If a capital campaign is on the horizon for your organization, Aaron Bishop and Brian O’Neil will share strategies and resources available to confidently predict your project costs and resources needed.

Full Transcript:

Steven: All right. Aaron, Brian, I got 2:00 Eastern. Is it okay if I go ahead and get this party started? 

Brian: Let’s go. 

Aaron: Yeah, let’s do it. 

Steven: All right. Awesome. Well, good afternoon everybody. Good morning if you’re on the West Coast I should say and if you’re watching the recording, I hope we’re having a good day no matter when, where you are. We are here to talk about capital campaigns, specifically counting the costs where capital campaigns often miss the mark. Going to be a good one. I love this topic. And I’m so happy to see a full room here. I’m Steven. I’m over here at Bloomerang, and I’ll be moderating today’s discussion as always. 

And just a couple of quick housekeeping items. Just want to let everyone know that we are recording this session. So if you have to leave early or maybe you get interrupted, or you just want to review the content later on, maybe share it with a friend or a colleague you’ll be able to do that because I’m going to send you the recording also going to send out the slides. So don’t worry, I’ll get all that good stuff in your hands later on today and you’ll be able to review the content as much as you want. 

But most importantly, I want to recommend and encourage all of you to chat in your questions and comments throughout the next hour or so. We’re going to try to leave some time at the end for Q&A. So don’t be shy. Don’t sit on those hands. We’d love to hear from you. Introduce yourself if you have not already. But keep the questions coming. There’s a chat box and a Q&A box you can use either of those. You can send us a tweet. However, you want to send a message. You can even email me if you want, although that might be a little harder than the other things. But we’d love to hear from you so don’t be shy. 

And if this is your first Bloomerang webinar, welcome. We do these webinars just about every Thursday. We love doing these webinars. It’s one of our favorite things we do here at Bloomerang. But if you’ve never heard of Bloomerang beyond the webinars we are first and foremost a provider of donor management software. So check that out if you’re interested. And if you’re shopping before the end of the year or want to make a switch, you can visit our website, learn all about us. Lots of videos on there you can watch. But don’t do the at right now because you are all on for a treat over the next hour or so to learn about capital campaigns from my buddies, Aaron and Brian. Both of them joining us actually in a room together, which is awesome from beautiful Alabama. Gentlemen, how you doing? You doing okay? 

Aaron: Doing great. Thanks for having us, Steven. 

Steven: Yeah, this is awesome to have you both here. I’ve been getting to know you a lot more over the last few weeks and, like I said, love the topic. And this is one where these guys definitely have a lot of knowledge. If you don’t know Aaron, he is the founder over at Bright Street Solutions. Check them out. They do a lot of really great consulting and placement if that is something that is of a need from you. He’s over in Birmingham. And like I say very often on these sessions, I always look for folks with that firsthand fundraising knowledge. He’s been a VP. He’s been in your shoes and certainly has been involved with a lot of capital campaigns.

And joining him also from Alabama is Brian O’Neil. He’s the ED over at Third Lens Ministries. We were talking before the session started, they’ve got a lot of really interesting projects. A lot of capital campaign projects going on especially overseas. So if any of you work overseas you might want to connect with him as well, even, especially if you’re in the ministry world too. 

So I’m excited. I’m going to pipe down. This is your show, guys. So I’m going to stop blabbing on here. I’m going to stop sharing my screen and I’ll let you bring up your beautiful slides here and it’ll be your show. Yeah, looks like it’s working. Take it away my friends.

Aaron: Sounds great. Well, thank you, Steven. Well, my name is Aaron Bishop as Steven said. I’m with Bright Street Solutions, a full-service consulting and placement firm in Birmingham, Alabama. I’m glad to be with you today. Brian, you want to say hello as well?

Brian: Yeah. Hey, I’m Brian O’Neal executive director of Third Lens Ministries a nonprofit based in Atlanta. As Steven mentioned, living in Alabama. And we provide program management services to other nonprofits. For those not familiar with that term, program management includes representing the owner or the nonprofit at every step of the development process from, you know, land acquisition, going through due diligence, design, preconstruction, and the construction to move in phase. 

We’ve been around for 12 years and have really focused on connecting volunteers from the architecture, engineering, and construction industries with opportunities to give back and then assisting nonprofits with their building needs. I was sharing with Steven earlier, you know, we’re working in about 20 different countries and are managing $50 million in development costs. So excited to spend some time with my good friend, Aaron, and my new friend, Steven, and talk about capital campaigns. 

Aaron: Yeah, sounds good, Brian. And the way that Brian and I know each other we’re strategic partners when we work with organizations. I look at the fundraising and the revenue aspects and Brian’s team of construction experts really brings value and creates a streamlined process for the actual project itself. So we’re excited to be with you today. We’re really passionate like many of you about capital campaigns. 

And as you all know, capital campaigns have been around for a long time. There are so many resources available to ensure that your organization has a successful campaign. You think about the various models that are out there, the templates, the timelines, the job descriptions, the consultants. I mean the resources really seem to be endless. 

You know, and in that same vein, much has been made about the common pitfalls or the mistakes that your organization should avoid to ensure your success. So if you’ve conducted a capital campaign or you’ve researched a campaign for one that’s on the horizon for your organization, you’re well aware that a capital campaign is a balance of, you know, it’s an art and a science to ensure its success. 

Today, Brian and I really want to take a bit of a different approach. We want to look through a different lens into these campaigns. We know the stress points. We know the burdens that can pop up, the mistakes, the challenges within these campaigns. And much has been made about them. We want to talk about what the construction aspect looks like for your organization. What your role is in that process and some things that you can be thinking about that can keep you doing the things that you do every day well, and share the responsibilities with some of the experts. And so that’s our goal for today. 

