The recent news of a $50 million gift to the University of St. Thomas’s new scholarship endowment initiative has a lot of executive directors thinking, “Is now the time to fund an endowment?” A healthy endowment is a boon to any size nonprofit and can ease the funding pressure of staff salaries, facilities or programs. Many development best practices that apply to any type of campaign also apply to an endowment campaign. But, when wondering “how to grow an endowment fund,” there are a few unique considerations to keep in mind:
- Develop a strong strategic vision: A well-funded endowment can serve a particular need forever, but, before asking donors to give, make sure you have a clear vision for the next year, decade and generation of your organization. Not every detail must be fleshed out, but a dynamic vision and compelling narrative can inspire action, even if the impact isn’t immediately felt.
- Speak to the investment-minded: Many donors want to see their gift have an immediate effect, but other donors are interested in a strong return on investment year after year. Gather a list of “investment-minded” supporters from your staff and volunteers, and ask them directly to contribute to your endowment. Be prepared to provide forecasts and cash flow projections so your donors know this endowment is a smart investment.
- Seek multi-year commitments: You may have a handful of donors in your database capable of making seven-figure gifts today, but for each one of these, you likely have dozens who could commit to six-figure gifts stretched out over many years. Because your endowment is a long-term proposition, seek out larger gifts that can be paid out over time.
- Establish an endowment committee: Unlike your general operating fund, endowments are highly-regulated. They require expertise to manage effectively. Before you call a single donor, have a lawyer, accountant or investment professional join your endowment committee. Proactively seeking out such assistance will put your donors at ease and ensure them that you will steward the endowment wisely.
- Embrace the incremental approach: Unlike capital improvements, which can often be “all or nothing” propositions, help your donors understand that every dollar contributed to an endowment is a dollar that can be invested, and the return can be drawn upon in the future. No matter what, a gift to your endowment helps improve the bottom line.
Whether you’re a small nonprofit looking to establish your first endowment or a large organization looking to grow an existing fund, our team is here to help. In the last 21 years, we have helped dozens of organizations meet their long-term goals through campaigns that have an endowment component. Following these endowment best practices are sure to help.
If you’re considering a campaign for your organization, or if you have any questions regarding the professional services provided by the Steier Group, I encourage you to contact me. We’d love to help you reach your development goals.