“We’re Closing Our Doors”
The fundraiser was on the phone with one of his clients, the CEO of a large chamber of commerce. During the call, the chamber CEO received an email from the head of the largest foundation in the city. The foundation executive was sharing another email, coming from the head of a large local nonprofit. The note to the foundation said, “If we don’t have an infusion of $3.4 million in cash in the next three weeks, we’re closing our doors.”
Unfortunately, that’s not an unusual message in the COVID-19 era. Fundraisers, chambers of commerce, and other nonprofits, as well as members of chambers, face life-threatening economic and health challenges.
The fundraiser is Rob Radcliff, managing principal of Resource Development Group (RDG), a leading capital campaign company. Executives from RDG and four other capital campaign firms (Convergent Nonprofit Solutions, Funding Solutions, NCDS, and POWER 10) were interviewed for this article. These five companies raise a collective $106 million per year for chambers and chamber-led economic development programs, for a total of more than half a billion dollars in active programs.
Not every chamber of commerce has a capital campaign, but the ideas and lessons these executives provide are relevant to all kinds of fundraising situations.
Asking for Money in a City of Empty Pockets
The virus has ravaged not just people’s health but the economy. When a restaurant can’t operate because people aren’t allowed to gather there, it is not a good prospect for chamber membership renewal. “It’s a bit distasteful to ask a troubled business for money right now,” said Mark Bergethon, principal at Convergent Nonprofit Solutions. Some chambers are putting off the ask until later.
Rob Radcliff classifies chamber members into three groups. First are the small businesses, many of which typically plan about four months in advance. Now, hit hard by COVID-19 effects, they’re more likely to plan four days in advance. Many of these companies are going to be unable to renew their chamber memberships, at least for the time being.
The second level of chamber members is the sponsors. These mostly larger companies typically invest, sometimes very generously, in chamber events. With most of those events cancelled, however, there’s not much to invest in. Thus at this level, as at the first (small business) level, the short-term outlook for chamber revenue isn’t good.
The third level comprises the large companies that are typical investors in chamber capital campaigns. While most of these larger enterprises have short-term worries of their own, they are insulated from the daily ups and downs of street-level business. They can put up funds for the chamber, even if they prefer not to opt for an entire five-year pledge.
Mark Bergethon suggested a way to seek short-term funds from major investors. It involves approaching longtime supporters of the chamber – the ones likely to ask, “What do you need right now?” The chamber CEO can approach such investors with an idea that requires only a short-term commitment. This may be at a financial level that doesn’t require approval by the companies’ boards and that doesn’t tie up too much of the companies’ money. Later on, the firms can be approached for a longer-term pledge.
There’s also what might be called the Cedar Rapids strategy. Tom DiFiore, the president of NCDS, brought this example up. Cedar Rapids experienced a catastrophic flood in 2008, the same year that the Great Recession began. Trying to collect pledges from investors in that year would have been not only difficult, but insensitive to the immediate needs of the community.
“They tightened their belt a little bit and turned five-year pledges into six-year pledges,” DiFiore said. In other words, investors could wait a year to make their next payment to the campaign. The investors got six years’ work for five years’ worth of pledge money. “They [the chamber] also redirected some of their funding to flood relief efforts,” he added. This showed flexibility, a concern for the community, and a commitment to deliver on the campaign’s promises no matter what.
Of course, it was also painful for the chamber to forego a year’s capital campaign revenue.
Hedges on Pledges
No executive was aware of any out-and-out refusals by companies to live up to their capital campaign pledge commitments for this year. But those negative responses are surely coming. One reason there’s a shortage of “no” answers from existing investors right now is that neither the chambers nor the capital campaign firms are in a hurry to solicit companies for those pledges.
Tom DiFiore of NCDS said that he’s happy that one of his major clients has the vast majority of the pledges for this year already wrapped up. He would worry if most of those pledges hadn’t been paid yet. If a chamber still had 80 percent of its pledges needing to be fulfilled over the next three months, “that’s a scary proposition.”
