Right Place, Right Time
When should your athletics booster club start building an endowment? Whether you're working to support a public or a private school, Mal Scanlan, who's helped raise millions of dollars as a development officer at Cretin Derham Hall in St. Paul, Minn., has a one-word answer: now.
By Mal Scanlan
Cretin Derham Hall in St. Paul, Minn.
Whether you're at a public school or a private school, an endowment should be the backstop of your finances. It's the underpinning of everything else, especially the plans for your long-term future, and if you haven't established one, you need to think about it right away.
An annual fund is subject to the stresses of the economy, which we can all see very clearly right now. An endowment is much safer, and even when endowment returns decrease, you're still going to have a reliable source of income--assuming you manage your funds well. If you do, that's money you can count on.
At a time like this, you need to approach people with the pitch that their gift will put your organization in position to weather financial uncertainties. If your organization is stable and your mission is worthwhile, your key benefactors are going to be supportive of starting an endowment. You tell them, "I know you've been supporting this organization for a long time. You're one of our best friends, and we'd like you to be one of the lead donors to help us start this endowment program."
Operate under the assumption that these people are your strongest supporters. They believe in what you're doing, and they've been supporting you consistently over some period of time. Does that mean they're going to immediately write you a check for $100,000? Probably not. But if they already have a head for business, you don't need to persuade them about the importance of starting an endowment. They already get it.
Once they decide this is something they want to support, they'll figure out how to do it--just make sure you don't approach them in desperation. Nobody wants to constantly be approached to solve your crises. If you're in trouble, they may help you once, but they're never going to help you twice.
A few years ago, there was a lot of money for giving. Everybody thought they were rich. It's not as easy as it was then, but there's still a lot of wealth out there. In the midst of the financial meltdown, I talked to a gentleman who said, "I may have lost 20 percent of my assets, but those assets were overvalued anyway, and I still have a lot left." To me, that underlined the importance of having an organizational mission you can effectively communicate to your supporters.
Right or wrong, some people may think there's a lot of waste in the public school system, and that may make it harder for them to contribute to your organization. But by keeping their money outside the system--by placing it in an endowment--they can protect their money and make sure it goes where they want.
Another problem with public schools is the leadership changes so frequently that people hesitate to donate money. My counterargument for them is, "If you put the money into restricted endowments, it doesn't matter who's running the school district. If the money is specifically earmarked for athletics, nobody else can touch it."
There are lots of good reasons why people at public schools are setting up endowments, but they all come down to one thing: kids. You need a new stream of revenue that will carry your program into the future, taking care of the generations to come.
The rule of thumb is that you're always going to reinvest into the endowment. Let's say you have $50,000 in your endowment, and it earns 8 percent. Each year, you adjust for inflation, distribute half of the earnings, and reinvest the other half back in the endowment.
If you're spinning out 4.5 to 5 percent in an endowment, it's going to take a lot of money to build an endowment that's going to make an impact. But you can't let that distract you from planning for the future--you need an annual fund and an endowment.
There's never a easy time to start an endowment, because everybody is always fixated on annual cash gifts. They're focused on the money they need here and now. But benefactors understand the importance of financial stability, and even if it takes time to set up an endowment, it will keep paying dividends in the long run.