How and Why to Make Endowment Fundraising a Priority for Your Nonprofit
Endowment Equals Financial Stability in Good Times and Bad
Why Endowments Make Sense for All Nonprofits
If your nonprofit is like most, you’re under so much pressure to generate funds for current operations that the thought of raising money for your endowment is a “luxury” left for another day or year.
However, when the next economic downturn comes, charities that placed a premium on raising endowment gifts can ride out the storm in style. The annual interest from an endowment can mean the difference between surviving or closing the doors.
It's likely that you and your board members equate endowment with large institutions like Ivy League colleges and university that have billions stashed away.
The truth though is that endowment fundraising need not be just for those elite nonprofits. Any organization can and should seriously consider raising endowment funds.
For those not familiar with endowments and how they work, think of an 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. That permanent savings account can ease the financial burden during tough times and help an organization flourish during more prosperous times.
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-, six- and seven-figure gifts and both outright gifts and planned gifts.
If you’re just getting started building an endowment, make your goal, at least, three times your annual operating budget.
How to Get Started
1. Get your key stakeholders to understand and value an endowment.
Sell your board. Show them examples of other nonprofits that have created sizable endowments. Explain the positive impact those funds have on people and programs. Bring in a consultant who can speak to the importance of endowment funds and analyze whether your organization is ready and able to raise endowment money.
2. Get your board to approve policies that make endowment a priority.
Many boards 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 must go to the endowment.”
3. Incorporate quantitative goals and objectives into your yearly fundraising plans, such as:
- To identify no less that XX prospects who are capable of establishing named endowment funds.
- To call on and cultivate relationships with no less than XX prospects for creating named endowment funds.
- To coordinate one special event during the fiscal year that can feed the endowment.
4. Establish an endowment committee.
Start involving key individuals such as board members and financially-capable donors to help manage and promote support of your endowment. This committee can identify endowment prospects, cultivate relationships, assist in solicitation calls and more. The committee can also recognize and steward people who establish named endowment funds.
5. Develop marketing materials for face-to-face calls.
You can create inexpensive handouts to introduce endowment gift opportunities to donors. Those materials should include:
- what an endowment is and how it works
- a menu of named endowment gift opportunities, such as scholarships, endowed chairs, facilities or equipment, and endowed internships
- brief descriptions of existing named endowment funds
- compelling messages about the impact of an endowment on your organization and those you serve
- a call to action and contact information.
6. Educate your entire constituency about endowment and its value.
Take every opportunity to educate people on aspects of an endowment, such as how it works, how it’s invested, and what types of giving opportunities exist.
Regularly share news and features about endowment through every possible avenue, such as your website, in your newsletter/magazine, when publicizing major gifts, and when speaking to various groups.
The growth of your nonprofit’s endowment depends on the amount of time and effort you and your organization’s stakeholders put into it.