He echoed Rob Radcliff’s comment that capital campaign investors are larger and better funded than the typical chamber member. A normal capital campaign has only 75 to 100 investors, DiFiore said. “We are not dependent on Suzie’s Clip and Curl for our capital campaigns.”
While most capital campaign investors will have the ability to pay their pledges, will they have the willingness to pay or to re-up for a new multiyear capital campaign? It depends. Hospitals do a lot to fund local chambers. Given all the disruption in the health field, DiFiore wouldn’t be surprised for a hospital to reduce, say, a $100,000 commitment over five years to something smaller. “The same thing with banks,” he said. “It’s going to be a case-by-case situation.”
Sean Mikula, chief executive officer of POWER 10, had similar views to Tom DiFiore’s about hospital funding concerns. “We understand that hospital CEOs are going to have to take a half-step back in the near term,” he said. When a hospital cuts back on elective surgery to accommodate COVID-19 patients, it loses money.
In addition, the civic wreckage in the aftermath of COVID-19 could prompt major investors to turn from long-term economic development strategy to short-term relief for affected citizens. “The pressure to direct whatever they can do to pure social community causes vs. economic growth initiatives is going to be intense,” DiFiore said. There will be increased competition for reduced funds.
Mark Bergethon had a similar thought of the post-COVID-19 environment for fundraising. “It’s going to be intensely competitive,” he said. “You’re going to have dramatically expanded needs at the same time that you’re going to have dramatically restricted resources.”
Rob Radcliff pointed to two categories of investors that will likely be a tough sell for a while: airlines, which have been virtually grounded, and energy firms, which have been victims of the Saudi-Russia oil price war and reduced energy use in general. Radcliff’s colleague Beth Pulliam also mentioned automakers, hotels, and banks as normally chamber-friendly investors that have faced the ravages of the coronavirus and that may not come back to chambers with full support after the curse of the corona is lifted.
Not everything is discouraging by any means. “Certain businesses are doing just fine,” Mikula said. “In the manufacturing, delivery, logistics space – you’re probably doing just fine.”
Online dating could be another growth area. “People want someone to quarantine with,” Mikula joked.
A Waiting Game
Although chambers need money badly for all kinds of things, this isn’t the time to begin a big ask. “Chambers aren’t going to start a first-time campaign in this very moment,” Sean Mikula said.
Nor is it the time to renew a big capital campaign. “If you are in a renewal for a four- or five-year campaign – I think most of them will delay maybe 60 days in the hope of accelerating thereafter,” Mikula said.
Even a campaign that’s already begun can come off the rails. Tom DiFiore had a client at the early stages of ramping up for a campaign but it pulled the plug. The community was heavily dependent on casino revenue. The casinos are not operating. The gaming houses aren’t expected to be major investors in the campaign. Still, “it’s just that the local economy will be severely impacted and they [the chamber] don’t want to be seen as tone-deaf.”
Mark Bergethon said that new clients that already have done most of the legwork to start their campaign “are very much inclined to continue.” He did have one situation in which the campaign chair wanted to stop the fundraising effort, but others prevailed and the campaign is moving forward. “It just shows you that there are different levels of nervousness,” Bergethon said.
Communicate
One time an unpleasant religious zealot accosted my younger brother Philip for money. Philip told the stranger that he didn’t have any money. The person scrutinized Philip and menacingly said, “What about your watch?”
That’s about what it must feel like to some business people right now to be asked to contribute to a capital campaign or to any cause, for that matter. It’s not the best time for the ask. It should be again, and maybe soon, but for now, there are other kinds of communication that are urgently needed.
The capital campaign consultants praise chambers that “get it” and are communicating effectively, building relationships with their investors and members. In fact, what better time to reach out to these supporters than now? Tom Mucks, president of Funding Solutions, admires chambers that are providing information to their constituents. “They’re playing a very active role in dealing with their members.” The chambers give guidance to small businesses on where to get assistance for SBA loans and other help.
