Feasibility Studies | 7 Secrets You and Your Board Should Know
Are you thinking of launching a campaign?
Do you need to raise a significant amount of money and aren’t sure where to start?
Many experts will tell you that the first step in a campaign is a feasibility study, however, many nonprofits dismiss this immediately and with good reason.
Feasibility studies are expensive!
What is a Feasibility Study?
A feasibility study is a process where a nonprofit determines the likelihood that a campaign they would like to undertake will be successful.
The process is very simple and whether you are doing it in house or hiring a consultant, the steps are the same.
3 Steps to a Proper Feasibility Study
First, you need to develop a prospectus.
This is a short (5-6 page) document that outlines who your organization is, the problem you are hoping to address, the solution you have to address that problem and finally, how much that will cost.
Often times the need is for a new building to expand services but more and more, nonprofits are looking to campaigns to raise money to grow infrastructure and programming.
Second, you need a group of prospective donors to interview.
Typically the nonprofit will review their donor list, see who might be able to give a major gift and they are then assembled onto a list to receive the prospectus. These names must come from your existing donors or those that you can gain access to through your board or other contacts.
Finally are the interviews.
The prospectus is mailed to the donor list and interviews are set up with those that are willing to meet with your team. If you have hired a consultant, they will do these interviews confidentially.
If you have concerns, this might be worth the money to get honest feedback from your donors. It can reveal why they might or might not fund your organization.
Usually, it’s a good idea to do these meetings yourself.
Conducting Donor Interviews
During the interviews, you do not ask for money.
You do ask for their thoughts, opinions, and advice. You can also ask if they would invest.
A consultant will show them a giving range table and ask if they see themselves giving at any level on the chart. You may not have to hire someone to do this. Most donors will be honest with you and it will help you build a bond that you can’t gain with a consultant.
After the interviews are complete, your team needs to evaluate what changes need to be made based on the feedback from those who would likely fund the plan. It’s critical to take their feedback into account and not dismiss any common themes that presented themselves.
What Happens After You Analyze the Feedback?
Once you have the feedback, you can make the decision to launch or spend more time working on the issues you found.
You can adapt your plan accordingly and cultivate any additional donors you will need to reach your goal.
The next question is do you do the study in-house or hire a consultant?
There are some important points you should consider before pulling out your checkbook.
What You and Your Board Should Know About Feasibility Studies
1. Most Nonprofits believe studies are the first step in launching a campaign. Most campaign companies believe it is the way to tell if you are ready.
This might seem like a subtle difference but the philosophical gap costs nonprofits millions of dollars each year not to mention the goodwill of donors.
As a rule, most donors don’t like studies. They are constantly being asked to sit for interviews with paid consultants and would rather talk to you directly.
Many nonprofit executives think that the purpose of a feasibility study was to open doors to major donors and gain buy into the plan. Basically, cultivation.
That is not, however, what campaign companies believe.
A campaign company will insist on a study to test if they can take you to the campaign immediately or if you need to address issues before they can be successful.
Think of it as an insurance policy since more than 50% of campaigns nationally fail to reach goals each year.
This is why you need to be very clear about why you are doing a study, what you have as a goal and if you believe you are ready.
2. Studies are expensive if you hire a consultant
If you don’t have the internal capacity to run a campaign, professional companies can be worth their weight in gold.
But plan on spending $25-30,000 on the low end for fees plus $5-8,000 in expenses for those services.
Some companies will charge less but make sure you know what you are getting. Some consultants will help with the ask while others will coach your board and volunteers but will not ask.
Know what you need so that you can hire the right firm.
3. You have to have the money available upfront to pay the consultant
This is actually one mistake that can end a campaign before it starts.
If you do get a recommendation to move forward with the campaign, you will need to have at least $150,000 to $250,000 in the bank to pay consultants and for fees and expenses available upfront.
Many nonprofits believe that the fundraising dollars will pay for the consultants.
While it is true that the money they raise will include funds to cover their expenses, the cash flow from the campaign will not start to come in for 6 to 9 months and even then it might be restricted.
If you don’t have that much upfront, determine how you can work with a coach to get you started on an hourly fee but don’t start with an expensive firm only to run out of money three to four months in.
4. Most nonprofits aren’t ready to go to campaign
While most campaign companies won’t share this, about 30-60% of feasibilities studies result in a “no go” recommendation.
Why so high?
Most nonprofits don’t know how to evaluate if they are ready to go to campaign and do not understand what firms will do for them.
5. Your consultant will not bring in large donors
Many nonprofits make the mistake of thinking that the consultant will use their connections to bring in big donors.
This is often why many nonprofits hire local contractors, however, this expectation couldn’t be further from the truth.
Large donors give to nonprofits that they trust and that have value for them. They don’t give to consultants because they know them. You must do the door opening and cultivation on your own.
If you can’t get them in the door, they won’t open it. They can’t use their goodwill and relationships until permission has been given.
While a firm can pull a plan together to present to prospective donors, the one thing they can’t do is create a donor base that is ready to give major gifts.
The number one reason that campaigns get a no-go recommendation is that the donors just aren’t ready to give or don’t exist.
6. If you get a “No Go” recommendation, most firms will insist you do another study.
So what happens if the report says you aren’t ready to go to campaign?
If you hired a firm to do the study, you will be given a list of recommendations to follow to get ready. What many nonprofits don’t realize is that one of the biggest dangers of doing a study before you are ready is that campaign firms will insist you do another study once you are ready.
They might call it something else, but they need to gauge investor interest and get a real campaign goal that is obtainable.
If you hire a new firm, they will most likely insist on a new study as well. This makes it even more important that you are prepared before you launch.
Going back to donors a second time, with another consultant can make them question the use of funds and your ability to pull off the plan.
7. It’s easy to know if you are ready
While you can’t guarantee 100% that a feasibility study will uncover all the money you are looking for, a quick assessment can tell you if it’s too early to send out the RFP.
At Sharity, our free Are You Ready to Grow assessment will show you where your nonprofit stands.
Start there and take a few moments before you look for a consultant or launch a study yourself.
You and your donors will be glad you did.
If you have any questions, contact us directly.
We’d love to get your thoughts and ideas about how we can make launching your next campaign a success.
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Our Are You Ready To Grow Assessment is your first step to identifying key areas to evaluate in order to meet your fundraising goals