated them well, the chances are very good that they will do so again. A capital campaign provides opportunities to build donor relationships that will not only lead to large campaign gifts, but that will also lead to other large gifts in the future—a clear long-term return on the initial campaign investment.
3. Capital campaigns train leaders to be better fundraisers.
There’s nothing quite like a capital campaign to get executive directors, board chairs, and development directors to gather their courage to ask for large gifts. And, like many things in life, the more you practice, the better you get!
A powerful return on investment from capital campaign fundraising is that it turns timid askers into tigers. One success leads to another and gradually, people in leadership positions become more comfortable with the process of cultivating donors and asking for large gifts. When the campaign is done, that skill remains and the organization’s ongoing fundraising will
How Do You Track and Realize the Long-Term ROI of a Capital Campaign?
Although creating a well-organized way of capturing the long-term and non-financial ROI of any campaign is a challenge, it’s an extremely worthwhile exercise.
Take time early in your capital campaign planning process to figure out some benchmarks to track over time that will remind you of the remarkable long-term results of your capital campaign. Metrics relating to your impact, capacity, major donor stewardship efforts, and executive or board fundraising could all be good candidates.
Key takeaway: While the straightforward calculation of ROI on a capital campaign is often striking, the longer-term benefits are likely to be even more transformational for your mission and your ability to drive impact. Be aware of these benefits, actively think about them, and you’re more likely to realize them.