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The Challenge of Challenge Gifts

Challenge grants can be a simple way to give your fundraising program a boost, and yet they can be…well, challenging. They offer an opportunity for your organization to grow its support base, increase giving across a particular donor segment, and increase gift amounts. However, they are not a tool to be taken lightly.

In their most basic form, challenge grants will enable you to request a one-to-one match for dollars raised around parameters you define. So if you request a $20,000 challenge to raise $20,000 in new individual gifts and succeed in doing so, you double your money and secure $40,000 for your organization. When executed well, challenge grants can give your campaign renewed momentum and a sense of urgency without creating a new campaign. Ideally, donors get so energized that match totals often exceed the amount of the challenge.

And if you don’t fulfill the challenge? Technically, the grantmaker owes you nothing. You stand to lose your credibility as a fundraising organization, as well as the grant.

If this strategy sounds like a gamble, it can be, particularly if you don’t treat the challenge as an integral part of your annual planning process. For instance, if your annual workplan calls for a 100% increase in giving from churches, you might find a foundation interested in faith-based philanthropy and request the challenge there. Ground the nature of the challenge in your fundraising plans, and you will find a new way to involve your challenge grantor while making progress toward other fundraising goals.

What kinds of goals are most achievable via challenge grants? If your goals include significant increases in the following, your organization may be a good candidate:

  • Individuals
  • Planned gifts
  • Religious institutions
  • Non-corporate foundations

Once you decide on the constituency to whom you plan to issue the challenge, be creative in the way you design it. For example, if you aim to increase your foundation giving by $50,000, you might propose that a challenge grant match every new or increased foundation gift on a one-to-one ratio, up to $50,000. Typically, your organization will then “earn” the funds at end of the campaign period, usually in 12 months. Include the challenge in every mailing and newsletter during the duration of the challenge. If your supporters know that their gifts will be doubled, you can bet that people will be more eager to make larger gifts.

If you decide to focus your efforts on planned giving, you may decide to structure the challenge over a multi-year period, since it may take more than 12 months to meet ambitious planned giving goals. In that case, structure the challenge in installments. You may decide that for every planned gift of, say $25,000 or more that is committed, the charity “earns” 10% of the challenge For a successful campaign, 10 gifts of that size will complete the effort. This way, if a grantmaker has issued a $250,000 challenge, you need not wait until the end of a multi-year period to begin reaping the benefits of your work.

Foundations and individuals are typically the best candidates to issue challenge grants. If you choose a foundation, the entity should be committed to the constituency you plan to challenge. So if yours is a local organization, consider soliciting a community foundation, family foundation, or individual interested in increasing philanthropy in your geographic area. If yours is a national organization, seek a large, private foundation whose interest lies in nonprofit management — many of these entities encourage such gifts in order to spur nonprofit growth. In general, loyal donors who are invested in your organization’s long-term stability will also consider challenges.

Most donors will gladly make challenge grants for your nonprofit’s unrestricted needs, although it is not uncommon to restrict a challenge to a capital campaign, endowment fund, or other project-specific effort. If you don’t have a pressing restricted need, consider this effort an opportunity to secure precious unrestricted funds.

Consider infusing your next annual campaign with a challenge grant. It can provide a refreshing way to push yourself, your colleagues, and your donors to meet challenging fundraising goals.

Susan Schaefer

About the Contributor: Susan Schaefer

Susan is a seasoned consultant, writer and speaker who is passionate about the nonprofit sector. Her practical approach to fundraising and board development has made her a frequent speaker at conferences and in classrooms. She founded Resource Partners LLC in 2001 with a mission to help nonprofits excel. Her work with executives, development staff and boards has empowered dozens of organizations to reach and exceed their financial goals. Susan brings integrity and proven results to all her work, resulting in clients who return to her again and again. She co-edited The Nonprofit Consulting Playbook: Winning Strategies from 25 Leaders in the Field, published by CharityChannel Press. Prior to founding Resource Partners, Susan helped lead the design and implementation of The Gates Millennium Scholars Program, funded by one of the largest private grants in history. Throughout her career, she has held seats on nonprofit boards, regularly holding leadership positions. Her next adventure includes serving as adjunct faculty at Johns Hopkins University. Susan holds a master’s degree in Not-for-Profit Management and a bachelor’s degree in English, both from the University of Maryland.

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