And so with that being said, you know, I am a fundraiser at heart. That’s my passion. And so we’re going to talk about the capital campaign. But for those of you who are new to capital campaigns, I just don’t think that it would be prudent if we didn’t at least mention some of those missteps in the planning and execution of a capital campaign. So I have a few listed here. These are not exhaustive by any means. But they’re just something for you and your teams to be thinking about if you haven’t addressed them yet. So I’ll just move through this pretty quickly.

But the first one that I’ve listed is the lack of a feasibility study. It still amazes me that organizations debate whether or not this is important. And I know that there are organizations out there who have not done a feasibility study and been successful. But I’m a big advocate of the feasibility study. It really reiterates the community’s perspective about your project and reinforces the need for it. And one of the things I like about the feasibility study is that if you’re discussing your project with the right people, it actually warms the donor and the community to your project before the beginning of your solicitation process. So feasibility study is an important part. 

The second one that I commonly see organizations struggle with is rushing through or rushing out of the quiet phase. You know, it’s kind of difficult to harness the passion of volunteers and advocates. And so it’s not uncommon that as you’re working through your gift tables and your commitments that your leadership or your donors will want to rush out and, you know, launch the social media campaign or start a new grassroots initiatives. And the capital campaign is a sequence of events that’s methodically planned. 

And obviously, the majority of the funds are raised in the capital campaign. We always advocate that you hit that threshold right around 65% before you move out of that quiet phase. I know that number of that needle can move a little bit depending on the organization, but anywhere from 50% to 55% to 70% of the threshold is where your organization should be before you move out. 

And then two others that I’ll just mention real quickly. And these really go hand in hand. Not having a realistic goal. I have a lot of clients or prospective clients that will come to me and say, “You know, we’ve met with our contractors. We’ve looked at our plans. We have our renderings and we need to raise $10 million.” And that all may be true. That may be the state of the union for them. But the other question that they have to really think through is, well, what can we do? What’s our capacity to raise those funds? So I always remind them, it’s a combination of what we need versus what we can do. And when those align well, when they intersect where they need to be, then you’re on good footing for your plan. When they don’t, it’s not that that can’t be your number or your plan, it’s just that we need to figure out where are the gaps and what’s missing in your plan. 

And that’s what leads to the fourth one here is the lack of prospects. You know, not having a deep enough pipeline for your prospect. Not being able to build out your gift tables. A capital campaign is all about momentum. Momentum is really important. And so for organizations who get a great start in their quiet phase and then slow down or stall even worse, you need to have a plan for replenishing your pipeline, for having a deep enough pipeline. I told someone just last week, you know, capital campaigns are a challenge in and out of themself. The only thing that I can think of that’s more difficult is jumpstarting a dead campaign or a stalled campaign. And so the pipelines, and just being able to understand what’s needed and who your prospects are, are just incredibly important. 

So these are just a few for you to think of. So there you go. We’ve been prudent fundraisers today. We’ve mentioned these. And I know there are more out there that you all could add to in the chat room there. But as I think about these, these obviously, play a part into the scope of your project, the amount that you’ll be able to fundraise. And when I think about where clients are with their campaign and their goals and whether they tend to move forward with their project, I think they’re kind of in two buckets. Organizations who have done a capital campaign before and they’re very comfortable with the construction part of that campaign. They understand what they need to fundraise. They just may need some support in a few segments of that campaign. 

Or there’s a second bucket that I’m really sort of anecdotally seeing a strong movement or a strong trend in the community. And that’s a group of organizations, nonprofits who are relatively new in their fundraising and really new to the capital campaign landscape. And if you think about the nonprofit industry as a whole, I mean, it makes sense, right? 1.5, 1.6 million nonprofits in the United States and you think about the number of new nonprofits over the last 15 years, 200,000 give or take new nonprofits. And these are organizations who have been successful. They’re meeting a need in the community. And they’re just coming into their first capital campaign project. Now, they’ve probably, you know, worked on a shoestring budget or they’ve really worked to streamline their resources. They’re wearing many hats for their organization. They’re growing into the way that they’re able to impact the community. 

One of the examples I can think of here. This is an organization in Birmingham. They’re called Unless U and this is their executive director in the front, Lindy. Unless U was started about 10 years ago in Birmingham. Lindy went to college and she has a brother with special needs. And she was heartbroken because he couldn’t have the same college experience that she had. And so it was her goal to start a nonprofit to give him and his friends the same kind of college experience. So she created a nonprofit. 

The first time they met, her brother and three of his friends met in someone’s basement, in a home to start with their curriculum and their college-type experience. And they began to grow. They moved to a transitional campus, and they began to add students and kind of expand their services to those students. And just this year, this is them, their building is actually complete, but Unless U finished a multimillion-dollar capital campaign, the first that they’ve ever undertaken like this. It was wildly successful. But you can see Lindy’s quote here. She really streamlined the fundraising process, but it was the construction aspect that really kind of ate up her daily schedule and just cut into what she was trying to accomplish as the executive director, the principal, the admissions counselor, the head of financial aid. And you’re wearing so many hats in a relatively new nonprofit. 

And so, you know, not all organizations are able to navigate that and be successful the way Lindy has been. And so that’s why I’m excited for you all to meet Brian and Third Lens today because Brian’s team, you know, a group of construction and design experts operating as a nonprofit to help organizations kind of be a liaison between the contractors and the actual job itself. 

And so, Brian, I guess I would turn it over to you, you know, just to start us off here. The state of the union, as you see it, between nonprofits and the construction industry when you’re working with clients to build out their projects. I think that’s a loaded question. And in this day and age with COVID impacting so many variables in the construction process, what are you seeing with nonprofits and how they’re navigating this?

Brian: Yeah, so, you know, the last 18 months has certainly been a challenge. And for those that aren’t aware in relation to the construction industry, you know, construction globally and in the United States has continued to grow and hasn’t stopped throughout the pandemic. But what we have faced is more challenges with availability of materials and prices. If you’ve built a house or know somebody that’s built a house recently, you know, lumber prices last year just went through the roof. And, you know, builders used to be able to lock in pricing for six months and now nobody will guarantee regardless of the size of your company the value of a two-by-four for more than seven days. 

