Any new advancement activity, especially if you are starting a new development office, will require a significant financial investment during the early stages before settling into a more routine budget allocation process. This investment typically includes hiring new staff and key infrastructure items, such as a functional database.
The investment should be proportionate to the size of the institution and to the expectations around the proposed activity. If there is an expectation that every donor prospect will be contacted annually, for example, you will need significant development office resources to achieve this expectation.
Activities should also be prioritised, as the economic climate may not allow you to invest as heavily in the office as you would initially like.
Talk with the finance office early on to get a realistic view, and research if there are any funders (e.g., government agency initiatives) that are available to help with start-up costs.
Starting Out
Here are some of the direct costs you might encounter when starting a new development office:
In addition to these direct investments, there will be indirect costs borne by other areas of the institution that will be working closely with the advancement office – finance, human resources, marketing and so on. The increase in their workload might also require additional investment.
It's Not Just the Office
For development efforts to be successful, they must be embedded firmly in the infrastructure and culture of the institution and funded as a core activity rather than as a ‘special project’.
If development and fundraising are new activities for the institution, set aside some investment for the training of senior staff and academic leaders. It is important that they have basic knowledge about advancement in order to co-operate with the fledging development office.
Action Item
Create a list of direct and indirect costs associated with starting or expanding your development activities/office. Note which expenses will be one-time start-up costs and which items will be incorporated with an ongoing annual budget (generated with the development director).
Most people want to know about the return on investment (ROI) for fundraising – how much it costs to raise each £1.
Each year, for the past 10 years, the Ross-CASE Survey has been collecting data from UK institutions about the scale of their advancement activities and the income those activities generate. Whilst return on investment in other countries may differ in values, it is likely that they will share similar traits.
In the last survey to be published, that from 2010–2011, UK universities (151 surveyed) secured £693 million in new philanthropic funds (new cash gifts, pledges and gifts in-kind) from 204,250 donors (up from £608 million and 184,945 donors in 2009–2010).
Overall, the median value of UK universities fundraising investment per pound received in 2010–2011 was 22 pence, maintaining the trend of offices becoming more cost effective as they mature.
Universities with established fundraising programmes (i.e., those established before 2000) secured a median of just under £3.5 million in 2010–2011, compared to a median of £1.1 million amongst those with developing programmes (i.e., those established between 2000 and 2006).
Overall, the median cost per pound raised declined from 32 pence in 2007–2008, to 27 pence in 2008–2009, to 22 pence in both 2009–2010 and 2010–2011.
It Will Take a While
Philanthropic income will not begin to pour into the institution from day one. It takes a considerable length of time to identify, cultivate and solicit donors, whether they are giving small amounts on a regular basis or major donations. Like many fledgling businesses, your new development office may take up to three years before it begins to generate a return on your investment.
That said, there are commonly some modest ‘early wins’ from prospective donors, already committed to the institution, but these returns may be erratic the first few years (e.g., a major gift in year one and then nothing significant in year two). Manage your expectations accordingly.
Don’t Just Focus on the Money
Whilst it is important to understand how your fundraising costs relate to your income, you should not lose sight of the wider benefits to your institution:
Enhanced public profile (local, national and international),
A wider network of ambassadors,
Engagement with influential individuals and networks,
Alumni engagement,
Shift in culture toward being externally focused,
Better developed external relations strategies,
Stronger governance structures and
A well-developed case for support.
Action Item
Ensure your expectations and benchmarks, as well as the case you present to others, reflect realistic short- and long-term ROIs.
Feasibility studies are most often used in two typical scenarios:
As a general consultancy, to receive advice on fundraising operations and to determine how an institution should embrace development-related advancement activities (generally during the start-up phase). In this scenario, the study would look at the internal readiness of the institution, the potential of the external environment within which the institution is operating and the resources and steps needed to begin a successful advancement activity.
For established development or advancement offices that want to embark on major new campaigns. In this case, the study would assess the volume of donors and prospects prepared to support an institution around a particular focus.
Whom Should the Study Involve?
