Tag Archives: major gift

Do you “get it” when it comes to wealth? Probably not.

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Let’s test your wealth instinct and find out if you “get it” or not.

Pretend that your boss comes to you and says: As you know, leadership is taking the company public next year. You can choose how you want to receive your $100,000 annual compensation from the three options below:

  1. $25,000 in cash and $75,000 worth of the company’s new stock
  2. $75,000 in cash and $25,000 worth of the company’s new stock
  3. $80,000 in cash and $0 worth of the company’s new stock

Which one do you choose?

This choice is difficult for you and me!

If the only wealth you have is cash in your bank accounts, maybe some retirement funds like a 401(k), and you are renting or own the home you live in (probably with a mortgage), your options are very limited. Could you survive on $25,000 cash for a year? You are considering the options based on your disposable income.

If you have a dual-income household, a second home, or some reasonably liquid investments that you could cash-in, all three choices might become plausible options. You have disposable income plus additional investment wealth.

I know you know that the $75,000 worth of stock could take off and double or triple in value-or even more. You want that stock!

Now, what if suddenly your parents passed away and you inherited the house they owned for 50 years, which sells for $800,000. Would that make it easier to accept $25,000 in cash with $75,000 in stock?

Of course it would!

And this is the shift in thinking that you need to make when you are researching and cultivating major gift prospects.

You do not want a cash gift.

Check out the asset allocation chart below. This chart is telling you many things, but among them is that in the first quarter of 2021, the high-net-worth individuals (HNWIs) surveyed were holding 24% of all of their wealth in cash and cash equivalents. A cash equivalent is something like a certificate of deposit (CD) or money market account–things that you can very easily turn into cash.

Source: Capgemini World Wealth Report, 2021

When you ask your donor prospect for a gift, do you want her to think:

“Gosh, they want me to give $50,000 out of my $250,000 cash. That feels a bit steep. The kids private school tuition went up a lot this year.”

Or would you rather ask for a gift of appreciated stock and have her think:

“If I give $50,000 of appreciated stock out of my $750,000 investment account, I can take a charitable gift tax deduction for the full amount and offset the capital gains taxes. I’ve always wanted to have this kind of impact on this cause.”

But you shouldn’t just believe me.

What do I know? Instead, you should believe Dr. Russell James who took the time to review a million nonprofit tax returns filed between 2010 and 2015. Numbers don’t lie. Dr. James discovered that nonprofits that received asset gifts raised more money. Check out the figure below for a snapshot of his findings.

Source: Cash is Not King in Fundraising: Results from 1 Million Nonprofit Tax Returns, Professor Russell James III, J.D., Ph.D., CFP®

Note: If you want to find whether your organization has a history of accepting asset gifts, you can check Schedule Min its public IRS Form 990.

Evaluating your donor prospects for wealth

If you want to grow your fundraising in major gifts, a key strategy is to ask for non-cash gifts. Understanding the asset allocation model from Capgemini featured above allows us to quantify this shift in thinking. We can now estimate the relative size of the cash vs. non-cash wealth held by our donor prospect.

Once you have estimated the value of the cash and non-cash wealth of your prospect, you can better understand how your prospect might view your ask amount relative to those values.

Below is an example of what this allocation looks like if we use the Capgemini asset allocation percentages on someone research has determined has an estimated net worth of $5 million.

Assets Value
Cash and Cash Equivalents $850,000
Non-Cash $4,150,000
Total $5,000,000

Imagine for a moment that you want to ask the prospect for $250,000. How does that stack up against each of the two categories, cash or non-cash?

Lean-in to the psychology of giving

Why would you want to fight against human nature and continue asking very wealthy donors for cash gifts when you could switch to asking for non-cash and raise more money overall? Lots of reasons. Maybe you feel much more comfortable asking for cash gifts.

I’m suggesting that it’s time to get comfortable with being uncomfortable.

To help you get more comfortable, check out this collection of work by Dr. James for more insights into the psychology of giving and techniques and tactics you can use in your work:

http://www.protopage.com/prospectresearch#Planned_Giving_(Dr._James)

Why Do Insiders Disclaim Beneficial Ownership?

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If you are a prospect research professional, odds are that you have searched for the beneficial ownership of securities table in a proxy filing with the SEC. But do you really know what beneficial ownership means Why do insiders sometimes disclaim the beneficial ownership they reported? Should you care? Maybe. If you have to explain it to others, such as development officers, then definitely!

The proxy (Form Def 14a) is the document a public company files each year to explain and be transparent about the securities or stock it has on offer for purchase by the public. After all, the SEC came into existence in 1933 to restore investor confidence in our capital markets after the stock market crash of 1929. From that perspective, beneficial ownership makes a little more sense.

