3 Ways Fundraising can Lead your College's Financial Turnaround
Photo by Oskar Kadaksoo on Unsplash
Colleges and universities that had barely recovered from the Great Recession find themselves blindsided again by the economic freeze meant to stamp out the spread of COVID-19. For many institutions, this is the third major blow to endowment and enrollment since 9/11.
When presidents and chief financial officers have a chance to look up, leading a financial turnaround will top the agenda. Looping in the chief advancement officer early will provide a number of advantages, not the least of which is that development’s revenue generation cycle can be shorter than the academic year and can transcend fiscal years.
Here are 3 things fundraising can provide that almost no other revenue stream can:
Softer Landing
In order to be fair to students, faculty and staff, full phase-outs and teach-outs can take multiple years. In order to bridge the gap between the current deficit and future savings, ask a donor to make a 3-year step-down pledge that will allow you to alleviate the entire deficit immediately with gift revenue, and each year thereafter to make incrementally smaller pledge payments based on the savings you anticipate.
For example, you can ask a donor to make a $175,000 3-year pledge to help you phase out a $100,000 program.
Year 1 = $100,000 Pledge Payment + $0 Savings
Year 2 = $50,000 Pledge Payment + $50,000 Savings
Year 3 = $25,000 Pledge Payment + $75,000 Savings
Year 4 = $0 Pledge Payment + $100,000 Savings
Longer Runway
Once you’ve done your homework to identify new revenue sources, ask donors to provide the funding to get new programs off the ground. Structure the pledge in the same way as the Soft Landing model, above, except that, instead of savings, the declining pledge payments are offset by increasing revenue.
As a matter of stewardship and good business hold yourself accountable to targets of genuinely new (not redistributed) net revenue. By all means, don’t create another cost center in need of a soft landing during the next recession.
More Lift
The tough reality is that even after new revenue streams are identified and painful cuts initiated, many colleges and universities will still face challenges funding basic operational and capital needs. Now is the time to be straightforward with yourself and your donors about what your most pressing financial needs are. Be brutally honest about what expenses should be scheduled for a soft landing and then seek and accept only gifts that provide that soft landing, a longer runway for new revenue or actually improve your bottom line this fiscal year.
College leaders need to turn their attention to financial turnarounds sooner rather than later. Advancement can play a crucial role in helping reshape the financial position of the institution while you develop a sustainable business model for the new normal.
When you’re ready to align your advancement resources with your turnaround strategy, call me.
In the meantime, Download: 3 Things Every College President Should Know About Fundraising.
With over 25 years of senior-level education leadership experience, including as president and vice president for advancement, David Rowe is a senior consultant with AGB: Association of Governing Boards, executive coaching and mentoring practice lead for Registry Advisory Services and the CEO of The Development President.