Should I Consider Raising Funds for an Endowment?
Endowments are often associated with large nonprofit organizations in higher education or hospital foundations. Money raised for an endowment is invested, and the return is designated to support an organization’s general operating budget, a specific program or staff position. The additional funding stream can sustain a mission-driven organization and its future presence in the community.
While fundraising events and donor visits may be difficult to conduct during a pandemic, small and midsize organizations may further realize the importance and need for an endowment to sustain future operations. So, is raising funds for an endowment right for your organization at this time?
First and foremost, organizations should concentrate on raising money for their annual operating needs. Many donors may prefer to support your organization’s annual operations through special events or direct mail.
Endowments take more time to build and require a substantial amount in principal to yield an annual distribution. They tend to appeal to donors who want to leave a lasting legacy gift to sustain the organization for future generations. In such cases, it is imperative that the organization has a planned giving program in place. This allows donors to make a gift toward an endowment as part of their legacy.
An endowment also provides an opportunity for a donor to make a major gift to your organization. Often, organizations establish policies for undesignated gifts — outside of budgeted revenue — to be included in an endowment fund. This opportunity may complement a donor’s intentions to sustain the future legacy of an organization and reserve major gifts to support an endowment.
When establishing an endowment fund, consider the following steps:
- Have a plan. Develop a clear vision for what the endowment returns will support.
- Create case materials to promote to donors.
- Set a reasonable goal. For example, if your nonprofit raises $5 million a year, an endowment goal of $10 million is not likely to be achievable. However, an endowment goal of $1 million may be more achievable and would also result in a great impact to your organization.
- Establish guidelines for withdrawing revenue gains. Set a minimum endowment balance such as $1 million before allocating distributions.
- Mine your database for potential donors and target gift asks to support your endowment.
AMPERAGE Fundraising Advisers can assist in establishing and raising funds toward an endowment campaign. Contact Justin Tolan, director of fundraising, at email@example.com to learn more.