Leadership
In either scenario, the feasibility study ideally should be led by someone who can take a largely objective view. That person is commonly a professional consultant, but it might also be a member of staff without direct involvement in the area or a lay member of the institution’s governing body.
Whoever conducts the study needs to have the skills to extract and analyse the right information. Those skills would include:
Diplomacy,
Insightfulness,
Good business acumen and/or knowledge of fundraising,
An ability to analyse complex information,
Strategic thinking skills and
The ability to represent information in a way that is useful and accessible.
Other Key Stakeholders
The person leading the feasibility study may need to talk with senior staff, academics, students, alumni, existing external partners, existing donors and/or other potential funders to understand their prevailing attitudes around development activities, the resources that might already exist or the potential support for a campaign (depending on the focus of the study). The study leader might also seek to speak with peer institutions that already have a functional development office.
When Should the Study Take Place?
Feasibility studies seeking general advice on fundraising operations during the start-up phase are designed to inform the strategic thinking of an institution and should be conducted as early as possible in the set-up process (ideally before formal activity has commenced).
Studies focused on new campaigns should also be conducted well in advance of any formal activity, as they can take several weeks to complete and be considered by an institution. A typical time span is three to six months.
What Should It Look At?
Depending on the purpose of the feasibility study, it should:
Assess where you already are in the spectrum of advancement activity. Do you have the raw materials to support this activity? Do you have some pre-existing activity? Is the mindset of the institution receptive to embracing development-related advancement activity?
Begin to articulate the case for support. What are the strategic goals for the institution or campaign and what does it need to achieve them? What are the institution’s strengths and unique qualities? Why should people invest in the institution or this specific campaign? What can be achieved?
Speak to a selection of external stakeholders and gauge their response to the draft case for support. Does it reflect their perceptions of the institution? Does it inspire them? Does it reflect their aims and objectives? Would they support the cause as it is described?
Describe the first steps, based on the information it has gathered, that the institution should take toward establishing a successful development office or launching a successful campaign. On what scale? Where is investment best made? How much might the institution realistically hope to raise? Who should be first to be recruited? What projects have the highest chance of success and with what mix of funders?
The Added Benefits
Feasibility studies can be expensive but they have several benefits, such as:
Providing the institution with a roadmap,
Engaging internal and external stakeholders in the process (and potentially stimulating culture change),
Helping to channel investment where it is most effective,
Educating potential funders and ‘planting the seed’ of awareness that they might be ‘asked’ in the future,
Assisting the institution to define projects that are ‘fundraising ready’,
Providing a touchstone for a newly appointed director of development,
Supporting the institution to develop realistic expectations and
Helping to influence and win the support of governing bodies, senior staff and academics.
Getting the Best Value for Money
Commissioning a feasibility study is costly, but you can reduce the costs by carefully developing a detailed scope and brief for whoever is leading the study.
First, ensure that the vision and strategic direction of the institution (or campaign) are well defined, as this is not in the scope of a feasibility study.
Next, have a clear idea of the kind of information you need to see in the study. Set clear boundaries of responsibility for the gathering of information. For example, the institution might undertake to provide detailed financial information and list of contacts who are happy to be interviewed for the study, thus saving the costs of some basic groundwork.
Then, agree a timetable with milestones based around deliverables that are realistic and useful. By doing this you can benefit from chunks of information throughout the process that may assist your strategic thinking rather than be overwhelmed at having to assimilate an entire report at the end of the study.
Action Items
Ensure that your institution is ready to embark on a feasibility study.
Determine the best time period (as early as possible before setting up or expanding a development office and/or launching a campaign).
Determine who will lead the feasibility study and the key stakeholders involved.
Create a detailed scope and brief including roles, responsibilities and deliverables.
Please note that the term advancement is often used when talking about fundraising in an educational context. As defined by CASE, the term encompasses alumni relations, communications, fundraising, marketing and allied areas.
Whilst this resource touches on all areas of advancement, its primary focus is on fundraising, or development. The terms development office and development director have been adopted to reflect this approach.
Many institutions have broad-based advancement offices, and the CASE website provides in-depth guidance on the wider aspects of advancement, including alumni relations, communications and marketing.