Additionally, you know, right now paint’s hard to find, or is becoming harder to find because last year there was an ice storm in Texas and Louisiana, and of which is where most of our paint is refined and made and, you know, shipped out to Home Depot and Sherwin-Williams. And in that storm, a bunch of them lost capacity because of broken pipes and only about 20% of them are back up full. So that’s been a challenge industry-wide. Those are the conversations we have on a daily basis. 

The neat part of COVID for nonprofits and I hear this almost on a weekly basis is that our nonprofit friends and ministry partners have raised more money in COVID than they did any year prior. And it’s people have just found generosity, maybe they found where their checkbook was while they were, you know, quarantining at home. But our partners are raising a bunch of money. And so what we were able to do is the beginning of last year, instead of, you know, sitting on our hands and, you know, resting on our laurels, we said, you know, let’s dream really, really big. And let’s really think about what the world looks like post-COVID. 

And so, you know, not knowing this, you know, 6 months, 18 months where we would end up and where we are now and really thinking through, okay, what happens when the world opens up back again and we’re able to approach donors and ask for big gifts. And that was the assumption. And so we started design processes on things that were a year to five years down the road. We started doing master plans. And what we found is that, you know, we could really add a ton of value and cast vision, and now that’s starting to come to fruition. 

You kind of asked, you know, about our experience working with various nonprofits, the ones that are doing the process of planning for a project really well, they treat it like the marketplace does. They treat it like a for-profit business. They have a process or, you know, we work through a process of what steps do we take one after another to get to the point where we can launch that capital campaign? And what they’re doing in that is they’re building donor confidence because if they plan it well, they execute it well. 

The ones that we see that are struggling, that we’re helping a lot are the ones that, you know, if they don’t have the process, it presents immense amount of risk. You know, assuming you miss a step and next thing you know, your budget’s blown or the land, you can’t build what you want to build on it. And that’s where the projects and the organizations really can lose credibility in a number of different ways.

But over the past 12 years, because we have access to industry-leading construction companies and architects and engineering firms, we’ve kind of learned also through stubbing our toe a couple of times a process for helping get that capital campaign ready to launch. And we called it Project Launch just because we know that when you’re ready, Aaron, to launch that campaign, we want to make sure that we’ve given you all the information to be successful. And so the nonprofit knows how much they need to raise. They’re able to tell a great story and they’re able to communicate a solution to an obvious need. So yeah, that Project Launch has been good for us. And today we formalized it and are now running with it.

Aaron: I think that makes sense. I can completely understand how that would increase donor confidence. They’re learning about the project and learning about the parties involved. One of the things as Brian and I prepared kind of some content to share with nonprofits about what are some things that you could be thinking about as it relates to a well-run or a poorly run construction part of your campaign, we created four takeaways for you here. And you can see them. We’re going to walk through each one of these. 

Because I think for me, as a fundraiser, I had probably naive on my part, I had this preconceived notion that an organization, you know, scientifically creates their fundraising plan. They build buffers into it. And then throughout the process, based on the renderings and the drawings, they hand it off to the contractor, and everything’s copacetic moving forward. Now, that was pre-COVID. So I’ll be interested to hear your take as it relates to some of these and how a nonprofit should be thinking about that, and then, you know, the questions they should be asking and the variables that they should be considering throughout this process in some of these four areas that we’ve highlighted. 

So the first one on your screen there is rushing through the planning process. You know, Brian, I had a potential client who had an urgent need, a tremendous mission. They were kind of uniquely positioned in the community to meet this need, but they needed facilities very quickly. And so before their case for support was even dry, before they mapped out their gift tables, their leadership team was . . . they were soliciting gifts in the community because the need was urgent, which is understandable. 

But again, the capital campaign is about a sequence of events. And so I can see where we rush through the process in fundraising and I know the reasons why we tend to do that. But from the construction aspect, I mean, you mentioned Project Launch, what do you see in organizations do well that sort of puts the sequence in order for them to manage their cost and to manage the process well from the get-go?

Brian: Yeah. So, you know, being a project manager, you know, I’m very process-oriented as is as most of our staff. And so, you know, every project’s unique, and every, you know, process for each project ends up having its idiosyncrasies. But if you’ve kind of got a roadmap, which is the template . . . Project Launch is just a template that we customize for the needs of each of them. But if you’ve got a process and you can take it step by step to get you to your end goal, which is launching the campaign, what you’re doing is you’re eliminating the opportunity for risk to arise. The scariest thing for me on a project is not knowing what I don’t know. And so if we can uncover all those risk variables, address them, invite people in to help us overcome them then inevitably as we reach the finish line our success is it’s not necessarily guaranteed, but we’re mitigating risk along the way.

We approach a project, I mentioned, you know, marketplace for-profit, it’s almost the same way a real estate developer would approach a new project. How do we go from A to Z and do it with diligence? In fact, one of the blessings over COVID has been that our new COO Bill McMahon, he did this professionally for hospitals for over 20 years. And, you know, he actually, you know, in his business had Project Launch as a formal product that they did for major hospital systems. He’s built some of the largest hospitals in the Southeast and up the Mid-Atlantic. And so in that, you know, he actually shared a template with us, which I’ll share on the screen now. It’s just a structured approach walking you through and it’s not necessarily, you know, the where all be all. We didn’t invent this. Industry professionals have been doing this for decades.

But what we have been able to do is walk with our partners to identify what steps we need to take with them. And that starts kind of with a readiness assessment and a gap analysis. That’s our internal evaluation of are they even ready? Is an organization even ready financially, operationally to venture into talking about a new facility? Then we look at land acquisition and land planning. You know, they may have their own piece of property. How do we appropriately, you know, use certain parts of it and talk about long term? You know, if you put a building in the middle of your land, but then it prevents you from growing we’ve shot ourselves in the foot. So, you know, thinking big ten years plus down the road and then building the immediate needs out from there.

