I recently hosted a webinar on best practices in nonprofit endowment management. Afterwards, I received an all too common question from a nonprofit executive who had been considering an endowment for her organization — how do I know if and when my nonprofit is ready to establish an endowment? The answer, like most strategic decisions, comes down to the individual organization and circumstances.
If your organization already has an open-minded management team and board who is willing to entertain the idea of attempting to build an endowment, you’re already a step ahead than most. For the rest of the nonprofit world, decision makers at your organization may be wary of diverting incoming funds to a long-term investment strategy rather than meeting the needs of today. In these instances, there are two integral elements to consider when deciding the feasibility of founding an endowment: presence and prioritization.
Presence
Growing and maintaining a successful endowment depends almost entirely on the relationships you have developed with your community and supporters. The majority of these relationships are founded on the basis of time, over which you are able to strengthen not only personal ties, but also trust in the sustainability and upward mobility of your organization.
Think about the organizations you donate to. You’ll likely find that your personal charity dollars are going to established organizations with a long-standing track record of success. The truth is, we all want our donations to matter, and giving to an reputable organization is just one way we help ensure our hard earned gifts are used in the right way.
When considering founding an endowment for your nonprofit, put yourselves in the shoes of potential donors and ask:
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Does our community know who our organization is and what we do?
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Have we been in operation long enough and do we have a history of proven success?
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Is ensuring that my organization will be able to serve the community perpetually an important goal that funders will embrace?
If the answer to any of these questions is no, start now by focusing your energy on building your presence in the eyes of prospective donors. That way, when you do establish an endowment further down the line, you can be confident you already have the pull in your community to raise the necessary funds.
Prioritization
If your organization already has the presence, then the next question should be — can we commit to making an endowment a priority for our organization? Running an endowment requires a strong and constant fundraising presence, usually through a dedicated development staff member. If you decide to establish an endowment, be prepared to have an employee whose job is, at least in part, focused on the growth of that endowment.
This person will be responsible with identifying which existing donors could serve as beneficiaries to the endowment and helping to attract future donations to ensure the development of the fund.
If you are a seasoned and reputable nonprofit on the fence about founding an endowment, ask yourself:
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Is our organization ready to commit to the time and energy needed to make the growth and success of an endowment a priority?
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Does our current development staff have the time and resources to building an endowment? If not, are we able to hire additional help to focus on the endowment?
If the answer to any of these questions is no, it may be prudent to wait a few months or years until your organization is able to fully commit to making an endowment a priority.
Need Help?
Founding and managing a successful endowment requires much more than consensus at a board meeting. You want an objective and educated opinion to ensure your nonprofit is making the best decision based on your current financial situation and individual circumstances.
Talk to an expert as to whether an endowment is right for your organization. Contact us online or call 800.899.4623.