Chamber CEOs are holding joint meetings with their mayors to “not only deal with the immediate closings but with the displacement of workers,” Mucks said. “This is the perfect opportunity to become a conduit for their business members,” he indicated.
One of his client chambers “was helping secure some supplies for one of the hospitals.” The message: “we’re all in this together.”
Mucks also encouraged chambers to reach out to their major investors, to thank them for their support, and to ask if they (the chambers) could help the investors out in any way. If chambers can find out the three or four things that are most important to each major investor, the chambers will have a clear path to satisfying those investors when the clouds clear.
Zoom and Other Tech-Enabled Communication
The POWER 10 team talks with volunteers about strategies for the campaign, past amounts invested by prospects, and program or plan refinements. COVID-19 is never far from view. “Most if not all of our prospects are impacted,” said POWER 10’s executive vice president, Amity Farrar. The question is, “What is the right ask amount?” The firm and the volunteers normally monitor prospects daily.
Farrar pointed out how campaigns are changing, and not necessarily in a bad way. “Campaigns are really a series of meetings,” she said. These are often meetings with volunteers associated with the campaign. The meetings are normally in person but she just finished one with Zoom software and “it went just fine.” The style of the meeting was a little different than an in-person meeting might be but the results were about the same.
Mark Bergethon seconded the sentiment about the appeal – and, in these times, the necessity – of Zoom video meetings. “In the campaigns that haven’t stopped we’ve seen a willingness to use Zoom,” he said. “I think that’s going to become a lot more common.”
People prefer in-person meetings but if video is all there is, because of travel restrictions and in-person meeting constraints, then Zoom it is. And certainly, Zoom is inexpensive and convenient. “When things become more normal, people may ask, ‘Why don’t we do it that way anyway?’” Bergethon said.
Bergethon suggested another tech opportunity: “Convene a virtual town hall.” It would be focused on, “What are y’all experiencing?” Even if the chamber can’t provide solutions to every member, it can serve as a convener. “The chamber is the perfect organization to bring folks together,” Bergethon said. “Generate a lot of goodwill.”
The Tacoma-Pierce County Chamber in Washington State is very effective at communicating to its members, Tom DiFiore said. It conducts three community conference calls a week, all about COVID-19, in conjunction with the Economic Development Board of Tacoma-Pierce County. “From what I hear, attendance is off the charts,” DiFiore said. Tom Pierson, president of the chamber, responded that Tom DiFiore’s comment was accurate and added: “Crazy times but the calls are huge for our businesses and they are expanding beyond Pierce County.” He added that the goodwill built by this program is phenomenal.
Changes in Capital Campaign Programs
Remember when the unemployment rate was 3.7 percent or so? Those were the good old days – maybe three weeks ago! That virus moves fast.
Now officials are talking about a potential 20 percent unemployment rate, at least for a while after the COVID-19 health crisis abates. This means that chambers’ efforts to promote talent attraction and business attraction may shift to business retention and workforce readiness.
Rob Radcliff said, “Every single strategy that has been devised for a chamber is completely irrelevant.” The aggressive efforts to recruit people and businesses to communities, often involving millions of dollars, are going to be thrown overboard. Massive infrastructures of economic development marketing and sales will vanish. “How do we recalibrate?” he said.
Tom Mucks had a somewhat similar viewpoint. “The problems that existed a month ago are going to be maybe a little bit different,” he said. “The chambers are problem solvers and what are we going to be doing for our members?”
“It doesn’t mean you won’t be able to raise money – I don’t mean that at all,” Mucks added. “People, if they see value to their business, they will continue to invest.” Referring to major investors, he said, “Those people are going to need organizations, chambers, more than ever. But we can’t be doing the same things we were doing.”
“The longer this [downturn] goes on, the greater the need there will be to place people,” Mucks said. That creates a huge role for chambers of commerce – finding jobs for people who lost their jobs in the coronacrisis. Instead of chambers trying to attract talent, these chambers will be trying to place talent.