And then, you know, one of the fun parts is getting an architect involved and talking about the program. What are the needs of the building and starting to layout a floor plan and doing some renderings? You know, for us, that’s called conceptual designers, schematic design. You know, that’s where you have those visual tools to put in front of a donor that they can go, “Ah, I see. And now I see what you’re talking about. Wow. That really is neat.” 

When I was in real estate development, it was told to me by somebody way smarter than I am that only about 10% of the population can look at a floor plan and visualize what it would look in from 2D to 3D. And so now, we’re able to create those, you know, it is 2 dimensional in some cases, we’re able to do 3D modeling, but how do we create those visuals to cast vision for what a project potentially will look like. And then putting together a budget. And not just a budget that, you know, we said, “Oh, that’s a million-dollar building,” it’s a number that has science and has input from industry professionals. 

And, at the end of our project launch phase, we’re actually now producing a fundraising packet. And that fundraising packet, you know, allows our partners to sit across from that donor and say, “You know, here’s the need. Here’s the process. Here’s the cost. You know, would you join us in this adventure?” 

Just sharing an example. One of our newest partners, Church Mission Network based in the Nashville area. I met them in the fall and we had conversations after the new year’s. And their executive director, Phil Johnsey says, “You know, hey, we have a need. We have a vision to build a sickle cell-centric hospital in Western Kenya.” Sickle cell is kind of a low, you know, visibility, but a high mortality rate in East Africa, and it’s not being addressed. So there’s a need. But Phil openly admits, “You know, our core competency is planning churches and feeding children.” 

And, you know, I love talking to Phil because he’s like, “You’re the professional I trust you. You know, here’s the vision, run with it.” So over the past several months, we’ve been working with, you know, indigenous architects, the local doctor that’s going to oversee, you know, the opening and the management of the project. And then, you know, by the end of the year, we’ll be able to provide him with a rock-solid fundraising packet where he can go share the compelling story of why this is important, where he can sit down and say, “We’ve counted the cost. Here’s how much it’s going to take for us to break ground,” and invite that donor, that foundation to come sit down with them.

And as I mentioned before, it’s no different than a real estate developer. The real estate developer’s going to follow a very similar process to put together a plan to go sit down with investors or a bank to get funding. We’re just doing it in the context of the nonprofit. So, you know, our quote here is trust the process. I talk about it with our team and our partners all day long. We’re going to plan our work, and then we’re going to our plan. And if you don’t have a process, you don’t have a plan, then how are we showing up every day trying to, you know, push the needle to the next step?

Aaron: I think that makes sense. Can you go back to that slide? Because, for me, you know, being process-oriented, I think this is a huge confidence builder and you talked about for donors. I think for executive directors and board members to work with either the board or, you know, a subcommittee, a legacy committee, whoever that might be, I can imagine though if I’m an executive director and I’m thinking about a project on the horizon, there are some that will be at the very beginning of this process. But for others, you know, you might have already met with an architect, or you might be down the road with a contractor already, whether it’s your own model or another model, is it plausible for organizations to come in midway through this process and pick up and leverage a resource like this? 

Brian: Yeah, totally. We actually had a conversation yesterday with a large ministry outside of Atlanta that they’ve kind of already taken some steps. They’re engaged with a nonprofit consultant that’s working on a feasibility study. They have some existing relationships. Integrating in and then covering some bases is, I mean if you’re 10% or 80% of the way through it, there’s a way for us to come in and, in general, be able to make sure that by the time you get ready to launch that campaign you’ve checked all the boxes appropriately. 

Aaron: I think that’s great. I think from thinking about my role as executive director, back in the day, I would’ve loved to have a resource like this or one similar to it where I could just talk through it with maybe a board member who’s in the construction industry or, you know, somebody that’s involved in the project. So I think this timeline or this process is phenomenal. 

So I want to move on to the second element that we want to talk about today. And that’s the cost in general. You know, there’s an old statistic that 65% of all capital campaign costs will increase from the initial estimate. So basically two-thirds. Now, that’s a pre-COVID statistic. So I can imagine if you told me it was 100% today, I’d believe you because of all the fluctuation in the market. But when you think about a nonprofit who’s engaging into a capital campaign and planning for their cost of the project, what are the things that you’re fact-checking to ensure that they include? Or maybe the better question is what are the things that nonprofits are forgetting to include? 

Male: Boom.

Brian: Thank you for that affirmation whoever just yelled boom. Yeah, so, you know, on our team and with our partners, we talk about counting the cost and that has some implications. We’re a faith-based organization and biblically, there’s a parable that talks about suppose if you wanted to build a tower, you know, would you not first sit down and estimate the cost to see if you have enough money to complete it? For if laying out the foundation and not being able to finish, then everyone would look at it and ridicule you saying, you know, this person began to build but wasn’t able to finish. So, you know, one of our main things is have we counted the cost? Have we factored in everything? And then have we planned for the unexpected?

The construction budget is only one line item in a development budget. And that’s probably the first thing I tell our partners when it comes to costing. Because you’ll have permitting fees, you may have, you know, some design fees, you may have to do some testing with surveys or geotechnical studies. And then, you know, we’ll talk about contingency in a minute. But as you approach your budget, there’s two main ways. And I’ve shared images of two recent projects. 

The first is Plywood People. It’s a space in the west end of Atlanta for nonprofits and startups and social entrepreneurs to come gather, be resourced, and launch with a vision of, you know, getting people that want to do good in the world to have a launching off point. And so they built out an old warehouse. And, you know, with that, their board had said, “Hey, we have X amount of dollars.” So it was a fixed price budget. So we walked into it, knowing that we had a fixed price. We designed it as the organization wanted to, but then we had to do what’s called value engineering. We had to make scope cuts to get it back down within that budget. That’s one way to approach it. 

