University and school fundraising has increased in effectiveness in Australia and New Zealand in the last ten years. We are seeing some successful fundraising campaign results and some high-value gifts to fund important work. In response, they sometimes name buildings, facilities, departments and staff positions after donors.
Sometimes, the naming is in honour of the person who has given all or part of the cost of the activity. Sometimes, it might recognise benefaction more generally and sometimes naming recognises community service or service to the institution and has nothing to do with benefaction.
What is naming for donors worth? How to succeed? There are different points to consider:
Linking the Naming Menu to the Fundraising Target
Universities and more often schools do a calculation in which the fundraising target for a new building is spread across all facilities in the building, and if all naming opportunities are taken, the target is achieved or over-subscribed. In this scheme, values vary by space and utility (visibility, traffic and use), and a bit of simple mathematics provides a full menu of naming options. This is a simple activity and can be effective if the amounts are scaled to the donors’ capacity to give and if the project is attractive. It suits single-building fundraising projects rather than building projects within a broader, comprehensive campaign.
Don’t Miss Opportunities to Raise Funds through Naming
Some institutions forego significant fundraising opportunities because they are not open to naming their facilities. In some cases (I suspect Brisbane’s Lady Cilento Children’s Hospital and Diamantina Institute are two examples), the government of the day picks a name without any consideration of the opportunity cost of doing so.
What to Include in the Naming Rights Policy
All fundraising needs to be supported by a few key policies: gift acceptance and prospect clearance, for example. Naming Policy is another important one. The policy will ensure that staff, in their enthusiasm to secure a gift, do not go outside the agreed values or bind the institution in arrangements that become uncomfortable over time.
Things to include in the policy:
- The proportion of the building funding required for naming (for example, “Building naming is available for not less than 20% of the total cost or value of the building”)
- The minimum term (usually three years) for scholarships, fellowships or staff positions to be funded annually.
- The Endowment multiple required – endowments require a capital sum 20 times – sometimes 25 – the required annual distribution
- The ability of the governing board to cancel naming agreements to avoid reputation damage to the institution
Considerations When Using Naming Rights to Fundraise
While we regularly advise clients on the naming values they might use, it must be recognised that naming values are not formed in a transparent retail market. Donors do not phone around to get the cheapest quote on naming a building or a business school, or a school library.
The cash value of the naming is just one aspect of the agreement. There are many other considerations, including:
- Amount (and variation according to type of donors – individual, family, foundation, government, or corporation
- Period of naming (number of years, in perpetuity, life of the building)
- Limited period or endowment
- Term of payments (do you name on a promise or part payment, or do you wait until you have been paid in full?)
- Use of corporate logo vs University signage protocols
- If corporate, do you accept product names?
- Actions in the event of change in corporate circumstance (change of name, ownership, business direction, ill-repute of the honouree)
- GST considerations (you don’t want to create a GST liability for individuals)
- Benefits in addition to naming (application of funds to purpose, influence in selecting named staff or scholarship recipient)
- Use of the money paid for naming rights (does the academic get any benefit for having itself or its facilities named?)
- The circumstances on which the institution (or the donor) might withdraw the naming
These items don’t just constitute a checklist for the gift agreement, but might also affect the cash value of naming.
While it is tempting to try to develop a very prescriptive naming policy covering all conceivable circumstances, such policies don’t usually serve the institution well and they result in fewer naming opportunities being taken up. Simple policies that state important principles work best.
Building the Market for Naming Rights
Naming for benefaction is still an uncommon event in our institutions and this presents a conundrum. If your naming values are too high, you might never name anything and you might forego significant philanthropic income. If it is too low, you might demean the institution’s reputation.
The important thing is to get started with a few significant naming properties. An institution beginning to offer named properties now might well do so for values that will in 10 years’ time seem very low if the institution has gone on to become a highly desirable place for naming.
For example: naming a university Law Library in university would be laughable at $5,000 per year but at $40,000 per year it might be worth doing. When, after five years, that naming contract is up, and the institution has developed its naming reputation, the value may have escalated to $100,000 per year. People will look back on $40,000 per year and think it was undervalued, but it will have done its job in creating a culture of naming values.
Is it appropriate for a school receiving a gift of $4,000,000 to name a building that cost more than $20million to build? You can only answer this if you know:
- Are there others who might pay more?
- Does the name bring honour to the school and attract others?
- Does this naming build closer links with the donor who might give more in the future?
- Will this name generate positive publicity?
- Will this increase naming levels for future donors?
What is the Donor Relationship Worth?
Naming is not about the value of a retail item. It is about an institution’s relationship with its donors – sometimes with implications lasting generations. Potential donors and sponsors are not window shopping or evaluating prices, they are looking for values alignment and recognition of their support.
Keys to Success
For universities and schools, naming should be part of an overall strategy to build a culture of philanthropy, and over time, to increase the contribution level required to be linked with the institution through naming.
The keys to success are:
- Correct but minimal policy settings,
- A close working relationship between the fundraisers and heads of institutions as they engage with potential funders.
Are you planning to use naming rights to fundraise for your project? AskRIGHT fundraising consultants can help you establish the value of your naming opportunities. Contact us on admin@AskRIGHT.com or 1300 758 812 (Australia) / 0274 929 636 (New Zealand).
To find out how Daniel can help your organisation, contact d.mcdiarmid@AskRIGHT.com.
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