Mucks and Radcliff are not alone. “Suddenly workforce may not be the problem now,” NCDS’s Tom DiFiore said. “It may not be about bold new initiatives.” The chamber must find an appropriate role for itself and not – when the time is right – be shy about making its case for funding for that role. The chamber CEO must be willing to say that without money to accomplish what’s needed, those needs won’t be fulfilled. “If we take a fundraising hit, we take a hit in the capacity arena,” he said.
“Chambers should be considering how they might adjust their existing strategic plans in order to facilitate a fast recovery in their respective communities,” Sean Mikula said. “You might want to shift some resources to promote downtown businesses that get hammered by the COVID-19 situation. That may not have been part of their existing plan.”
This new approach may lead to new funding opportunities. “There are dollars out there from the government or other sources to help the community,” Mikula said. “You need to make programmatic changes. Money not available before might be there now.”
Toward Something New
The eerie quiet of the nation’s economic motor provides a chance to think. Many chamber executives and their staffs are making use of spare time to imagine what their organization can be on the other side of the crisis. It’s also an opportunity to draw back the arrow on the bow so that it’s ready to fly when the time is right.
Fly toward what? What are chambers becoming? What should these business organizations be? And how will they be funded?
RDG’s Rob Radcliff, who spends a lot of time exchanging ideas about the long term with his mostly large-market clients, has thought a good deal about these issues. “Experience and creativity will be a lot more important than structure and process,” he said. If what we’ve done before is not exactly what we’ll do in the future, we need the examine the past with a critical eye and reconstitute our activities significantly.
Beth Pulliam, a principal at Resource Development Group, is a millennial who is not fazed by the current seeming chaos in chambers and fundraising. “The idea of recession is not new to millennials whatsoever,” she said. “We are very risk-tolerant.” Millennials are accustomed to jumping from company to company and hustling. They have created plenty of startups, figured out how to make technology work for them.
Chamber millennials are prepared to look at strategy in creative ways and to question assumptions. “What is the value of an economic development agency? What is the advantage of a chamber?” she said. These are questions that come naturally to those who are young and new to the field.
For Radcliff and Pulliam, part of the questioning process is wondering, who are the chamber funders of tomorrow? Radcliff was struck by a list of 10 industries that were benefiting from the COVID-19 economy and would likely come out ahead afterward. Examples include online work and education and support, such as Zoom, and streaming media, such as Netflix. “Not one of these industries is in the portfolio of any chamber of commerce in the country in any meaningful way,” he said.
Similarly, he rattled off the names of five or six Fortune 100 technology companies and questioned whether they supported local chambers significantly in more than five markets apiece. Are chambers letting the digital economy slip through their civic fingers?
“There’s a fundamental disconnect from what chambers do and what those companies are interested in,” he said. “Maybe those companies haven’t seen the value proposition.”
“It’s both a problem and an opportunity. Somebody is going to crack that nut. I’d like it to be us,” he said, referring to his company.
Going Forward
All five of the capital campaign companies are struggling with the agony of the short term while trying to imagine what the world will look like after this crisis passes. They all have non-chamber clients, but chambers are a major part, and in some cases the dominant part, of their business. If chambers and their economic development efforts succeed, these companies are likely to do well, too. And if chambers falter, so will these firms.
The good news is that chambers of commerce in the United States have struggled through a few difficult times before – every war the nation has fought, every financial panic and recession and the Great Depression, and multiple plagues from the yellow fever, cholera, and smallpox to the Spanish flu and polio. And we won’t even go into technological and economic changes such as the rise of chain stores, the decline of many small-town Main Streets, the Internet and social media, and the rivalry of Walmart and Amazon with many small businesses that make up the backbone of chamber membership. Most chambers bounce back, if sometimes battered and bruised. Coronavirus probably won’t stop them either, even though it will give all of them a scare and some of them a sharp bite.
So we’ll get through it. But how? And with what funding mechanisms?
Let’s work from home and figure it out.
As Rob Radcliff put it, and as his peers in the other firms – and chambers – would no doubt concur, “We’re shut in but we’re not shut down.”