Now, another way to approach it is with a, like a partner myLIFEpeaks in Haiti, which I’ll be down there on Sunday to close this project out. You know, they said, “Hey, we have a vision. Tell us how much it’s going to cost, and then we’ll go raise the money.” And that’s great for me because it’s kind of a blank canvas and, you know, within reason we can approach it, define it, and make sure that we’ve got the cost.

And for this project specifically, we had to validate the numbers. We’re working with an indigenous construction crew where we’re wanting to make sure that, you know, every brick and stone and, you know, piece of metal is accounted for in the building. So we brought in some industry professionals to check the estimates and come in to make sure that the numbers made sense. And ultimately, that created our high watermark. Now, if we were able to do it for less, that’s great. That’s an awesome story. And I’ve got an example we’ll share here in a little bit. 

Another cost that too often gets overlooked is what’s the operational budget add by adding a new facility? Meaning how much are we going to have to pay for the lights? How much toilet paper are we going to have to put in the bathroom? 

Aaron: They ask you that all the time. 

Brian: You know, adding that to your annual fund is key. And so we want to make sure that we identify and help them in that process and that it’s being . . . But then there’s another operational cost that gets overlooked all the time and that’s deferred maintenance and ongoing maintenance. So over the course of the life of the building, do you have it in your operating budget a fund that hopefully, grows so that when that air conditioning unit goes out, you’ve got money to go replace it, when, you know, breaks in the building, you’ve got reserves that you’re pulling out of. And so those are conversations that we have that we think are very important. Inevitably, that spurns conversations from a budgetary standpoint with the annual fundraising. 

The last best practice I’ll share with you is contingency. Now, we talk about contingency all day long, but oftentimes I mention that and our ministry partners have no idea what that means. And so in looking at contingency, that’s planning for the unexpected. We’ve got a project in Atlanta that as we were going through the process, we had done some soil testing and it came back kind of like, eh, it’s okay, not bad. Well, we were tearing down an old building and what we didn’t have is underneath that building what the soil conditions were. And so as we’re, you know, pulling up the old foundation, so we can start on our new foundation, we find out that there’s a bunch of old rubble and rocks and bricks and stuff in there. And then we have some more soil tests done because it’s like slime and we find out the soil conditions aren’t good. So having a contingency allowed us to plan for the unexpected, which ended up being that we had a significant increase in the budget that we pulled out a contingency in change orders to do helical piers. I mean, this is the footprint on this . . . 

Aaron: That’s a big undertaking. 

Brian: Yeah. It’s a big undertaking. It’s a lot of science. It’s a lot of consultants that we were able to bring into the project that are smarter than me. But because we have those funds in reserves, then we draw from those funds and are able to not have to go out and raise an additional $50,000. 

Aaron: So I guess my question then, and you may be getting there, I’m an executive director. I’ve got a committee where I’m working with a contractor and they come to me and they say, let’s talk about your contingency budget. What number should I be expecting? 

Brian: Yeah, I’m a huge advocate of 10% at a minimum. We just recently we’ve got a project in Kenya with our partner Valley Light and their funding partner in America, Just One Africa. We knew that when the contractor, you know, put their budget together that the . . . we hadn’t finished. We hadn’t picked tile or anything like that. We’d gotten a base price. But we knew that there were going to be some upgrades that we needed to make. So we put a 20% contingency on that project. And thankfully, we were able to start to draw out of that because we realized, you know, his expectations of finishes weren’t quite our expectations. We wanted to beef up the hot water system. They used solar-powered hot water. And so, yeah, we’ve been kind of using that as our bucket to do upgrades to the project because we planned for it.

Aaron: So 10% would be the starting point . . . 

Brian: Yeah.

Aaron: . . . but it could ebb and flow a little bit depending on . . . 

Brian: Ebb and flows 

Aaron: . . . the project or your perspective with the client? Okay. 

Brian: Exactly. 

Aaron: That’s helpful.

Brian: And depending upon where the project is, the scope of the project. You know, there’s times I might go down to 5% to 8%, but 10% is generally the number that we start with and then we talk through, do we need to increase or decrease it? 

And so, yeah, I mean, my lesson on this is planning for the unexpected never hurt anybody. You know, the worst-case scenario is that you have to use your reserves to cover, you know, an unforeseen condition. The best-case scenario for you as nonprofit leaders is that when you come in under budget, you get to brag about it. There is nothing more compelling than at the end of a capital campaign you say, “We budgeted this and we delivered for this, and we saved X amount of dollars. Give us more money next time we ask for the next capital campaign.”

Aaron: Yeah, I love it. I love it. So I want to move us on here to the third pillar that we have and that’s the impact that it has on leadership. I really like Lindy’s quote from earlier where she said she wore many hats, but the hard hat was not one she anticipated wearing as much as she did. I actually heard her saying that on her way, she was running out of a meeting to meet with the site supervisor at the new construction site. And so I think about the roles. You know, if you’ve worked in a nonprofit, there’s no doubt you’ve worn many hats in your role. You’ve served different functions just to move the mission forward, to move the organization forward in your community. So when you work with nonprofits, can you kind of describe what is appropriate or what the expectation should be for the Lindys, the executive directors? And where is that line drawn between the architects and the site supervisors and the contractors? What does that look like in a healthy relationship?

Brian: Yeah, so, you know, as a nonprofit leader, this is realistic for me because, you know, I deal with board, budgets, staff, operations, our contingency of ministry partners, volunteers. You know, that all flows up the org chart to me at the top. And, you know, what we’ve noticed is that then you start to add construction manager onto the org charts, as far as responsibilities and you’re asking your ED, your CEO, whatever that position is, all right, now you got to manage the architect, now you got to ping the contractor. 

Aaron: [inaudible 00:37:50].

