When most nonprofit leaders think about endowments, they picture something… big.
Big gifts. Big donors. Big institutions with big budgets.
It’s no wonder many small and midsize nonprofits assume endowments are out of reach.
Something to think about someday, when the organization is larger, the budget is less tight, or a transformational donor finally walks through the door.
But what if that assumption is holding your organization back?
The truth is, you don’t need a million-dollar gift to start building long-term financial stability. You don’t even need a donor. With the right mindset and a board vote, your nonprofit can start creating a board-designated endowment (also known as a quasi-endowment) using funds you already control.
In this post, we’ll share four reasons why your organization should consider this powerful (and underutilized) tool, no matter your size.
Reason #1: You Don’t Need a Major Gift to Get Started
When most people hear the word endowment, they immediately picture a million-dollar donation, a legacy gift, or some anonymous benefactor changing the game with a check. And for small or midsize nonprofits, that can feel completely out of reach, like something reserved for universities or national foundations.
But here’s the good news: you don’t need a major donor to start an endowment.
One of the most flexible options for nonprofits of any size is a board-designated endowment, also called a quasi-endowment. Unlike a traditional, donor-restricted endowment, this kind of fund is created and funded internally by your board. It’s not something you have to wait to show up. It’s something you can decide to build on your own terms.
This isn’t about locking away a fortune. It’s about setting aside strategic amounts over time, when your budget allows, and committing to long-term stability. Maybe that starts with a one-time surplus. Or maybe your board sets a policy to contribute a small amount of your operating budget each year. Either way, you’re making a move toward sustainability that’s fully in your control.
And if you're wondering, “But can we really afford to do that?”, you’re not alone. Many of the nonprofit leaders we work with are juggling tight cash flow, donor restrictions, and rising operating costs. That’s exactly why we advocate for starting small and steady. Even modest contributions, if planned and tracked well, can grow into a meaningful reserve.
Want to learn how to carve out funds for your endowment—even without a major donor? We’re walking through simple strategies in our upcoming webinar, How to Fund Your Endowment Without Starving Your Mission. Register here.
Reason #2: It Sends a Strong Signal of Stability to Funders
If you’ve ever sat through a grant review or funder meeting where the question of “long-term sustainability” came up, you’re not alone. Funders, whether private foundations, government agencies, or major donors, want to know that your nonprofit can weather a storm. They want to see that you’re not living year to year with no margin for the unexpected.
A board-designated endowment gives you something to point to.
Even if the fund starts small, it signals that your organization is thinking beyond this year’s budget. It shows that you’re taking steps to protect your mission, not just fund your programs. That kind of forward thinking can set you apart in a competitive grant cycle or donor conversation.
You don’t need a six-figure endowment to begin sending this message. A designated reserve, even a modest one, that’s tracked, named, and acknowledged in your board minutes demonstrates intentionality. It can give funders confidence that your leadership team understands the importance of financial resilience and is acting on it.
This kind of planning may not guarantee new funding, but it can strengthen your case for support. It also gives your development and finance teams something concrete to build into conversations with stakeholders who want to know, “Where is this organization going?”
Starting to set funds aside is a proactive move. It’s one more way to say: We’re serious about our mission, and we’re making decisions with its future in mind.
Reason #3: You Maintain Control and Flexibility
One reason many nonprofit leaders hesitate to create an endowment is the fear of locking funds away for the long term. When resources are already tight, it’s understandable to be cautious about setting aside money that you might not be able to touch.
That’s where a board-designated endowment, sometimes called a quasi-endowment, can offer a more adaptable option.
Because these funds are internally designated by a board vote rather than externally restricted by a donor, your board retains the authority to adjust contributions, pause them if necessary, or repurpose the funds in response to urgent needs. That level of governance may provide your organization with added flexibility compared to donor-restricted gifts, while still reinforcing a long-term financial plan.
Of course, treating the fund with discipline and clarity is still key. A written Investment Policy Statement and Spending Policy, regular reporting, and board oversight help ensure the fund remains aligned with your mission and financial goals.
For many small and mid-size nonprofits, this approach can strike the right balance: formal enough to demonstrate responsibility, flexible enough to respond to real-world challenges.
If you’re wondering how your state’s laws intersect with your endowment strategy, it’s worth understanding the Uniform Prudent Management of Institutional Funds Act (UPMIFA), which governs how nonprofits manage and spend endowment funds. Read our full guide to UPMIFA here.
Reason #4: It Builds the Foundation for Future Donor Support
Many nonprofit leaders feel stuck in a loop. They know they need to build an endowment, and they’ve heard that donor-restricted gifts, like bequests or stock donations, can be powerful tools. But there’s hesitation. Are we ready for that kind of gift? Would a donor even consider it?
Here’s the truth: it’s much easier for donors to give to something that already exists.
When you’ve taken the step to establish a board-designated endowment, even with a small balance, you’re no longer talking in theory. You have a real fund. You’ve shown that your board is behind it. You’ve demonstrated that you’re serious about long-term planning. That creates clarity and confidence for your donors.
It also gives you something tangible to point to in donor conversations. Instead of saying, “We hope to build an endowment someday,” you can say, “We’ve started one, and we’d love to grow it with your help.” That shift in language can make a difference.
In our upcoming webinar, we’ll show you how to confidently communicate your endowment plans with funders and supporters, even if you’re just getting started. Sign up here.
Ready to Take the First Step?
You don’t necessarily need a major gift, a large surplus, or a perfect financial year to begin building toward long-term sustainability. A board-designated endowment gives your organization a way to start planning for the future on your terms, at your pace. It may not happen overnight, but starting small with intention can help build confidence with your board, trust with your funders, and momentum for your mission.
If you're ready to explore how this could work for your organization, we’d love for you to join us for our upcoming webinar:
How to Fund Your Endowment Without Starving Your Mission
Wednesday, August 20 at 1:00 PM ET
In just 30 minutes, we’ll walk through practical strategies on how to start adding funds to your endowment, including how to carve out funds for a board-designated endowment. So you can start building your financial future without sacrificing your present.
Register now and take the next step toward growing with intention.
