There is a new kind of money that every nonprofit leader should understand and many should go out and raise. Capacity capital is the money that nonprofits so desperately need to build strong, effective, sustainable organizations that can create more social change. It is a one-time investment of money to add new technology, an evaluation system, a new revenue function – ultimately money to grow or strengthen the organization.
Today I’m excited to release our newest step-by-step guide Creating a Capacity Capital Campaign which shows how to take the ideas in the Enormous Opportunity of Capacity Capital E-book to create your own capacity capital campaign. This new guide shows you step-by-step how to plan for and launch a campaign to raise organization-building dollars. (You can see the other step-by-step guides, e-books, and other tools on the tools page of the website here).
A nonprofit could use capacity capital in many ways, for example to:
- Plan and execute a program evaluation
- Plan and launch an earned income stream
- Create a strategic financing plan
- Hire a seasoned Development Director, or other revenue-generating staff
- Purchase a new donor database
- Improve program service delivery
- Upgrade website, email marketing, and/or social media efforts
- Launch a major gifts campaign
If those organization-building elements were in place, a nonprofit could start:
- Doing a better job of delivering their program
- Raising more revenue annually through a more effective fundraising function
- Securing more external support because they can prove program results
But raising capacity capital is not like traditional fundraising. It involves determining how much capacity capital you need, creating a compelling pitch, deciding which prospective funders to approach, and educating those prospects about the power of capacity capital.
The Creating a Capacity Capital Step-by-Step Guide will show you how.
This guide is organized into 6 sections. Each section will require you to do some thinking, writing and planning. As you work your way through this guide you will be creating your capacity capital campaign.
- Create a Capacity Building Plan
- Determine a Capacity Capital Dollar Goal
- Break the Goal into Investment Levels
- Develop a Capacity Capital Ask
- Create a Prospect List
- Demonstrate the Return On Investment
You can download the guide here.
Last May I launched a new ongoing blog series that profiles Social Velocity’s work with Charlotte Chamber Music, a small performing arts organization that has a big vision, but lacks the capital to get there. Charlotte Chamber Music enlisted Social Velocity’s help last Spring to create a strategic plan and a capacity capital pitch to raise the money to execute on their big plan. You can read the whole series here.
Capacity capital (or “philanthropic equity”) is the money so many nonprofits desperately need. Capacity capital is dramatically different from the day-to-day operating revenue for which nonprofits are always fundraising. Capacity capital doesn’t fund delivery of nonprofit services (beds for a homeless shelter, new productions in an opera house, books for an after-school program). Rather, capacity capital builds the organizational infrastructure of the nonprofit (technology, systems, administrative or fundraising staff, materials) that allows the organization to become more effective or grow. But you cannot simply go out and ask for capacity capital. First, you must develop a compelling, inspiring, actionable and measurable plan for what you would do with the capacity capital.
After several months of working with Charlotte Chamber Music we had a strategic plan that staff and board were excited about and invested in. But it’s not enough to have a great strategic direction and goals and objectives to get there. You have to make the plan operational. That means you have to tie the big plan to the day-to-day activity of the organization and the price tag need to get there.
The next step in the process was to develop:
- An annual operational plan built from the strategic plan, and
- A budget
To do this, Executive Director Elaine Spallone needed to create milestones for each year of the plan. She needed to articulate what had to be accomplished in each year of the plan. This allowed her to start to break the big 3-year plan into annual chunks. Once she was happy with those milestones, she created a laundry list of activities that had to be accomplished in the first year in order to hit the first milestone. Once she was happy with that comprehensive list of activities, she tied each activity to a deliverable, a deadline and a person responsible.
As Elaine said:
Creating the operational plan was intense in the time investment and level of detail required, but worth every minute spent in its creation. It is especially gratifying to check off items and see the progress made. To be fair, it can also be frustrating to realize what is not moving forward. But the good news there is that those issues are clear, and can be articulated, shared and modified.
At the same time, she needed to project revenue and expenses over the period of the strategic plan. It’s not enough to have big goals, you need to understand the price tag associated with those goals (expenses) and how the money (revenue) will flow into the organization to meet those expenses. So Elaine created a 3-year revenue and expense projection that was tied to the goals and objectives of the plan.
Once she had these two key pieces in place (annual operational plan and 3-year budget) she could begin to put some key monitoring pieces in place to ensure that the strategic plan was being executed on. These monitoring pieces are:
- Each monthly staff meeting is tied to the deliverables of the operational plan that are due that month
- Each monthly board meeting includes a dashboard report on the status of the goals of the plan
- At the end of each fiscal year, Elaine will create the next year’s annual operational plan tied to the strategic plan
- Annual employee evaluations will be tied to an employee’s performance on their part of the operational plan
- Each annual budget will be tied to the costs of the annual operational plan
So now that Charlotte Chamber Music had an inspiring, investable strategic plan and a budget and operational plan to ensure that the plan would actually come to fruition, they were ready to go out and raise the capacity capital they needed.
In the next post in this series, we’ll talk about how we created a capacity capital pitch and a strategy for going after prospective funders.
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