Brian: Yeah. And it’s burdensome. I mean, if you’re a nonprofit leader and you aren’t experiencing some level of burnout anxiety, you’re probably not being honest with yourself. And that’s a real conversation. I’m talking as a peer here. And so what we said is, and it took us a couple of years to kind of define it, but I mentioned this project here in Plywood and Jeff Shinabarger’s a friend. And after we finished the project, you know, we were sitting around and he is like, “Do you know why my board hired you?” And I was like, “To manage this project that’s amazing and, you know, is great.” And he was like, “No, no, no, no. Do you know why they really hired you?” And I was like, “I’m not following, Jeff. Tell me.” And he said, “They hired you because there was a going concern that adding one more thing was going to send me spiraling into burnout.”

Aaron: That’s it. 

Brian: And Jeff actually, they host an event every fall in August, and he just, at the most recent Plywood Presents, he shared two years prior as the building project was just about to get started a poignant moment. It had nothing to do with construction but had everything to do with construction. As he’s entering the last day of this major event, it’s their biggest thing they do every year, he’s in the green room before anybody shows up, curled up in a ball. I mean, crying. I mean, I get the image that he was almost sweating blood from the fact that all this was coming down on him and he was questioning every part of his qualification to lead the organization and construction would’ve just been another thing on the list that pushed him into that hole. 

So, you know, it doesn’t have to be Third Lens, but to Lindy’s point, you know, wearing the construction hat shouldn’t always fall on the ministry leader. There are people out there whether it’s us or construction professionals that do this for a living, or you may have a volunteer that’s retired. Push back against adding that to your job description.

I’m a huge fan of the book “Essentialism.” We’re actually going through it as a staff right now. And if you have a construction project on the horizon, I think it would behoove you with your board to sit down and talk about all the things that you do and all the things that are mission-critical towards executing the vision of your organization. And I think what you’ll find is managing a construction project isn’t going to fall anywhere on the essentials of your job. And, you know, burnout’s real. Don’t dismiss it. It’s an active conversation I have individually and corporately with my board. And I’d encourage you that if there is a construction project on the horizon or a major capital campaign, ask for their help, ask for resources, ask for professionals to speak into it. Because this could just be the straw that breaks the camel’s back.

Aaron: Yeah. I think as a general rule, capital campaigns are a draw for executive directors. I think, you know, nonprofit leadership wants to be a part of this exciting season in the nonprofit’s life. So I just always kind of am sad when it turns the other way and just becomes an overwhelming burden throughout the process but.

Brian: Yeah, and our goal is, you know, if we’re the one touchpoint to the organization’s leadership, including their board, if we’re that singular touchpoint, and we just bring you high level, here’s where we are, here’s where we’re tracking, then maybe that simplifies the . . . I mean, yes, it falls under your responsibility but you’re not having to drive it on a daily basis you just have to manage the one component.

Aaron: Yeah, I think that makes sense. And I think it continues to go back to confidence in the process so. Well, the last pillar we wanted to talk about is just missed opportunities. You know, Brian, I think about when I see healthy nonprofits create leadership teams, or they create and build their board of directors, they’re very methodical in how they do that. You know, they deal with a high level of precision. They find individuals who align with their mission. They’re representative of the communities that they serve. They’re highly skilled in a vocation or an industry, but they’re individuals who can in their own way move the organization forward. 

But when I see organizations build up capital campaign planning teams, or steering committees, I mean this is completely anecdotal. I don’t always see the same precision. They certainly have some of those individuals and board members as a part of that. But they have major donor prospects, but I don’t see the depth of that precision. That’s not exclusive but at times, I certainly don’t. I think that’s a missed opportunity. When you see ways that nonprofits are operating and then carrying out these campaigns, from your perspective, and I’ll ask you to put your construction hat on, what are some missed opportunities that you’re seeing or your team has seen through their constant engagement with nonprofits?

Brian: So another book recommendation I’m a raving fan when it comes to “Good to Great” by Jim Collins. In that book, there’s two concepts that resonate with me very closely to the mission and vision of what we’re trying to do here at Third Lens. The first is having the right people on the right seats on your bus. Another way of saying that is, you know, running in the lanes of your gifting. And, you know, if we’re being honest with our inner hedgehog and finding the Venn diagram sweet spot of our giftings, what we can monetize and our passions, we’d look at, okay, a nonprofit leader, you know, runs in leading a hospital, you know, running a children’s home. That’s the lane they run in. 

We run in a completely different lane. But when you bring a team together and you have all your lanes full, you have all the seats on your bus full, that’s a strong machine. That’s how you get things done. You bring in a fundraising professional to do your feasibility study, to run your campaign, to coach your team. And so first I think building that team is essential. Sometimes that can be done internally, but sometimes it has to be externally. 

The other part of it is that I think there’s missed opportunity to truly engage a nonprofit’s network and tap into their network. By that, I mean, you know, within your board, you may have a couple of people that have background in real estate construction, or at least, but are we asking the question, you know, or making the invitation, “Hey, I want you to be a part of this project because I know you’ve built something before. I know you run a successful business and you have a facility.” And so proactively reaching out to that network of volunteers, staff, and saying, “Hey, who wants to be a part of this project?” 

I’ll mention Plywood again. Just a great example of teamwork. So you see this image here that has the total budget of the project. This is the value, fair market value of this build-out of this interior space, $1.67 million give or take. Well, what if I was to tell you that in reality, the budget for construction was only $900,000 and they had about $100,000 for furniture, fixtures, equipment. They have an event space in here so there’s a huge LED screen. This project, we saw almost $600,000 in cost savings. And I’ll explain how that happened. And it was a poignant moment that I’m . . . 

Aaron: Yeah, yeah. Please, explain that I want to hear.

Brian: . . . that I’m excited about. And again, this is like our champion, you know, project so please don’t have these expectations for every project. But on this one, you know, there was direct conversations with the board that within the board, they created a building committee. That’s probably not uncommon to any of you. What we did is from a funding standpoint, we knew what our high watermark was. That was our budget. So we had a hard budget ceiling. We made cuts to get our budget within that ceiling. But then because the team, and that included, you know, the Third Lens side, it included our architect, it included all of our volunteers because everybody on the team believed so much in the mission, we ended up tapping into our networks heavily. 

