Originally published December 17, 2014

When we walk into an automobile dealership, is the first vehicle we see the least expensive? Enter a clothing store—are the discount clothes in the front of the store? What about furniture stores—is the marked-down merchandise featured closest to the front?

No. It’s just the opposite. You have to walk past the most expensive vehicles, the latest/trendiest fashions, and top-end furniture to make your way to the discount section.

So, when donors ask, “How much does it take to create an endowed fund,” why do we typically answer with the lowest amount required? Is this answer in the best interest of the donor or achieving our organization’s mission?

Retail salespeople are likely to ask questions about how we plan to use the vehicle, where we will wear the new clothes, or the setting for the new furniture before recommending merchandise for us to consider. As fundraisers, we should do the same in responding to our donors’ endowment gift amount questions.

To recommend an amount for a donor to create an endowed fund:

1. Learn what impact the donor wants to have. Depending on your organization and the type of endowed fund your donor wants to establish, you might ask:

  • “What size scholarship award do you want your endowed fund to generate each year?”
  • “How much spendable income do you want your fund to produce for the medical research team annually?”
  • “What amount of money do you want your endowed fund to produce for land protection?”

2. Take answers to the “impact” questions to determine the endowment required to achieve what donors want to accomplish.

  • “I want a student to receive a $2,000 scholarship each year.” “This will require a $40,000 endowment gift.”
  • “I want to provide $10,000 in annual spendable income for the medical research team.” “An endowment of $200,000 will be required.”
  • “I want to make at least $20,000 available each year for land protection.” “An endowment of $100,000 will be required.”

3. Use donors’ reactions to adjust or confirm the endowment gift requested.

  • The scholarship donor may say, “I think I want the amount of the annual scholarship to be at least $10,000.”
    “That’s wonderful. This will require a gift of $200,000.”
  • The medical research fund donor might counter with, “I think $150,000 is the maximum gift I can make to establish this endowment.”
    “Your gift will generate $7,500 a year in support of medical research—that’s great!”
  • If the land protection donor says, “Yes, $100,000 is what a want to do.”
    “That’s terrific—thank you!”

Continuing to respond with the minimum endowment required, when donors ask, “How much does it take to create an endowment?” will likely minimize our endowment gifts. Furthermore, will the donor be happy when the amount of spendable income falls short of the impact he or she wanted to have?

Asking a donor about the expected impact he or she wants to have at the outset enables us to know what the donor wants to accomplish and the amount of endowment required. The end result will be more satisfied donors, potentially larger endowment gifts, and greater impact on our organizations’ missions.

Copyright © 2014 Bentz Whaley Flessner & Associates, Inc.

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