6 Practical Steps to Grow Your Endowment

Posted , by Abby Webster, Vice President. Topic: Donors, Fundraising.

How to Grow Your Endowment
(and why you should put in the effort)

 

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By Abby Webster, Vice President

In the midst of what has been a constantly changing economic, philanthropic, and social climate, a nonprofit’s commitment to financial stability and diversified revenue streams has become increasingly important to fulfilling its mission. One way that many nonprofits are seeking to ensure their sustained impact and weather uncertainties is by growing their endowments. While nationally, only one in nine nonprofits has endowment funds, a study of the asset allocation of nonprofit endowment funds found that those nonprofits with endowments grew more quickly in terms of their assets, revenues and contributions.

This study points to the importance of endowments and confirms what we are seeing in the nonprofit sector with our clients. Over the last five years, we have helped nonprofits raise hundreds of millions of dollars for their endowments. Almost 60% of the campaigns we supported during that time included an endowment goal. These organizations range in budget size and span different sectors.

What does it take to raise funds for an endowment? And are the benefits worth the effort? Before you say, “We would love to grow our endowment, but there is no way we could possibly raise above and beyond our operating needs,” there are practices you can implement in the coming year that will set you up for endowment growth.

The common thread is a commitment to strategy, planning, communication and solicitation. The fundraising cycle applies even to endowment fundraising.

First, what is a nonprofit endowment? It is a fund set aside by an organization, the principal of which is invested to generate income. The income generated from the endowment is then used as a stable, long-term source of support for the nonprofit’s operations, programs, or initiatives. In many cases, nonprofits establish spending policies and separate management to ensure that the endowment exists in perpetuity.

Three Benefits of a Strong, Well-Managed Endowment

  • Financial Stability – provides a stable and reliable source of income despite external factors, economic uncertainty or fluctuating donation levels
  • Strategic Flexibility – allows a nonprofit to adapt to changing circumstances, address unexpected challenges, explore innovative approaches and plan long term for new initiatives
  • Donor Confidence – appeals to donors who view their donations as investments and are looking for organizations with long-term sustainability and impact
Steps to Grow Your Endowment
  • Develop a Comprehensive Strategy
    • Clearly define your organization’s vision and goals
    • Outline a long-term plan that includes how the endowment will help you meet your goals
  • Educate and Communicate
    • Many supporters might not be aware of how an endowment operates and how it will support your work over the long run. Be prepared to clearly communicate the purpose AND the impact of the endowment
    • Regularly update all donors on progress, not only dollar amount raised, but what the endowment is enabling your organization to do
  • Seek Professional Advice
    • Reach out to financial and legal professionals to ensure compliance and optimal management of the endowment
    • Consider working with a nonprofit consultant, like The Curtis Group, with years of experience helping nonprofits establish and grow their endowments. We can help you:
      • Create your long-term and comprehensive strategy
      • Establish your spending policies and best practices
      • Outline your key messaging points, case for support and materials
      • Create unique and customized solicitation approaches to incorporate endowment asks into your current fundraising
      • Prepare you for a successful endowment campaign
  • Promote Planned Giving
    • Encourage supporters to include your organization in their wills or estate plans and designate all realized planned gifts to fund your endowment
    • Planned giving is an effective way to secure support for an endowment without impacting annual fundraising efforts. Provide information on the benefits of planned giving and deferred gifts and how it can be beneficial for both the donor and the nonprofit
  • Engage Current Donors
    • Start with your board. These are individuals who have given their time, talent and resources to support your work. Discuss your goals for an endowment and ask them to consider making a pledge over and above their annual support to help build it
    • Your current supporters are committed to your work and will be interested in learning how a gift to your endowment will help you better meet your mission
  • Provide Stewardship
    • Establish personal and customized approaches to acknowledge and engage planned giving donors and endowment supporters
    • Keep donors informed about the performance and direct impact of the endowment
    • Maintain transparency in all financial matters, demonstrating responsible and accountable management
Remember that growing an endowment is a long-term endeavor, requiring consistent effort and a commitment to building lasting relationships with your supporters.
Reach out to The Curtis Group, and let’s brainstorm together about how you can grow your endowment!
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