The architect, Ashley McClure, who’s a good friend of mine and serves on our advisory committee, he works for Gensler, the largest architecture firm in the world now, he actually went to vendor contacts of his and got all the furniture donated, got all the light fixtures donated. And even one-off things like the sound wallboards that deafen sound, he found people that were willing to give and leveraged his network. He also went to his firm and said, “Hey, this is a worthwhile cause.” And they donated 90% of their design fees. All the engineers that we helped recruit to the project donated their services, tens of thousands of dollars. And then the board, as we’re sitting there with the committee, we started to name off all the different areas where we could use their help. Well, one board member start saying, “Oh, I know so-and-so.” And another one says, “Oh, I know so-and-so. He works there. Oh, he works . . . Yeah, I know this.” 

Aaron: Yeah, the lily pad.

Brian: Yeah, next thing you know, it starts cascading. So then we start creating a tracking mechanism where we’re managing the board members out there making the asks for everything. I mean, all the tile, all the flooring was donated, the whiteboards for the conference rooms, the appliances. We even had one of the board members, he donated or he committed to buy heated seats for the toilets. I don’t know why that still sticks with me. It’s probably because you’re like, heated seats for the toilets? Anyway. 

Aaron: Hey, why not?

Brian: He’s a raving fan of heated toilet seats and bidets. But all that to say is we created an opportunity for people within the network of Plywood to jump on board and network for the project. And so all we did was we asked them, “Who do you know that we need to know specific to this project?” It’s a John Maxwell quote. He suggests that anytime you’re in a meeting with someone you ask, “Hey, who do you know that I need to know?” It’s a great question for nonprofit leaders. But I think there’s an application-specific to a construction project because if you can get connected with that one person, that’s one layer, one Kevin Bacon layer outside of your network, the project will see things happen. It could be the contractor. It could be the guy that provides heated bidet seats for your project. But if you don’t ask, then we’ve missed that opportunity.

Aaron: Yeah, absolutely. And in a construction project like this, I think it’s good for our organizations to remember that all dollars are created equally whether that it’s an actual dollar or an in-kind dollar. And so it all contributes to the bottom line. Hey, Steven, we’re excited to share some of this information. At the very least, we hope that this will give organizations considering a capital campaign just something to think about, some ways to create some efficiencies with their contract vendors or partners in the community. So we’re glad to answer any questions if there are any.

Steven: Yeah, absolutely. But first thank you, gentlemen. This is really interesting to listen to and hear the stories. I really love the resources you provided, especially that timeline. So thank you. Thank you. This was really enlightening, at least for me personally, because I don’t know too much about capital campaigns. So hopefully, the rest of you enjoyed. I think they did. I’ve seen some chats to that effect. 

But yeah, we probably got about, you know, seven or eight minutes for questions. So if you haven’t asked a question yet now is the time. And I know you guys were chatting answers to a couple of questions so I’ll try to avoid those. But there’s some good ones in here. One from Holly. Holly says just started a capital campaign. Doing the silent phase. They’re doing the feasibility study right now. They did another capital campaign in 2010 and some of their current donors contributed to that capital campaign, you know, 10 or 11 years ago. How would you recommend approaching those folks? You know, maybe you’re going back to the well kind of quickly and, you know, with another campaign. Any thoughts for maybe segmenting communications to those folks who just gave, you know, about a decade ago to the last campaign?

Aaron: Yeah, that’s an interesting question. And I probably need to know more about to give my best answer. But I think fundraising and capital campaigns are all about storytelling. And so what is the story that your organization is telling from the last campaign to this one? What is the need in the community now? And then as I always talk to my clients about, you really need to paint a picture as to why are you uniquely positioned to meet that need? And so there are certainly some dynamics that come through in terms of, you know, what was the frequency of the last gift? How well have we stewarded in between those gifts? And so there are some dynamics in there I would want to know more about. But I think continued conversation about your story, your impact, and their role in that is probably where I would begin.

Steven: I love it. Makes sense. There’s been a few questions kind of I think the heated bidet seats got people thinking about, by the way, I’d really love to know what the fair market value of that is, but that’s another question.

Aaron: I’m really glad it made it into the transcript as well.

Steven: Well, it got some people thinking because we got some questions about those in-kind donations pro bono services. Is that something that you should, you know, kind of be counting on, or is it just kind of a nice thing to be surprised by? You know, does that impact may be the contractor’s budget when you’re planning those things? Is that a reasonable expectation that those things would happen or just kind of a nice thing after the fact? What do you think?

Brian: Yeah, it’s a great question. I would approach a project as if you’re going to get zero in-kind donations. So that’s in creating the high watermark, that ceiling, that’s your worst-case scenario. So I mentioned Church Missions Network. We’re going into the number that we’re providing to them when we finish design and budget for them is going to be the worst-case scenario. So it’s going to include everything as if you paid every dollar for every piece of it. 

The fun story, the Plywood type story is once you start leveraging that network and start bringing it down, we actually have a budget where we track, we create the high watermark. Well, then we start throwing in the in-kind and then we start throwing in the actual cost. And if we’re able to save any money and if we don’t use contingency, then at the end of the project that mechanism says, hey, yeah, we had the $1.7 million project, but we did it for a little over a million. 

So yeah, for planning purposes, I’d be remiss if I told you to count on anything at all. It’s just not a realistic expectation. It’s a crazy world out there that could pivot in a heartbeat where, you know, architects can’t do pro bono services anymore, tax law could change, whatever that variable is you can’t plan for it. So if we’re truly following the process, we create the worst-case scenario and then we manage it down to the best-case scenario.

