The Need for Fundraising Feasibility Studies
The early stages of a new capital project are phenomenally exciting for any arts organisation – the prospect of being able to develop the scale and technical quality of your artistic programme, to improve your audience's experience and deepen your engagement with them, to increase earning potential, all this makes the scoping process so inspiring. Most exciting of all may be the opportunity to express your vision in bricks and mortar, glass, concrete or steel – the possibilities aren't exactly endless, but certainly many and varied.
Therefore, Board, Executive and staff tend to spend much time, effort and money to explore different physical options and work out which best meets the organisation's objectives. Nobody would dream of starting a construction project without a thorough feasibility study and business case. So why is it that many client organisations will embark on a capital campaign without a previous fundraising feasibility study? Fundraising is often only considered once the target has been set, by the exigencies of the project rather than by a realistic assessment of the fundraising potential.
Developing a project to an advanced stage without sufficient understanding of the realities and likely outcomes of a capital campaign means taking big risks, as it can result in a serious mismatch between the project cost and what the campaign may be able to deliver. There are a number of reasons for this, including:
• High expectations – The scoping exercise is necessarily aspirational – which artistic director would put themselves through a capital project unless they can make it count?
• Design team ambition – The professional team commissioned to carry out the feasibility stage designs is likely to interpret its brief and push the design to the maximum.
• Cost uncertainty – Costings at this stage will be based on estimates and rather broad brush. As the design development progresses to more detailed stages, costs almost invariably go up, increasing potential funding gaps even further.
• Insufficient understanding of total project cost – The cost of delivering a capital project is much higher than just the construction cost and design fees. It includes many non-construction related cost, for example the cost of running a capital campaign.
It also seems that once a notional project cost, however unrealistic, has taken hold in people's minds, it becomes difficult to conceive of a different figure. Say an organisation has been thinking about a £10 million pound project but finds it can only afford half of that. No amount of tinkering with the existing designs will resolve this problem – a completely new design will be required, with inevitable impact on the artistic and business planning, additional fees, delays etc. This can badly shake confidence in the project and its leadership and damage fundraising potential.
A fundraising feasibility study undertaken in parallel with the design development will introduce early on the awareness of what is achievable, and therefore help avoid such pitfalls as unrealistic expectations, abortive design cost, loss of confidence or, in the worst case, incomplete projects. The timing of the study is therefore as important as its content.
So what does such a study actually look like?
It should create a roadmap for the successful completion of the capital project, establishing a good understanding of the challenges and opportunities the organisation faces in attracting sufficient funding for the project, whilst ensuring a sustainable overall financial position in the medium term.
The study will:
• Analyse the organisation's internal readiness for fundraising on an increased scale and will recommend where capacity needs to be built.
• Assesses fundraising potential in the market context and begin to identify prospects.
• Recommend a fundraising strategy as well as a communications strategy to support it, both fully costed.
The study will not only address capital project issues but also ensure that the organisation's financial position remains stable throughout the entire project, in the run-up, during the delivery phase and for an appropriate period beyond project completion. The adverse effects of a capital campaign on revenue fundraising mustn't be underestimated. The study will therefore propose a parallel revenue fundraising strategy that will allow capital fundraising to be maximised whilst ensuring sufficient revenue funding during a period that is likely to see increased operating cost.
Here is a suggested outline that can be adapted to the requirements of individual organisations and projects:
• Executive summary
• Overview of the organisation and background to the project – The reasons behind the project, how it contributes to the artistic vision and mission, its objectives etc.
• Governance and management – Good leadership and sound structures are essential for the success of the project, which will after all represent a period of significant change for the organisation. Funders will be paying much attention to this aspect.
• Financial position – An assessment of the organisation's general financial health, its balance sheet, reserves, performance against budget targets for all areas of income generation;
• Detailed project parameters and issues arising – This is where the fundraising and physical feasibility studies meet.
• Fundraising context and climate – An assessment of the internal and external factors that will determine the success of the campaign.
• Fundraising strategy – An integrated strategy for capital and revenue funding.
• Communications strategy – Complementing the fundraising strategy and transmitting appropriate messages about the organisation's current status and future.
• Budget – The cost of implementing the fundraising and communications strategies for inclusion in the total project cost.
• Timeline – A realistic assessment of how long it will take to deliver the necessary funding
• SWOT analysis
• Conclusions and recommendations – These may well go beyond the immediate requirements for fundraising and shape the strategic approach to the project as a whole.
At Achates Philanthropy we're always happy to talk through your ambitions and plans for a capital project on a pro bono, no obligation basis, to help you ensure that the reality of your project lives up to your initial vision.
Dagmar Walz | March 2015