LONG TERM STRATEGIC FINANCING & CAPITAL CAMPAIGNS

April 6, 2010

Questions from Readings

What is the Nonprofit Finance Fund’s attitude toward debt?

What types of nonprofits were profiled in this monograph, and why do they need loans?

What are some responses to economic hard times?

Why would structural and engagement strategies be better than quick financial strategies?

Loan Case Studies of Educational Nonprofits & Slate 60

Tough Times Strategies: Moving Beyond the Bake Sale

Questions from Readings

What are some of the organizations studied and what were the criteria for selection?

What growth strategies to “really big” nonprofits employ that go against conventional wisdom?

Is government funding growing or declining compared to GDP?

What are 2 quick ways to bring in revenue?

Why develop money making ventures?

What kind of organizations are best suited to this?

How Nonprofits Get Really Big

Short and Long Term Approaches to Finding Revenue

a time-limited effort to raise significant dollars for a specific project. Often the acquisition, construction, or renovation of a building. Sometimes used to build an endowment or fund an extraordinary acquisition. Capital campaigns have a beginning and an end, and employ all the usual means of fundraising.

Capital Campaigns

Capital Budgets

Will the asset improve organizational performance?

How will the acquisition be financed? What will it cost to obtain and maintain

the asset throughout its life? Capital acquisition budgets: showing

capital over time (one year showing total cost, projected additions or sales, proposed through next year.

Asset Management

Determining Cost of Major Purchase Original cost: purchase price, shipping,

accessories, installation, training, other Annual cost: purchase price/estimated

years of use Recurring annual costs: insurance,

maintenance, upgrades, training

Example – Heart House Houston

Expense TOTAL In-Kind

Needed

Land $90,000 $90,000

$0

General Conditions: contractor, surveys, permits, tests, etc.

45,000 25,000 20,000

Professional Services: architects, engineers, legal, etc.

110,000 75,000 35,000

Construction 1,200,000

500,000

700,000

Example – Heart House Houston

Expense TOTAL In-Kind

Needed

Fixtures 12,000 0 12,000

Exterior 30,000 8,000 22,000

Furniture, equipment, supplies

62,000 5,000 57,000

3 years utilities & maintenance

35,000 0 35,000

Example – Heart House Houston

Expense TOTAL In-Kind Needed

3 years operating 420,000 0 420,000

Fundraising 45,000 25,000 20,000

Contingency 80,000 0 80,000

TOTAL $2,129,000

$728,000

$1,401,000

Campaign Elements

Organizational background including funding history, board, etc.

Case statement for organization and specific project (i.e. growth plan)

Budget Budget goals by time and size of gifts Potential donor identification by constituency

(individuals, corporations, foundations etc.) Naming opportunities Materials

Long-Term Strategic Planning

Macro Resource Goals

Establish working capital base Maintain a minimum of three months’ operating

funds Retire debt or reduce accounts payable Seek endowment funding for investments Buy or build a facility Establish branches or franchise Conduct marketing campaign to increase revenues Raise salaries and/or increase staff Improve employee benefits Establish volunteer branch Hire CFO

Resource Acquisition

Forming alliances to improve efficiencies (i.e. sharing high-cost professionals, co-sponsorships)

Business income – related and unrelated Loans Investments Planned gifts

Trusts Retirement funds Life insurance policies

Endowments

Permanent gift meant to be kept intact to produce income to support activities, sometimes specific. Organization must be relatively stable. May be restricted for a specific number of years – 25, 50, 100. Restrictions may have stipulations for times of crisis.

Investments

How long can funds be invested? Can we afford to lose money? How secure are funding sources? Are staff capable of overseeing

investments Consider the risk – risk pyramid

Choices for Tight Budgets

Raise service fees, publication rates, membership prices etc.

Charge for services offered for free Eliminate programs and/or downsize

staff Merge Sell underutilized assets

Review of Financial Reports

Suggested Inventory

Independent Accountant Audit Opinion Letter Statement of financial position Statement of activities Statement of financial position Cash flow statement Notes to financials Management letter

Review of Financial Reports

Suggested Inventory

Monthly Status Reports Program service reports and

ratio analysis Investment performanceProjected Budgets Operating revenue and costs by

function Cash flow analyses Capital expenditures Fundraising projections