Steven: That makes a lot of sense. And, you know, the other side of that, since you mentioned you got so many of those things, which was great, should you be a little proactive about maybe, you know, at least bringing up the possibility to those prospective, you know, corporate sponsors or vendors, or, you know, contractors that . . . You know, I’m just kind of curious on the example you gave Brian. Like, how did they get so many of those things donated? Was it purely by chance or did they kind of actively, you know, plant that seed in the potential donors’ minds?

Brian: So as we were concurrently going through value engineering, so we had a sealing budget we’re going through that, and then it’s a round table. It’s us, the architect, the engineers, and then the board members that were on the building committee and we’re sitting around saying, “All right, well, if we don’t get something, then we got to cut this.” And we thankfully, because it happened while we were in permitting so we had weeks, if not months. You know, we’re looking at, hey, if we get . . . Who knows who in plumbing? And I had a plumbing contact. I reached out to them. They committed to donating all the plumbing fixtures. So then we take that roughly $10,000 value and then we add it back to, okay, we got the plumbing so now we can add this part of the project back to it.

And so it was a collaborative effort of, you know, if we can get in-kind, then we can add, you know, this conference room back in that we had to cut. And so it’s a back and forth. But it was process-oriented. We had a weekly meeting going through the budget, trying to find where we could, you know, squeeze, you know, a quarter out of a penny. And ultimately, we were able to deliver, you know, the minimum viable product plus some of the wishes and desires that they had in the original vision. 

Steven: That’s cool. Yeah.

Aaron: You know, I’ve seen org charts. If you think about those steering committees that really lead the fundraising effort. You know, you got your corporate team, your small business team, your grants team, you got your stewardship team. I have seen in-kind teams created to work sort of in an ancillary role. They’re not really connected to the fundraiser as just so much to know that they’re not going to the same person twice. But we build the plan to raise the actual revenue. And then every win we get over from the in-kind team is a win off the bottom dollar, but we don’t count on it. So it’s just a way for fundraising teams to think a little bit differently without relying on it necessarily from the start.

Brian: Yeah. And what we have is a tracking spreadsheet that’s, you know, collaborative document and we outline every little component concrete, you know, lighting fixtures, plumbing fixtures, all those pieces. And then with the contractor, we identify what’s the date that if we don’t have a commitment, you’ve got to buy those materials. And so then it throws the accountability back on leadership and whoever’s a part of that steering committee to say, okay, I’ve got until this date to go find this otherwise, you know, we’ve got to pay the fair market value.

Steven: It kind of goes back to what Aaron was saying about storytelling. Like, hey, if we got this for free, we could do X or add that thing back in. That’s compelling to me. And the other thing I heard you say is have an in-kind team, right? You should have one. Because if you don’t, I’m guessing the much lower chances that you’re going to get anything in-kind because you don’t have a dedicated team. So that makes sense. 

Kind of time for one more question. The one from Alison is sticking out to me. What do you all think about having a dedicated budget line item for, you know, meeting with potential donors and perhaps taking them out to coffee or lunch to explain the project? Like, is that a reasonable thing to have in the budget, and if so, any ballpark figures for that?

Aaron: Yes, definitely. Definitely, that’s part of it. That’s kind of included in your cost to the campaigns. For those particular items, I have to do a little more research as to what would be an appropriate number. You’re, of course, always trying to get that donated in-kind or try, you know, a board member to cover that for you. That’s part of doing business. And so it’s expected. I do know some organizations that don’t really make room for that and they kind of work in a smaller capacity, but for the most part, that’s a part of, you know, when you’re talking about hundreds of thousands or a multi-million-dollar project that ends up being a pretty small part of it

Steven: Makes sense. Yeah, have the board member take them out, pick up the check. A good solution there. Dang, this was fun. Time’s flying by here. We got maybe 90 seconds left. I don’t want to keep people too much longer. But Aaron, Brian, I’ll give you the last word. Where can people get ahold of you? I know we’ve got the contact info there, but please let people know again.

Brian: Yeah. So brian@third-lens.org is my email address. Website’s the same. Social, it’s third_lens on all platforms. If you’ve got any further questions, we’d love to answer and be a resource for you.

Aaron: Yeah, same here, aaron@brightstreetsolutions.com, it’s brightstreetsolutions.com. We’d love to be a resource for you. If it’s not us, we’d love to connect you with somebody in your backyard to help you out. But we’re really passionate about capital campaigns and we want you to be successful.

Steven: Yeah, I can tell that passion came through. Thank you both for taking the time and sharing all your knowledge. This was really interesting to listen to. And connect with them. They’re obviously a wealth of knowledge. So definitely take advantage of the opportunity. And thanks to you all for hanging out and listening. I think we had almost 150 people. That’s awesome. I know things are getting kind of busy with year-end, so it’s always nice to see folks taking time to learn a little bit more. 

Speaking of we’ve got a webinar coming up next week, a special Wednesday session. Thursday is Yom Kippur so we made a move there to let people join live if they’re celebrating on Thursday. So Wednesday, we’re going to be talking about strategic planning, specifically how to involve the community in that process. Julie is awesome. She did a webinar for us last year that was really, really great. So we’re having her back. So nice dovetail out of this. If strategic planning is of interest to you or top of mind, join us 1:00 p.m. Eastern next Wednesday, the 15th. And if you can’t make it, register anyway because you will get the recording just like you’re going to get the recording of this session here in just a few minutes. So be on the lookout for an email from me with the slides and the recording. You’ll have that before dinner time I promise. So we’ll call it a day there. Thanks again to all of you for joining. Hopefully, we see you again next week, but if not, have a good rest of your Thursday. Have a safe weekend. Stay healthy out there and we will talk to you again soon. Bye now.

Kristen Hay

Kristen Hay

Marketing Manager at Bloomerang
Kristen Hay is the Marketing Manager at Bloomerang. From 2018 - 2020, she served as the Director of Communications for the Public Relations Society of America's local Hoosier chapter. Prior to that she served on several different committees and in committee chair roles.