It’s scary how many nonprofits enter a crisis right after reaching their capital campaign goal. You wouldn’t think this would be the case, since that’s when all their money is raised. But while organizations budget to BUILD their new building, many forget to budget to OPERATE their new building. Suddenly, cash is flowing bright red to cover new salaries, supplies, insurance, utilities, etc. It can be a tense season that should be spent enjoying a fabulous new building and expanded program.
How does this happen? Lack of planning. Nonprofit leaders get excited about their new building and neglect to focus on the less glamorous operating expenses of the post-construction period. Their focus is on growth, not on sustainability (see the blog post on the Growth Cycle).
This is what operating expenses look like:
Meanwhile, annual revenue takes a little longer to catch up:
Most campaigns benefit from a boost in annual campaign income. However, it often grows at a slower pace than the expenses do. Because of this, you create a revenue gap:
So, what to do? How can you “cover your gap”? Here are a couple of strategies:
- Pro Forma Operating Budget: Projecting your revenue and expenses five to ten years into the future (post-campaign) can go a long way toward sustainability. I would always prefer to anticipate a gap and plan for it than trip on it. This is where the accountant on your board can be a big help!
- Endowment/Cash Reserve: These days, it makes lots of sense to add an endowment or cash reserve right into the capital campaign goal. This brings two major advantages. First, your gap will be filled. Second, you have a stronger response to common major donors concerns about sustainability.
Don’t grow your organization without covering your future operating costs. As you head into a capital campaign, remember to cover your gap.
Dickerson, Bakker & Associates is a gap zapping firm. Contact us today to help you measure the gap and prepare you for a successful campaign before, during, and after.
