From GuideStar: “Not long ago, GuideStar’s editorial director told me that “most of our readers are convinced that endowments are good things; if their organizations do not have endowments, it’s because they can’t justify diverting money from programs to start endowments.”
It’s understandable that many nonprofits would feel that way. Most are very small, and nonprofits of any size often face demands that far exceed their resources. Smaller nonprofits also tend to view endowments as “end-game” financial instruments, money to be tucked away once they’ve achieved both success and stability … if they ever do so.
There is, however, another way to look at endowments: as part of good financial planning that ensures that an organization will be around in the future to carry out its mission. Here, then, is a five-step plan that a smaller nonprofit can use to create an endowment—and put itself on solid financial footing.”
Step 1: Implement an organizational business plan based on responsible financial planning and management.
Step 2: Sell your board and/or donors on the need for an adequate cash-reserve fund before addressing an endowment.
Step 3: Set up both the cash reserve and an endowment fund.
Step 4: Look for investment managers who offer suitable strategies (in terms of historical return and risk) for the endowment and perhaps even the cash-reserve fund.
Step 5: Incorporate cash-reserve and endowment components into capital campaigns and regular fundraising efforts; tout those accounts to grantmakers.
For the full article please visit: http://www.guidestar.org/rxa/news/articles/2014/five-steps-to-starting-an-endowment.aspx?utm_source=All&utm_campaign=2014-05-01+Nonprofit+Newsletter+Prospectors&utm_medium=email.
Davis & Hodgdon Associates has been assisting individuals, businesses, and nonprofit organizations in the Burlington Vermont Metro area for more than 20 years. If you have any questions or concerns please feel free to call 802.878.1963 or email [email protected].