A beneficial owner is…

  1. A person who enjoys the BENEFITS of ownership even though the stock is not directly owned in his/her name.

    For example, I may change the title of my stock to a trust, or a foundation, or an LLC, but still, maintain the benefit of ownership as a trustee or beneficiary or both.
    .
  2. A person (individually or as part of group) who has the power to vote on shares, or who wields influence over a shareholder’s vote.

Fundraising research is less concerned with whether the prospect can influence the votes of shareholders, but we do care about enjoying the BENEFITS of ownership, because this can have an impact on our prospect’s wealth picture.

James Dimon Example

Let’s look at an example: James “Jamie” Dimon is CEO of JP Morgan Chase & Co. (JPM). According to the beneficial ownership table in the proxy filed on 4/6/2020, he owns 9,538,667 shares of company stock. Or does he?

Footnote #3: Includes 115,800 shares owned by entities as to which Mr. Dimon disclaims beneficial ownership, except to the extent of his pecuniary interest therein.

If Mr. Dimon BENEFITS from those 115,800 shares, but DISCLAIMS this beneficial ownership, who might have legal and direct ownership of them?

A Form 4, Statement of Changes in Beneficial Ownership, must be filed every time an insider has a change in the number of beneficially owned shares. It often gives us greater detail on who owns exactly what shares. Could it help us with Mr. Dimon’s disclaimed, mystery 115,800 shares? Indeed, it does!

Form 4| Filing date 10/14/2020(much later than the proxy filing

Note the footnote #1 next to ownership by “LLC”? This savvy guy doesn’t want us to know the name of the LLC, just that it is an LLC.

Footnote #1 reads: Reporting person [James Dimon] disclaims beneficial ownership of such shares except to the extent of any pecuniary interest.

Mystery solved?

An LLC of undetermined name legally owns title to 143,388 shares of JP Morgan Chase & Co. stock. And Mr. Dimon DISCLAIMS that ownership, even though he is legally required to report it because he benefits from the ownership.

Translation / Interpretation

In Mr. Dimon’s example above, we are discussing fewer than 200,000 shares out of more than 9 million shares. From that perspective I care a lot less about that mystery LLC. But I have researched more than one prospect where the mystery LLC owns the lion’s share of stock. Sometimes I even know the full name of that LLC.

And too often, even knowing the company name doesn’t help.

As I have described before, someone like Mr. Dimon could be a member of an LLC in Delaware and the public (and even the Delaware Division of Corporations) wouldn’t know it!

The DISCLAIMING of beneficial ownership in Mr. Dimon’s case feels interesting because he benefits from a laundry list of indirect ownership that he does not disclaim: 401(k), family trusts, spouse, etc. Since he does indicate a pecuniary (financial) interest in the LLC shares, we might speculate that he expects to profit from whatever the mystery LLC is going to do with his shares, but that he argues that he is not influencing the investment.

Is Speculation Warranted?

Speculating is fun! And sometimes it does help to put numbers into perspective, especially if you are fussing over exactly how much and what kind of gift proposal to put together for a prospect.

Following is my completely fictional speculation about Mr. Dimon’s mystery shares as written for the prospect profile. For this fictional example, assume that I discovered the name of the LLC was MiamiBeach LLC and that I knew his daughter started a real estate venture in Miami Beach.

We know that Mr. Dimon’s 32-year-old daughter recently began a real estate venture in Miami Beach, Florida. We do not know who owns Miami Beach LLC because it was incorporated anonymously in Delaware. Since Mr. Dimon disclaims ownership of the shares owned by Miami Beach LLC, we might speculate that it is his daughter’s company, and that Mr. Dimon invested those shares in his daughter’s company, expecting a financial return.

We can speculate, be we can’t actually KNOW this to be true. The information about the true disposition of those shares is NOT available to confirm our speculation.

Be Clear. Be Firm. Have Fun!

If you are going to pick apart stock holdings and speculate, just be sure to use very clear language. Words such as the following are useful:

  • We do NOT know if this is true, but we are GUESSING based on…
  • We can NOT know who owns this company, but we SPECULATE…
  • Mr. Dimon disclaims his ownership of these shares and although we can NOT know the details of exactly who owns the shares, we SPECULATE…
  • Because this is SPECULATION, you might want to consider these shares as NOT available for gifting.

The pressure on your development officers to raise the most money possible to further your mission is real and it is powerful. If you are comfortable speculating, it can help your development officer to put the stockholdings into perspective relative to the full philanthropic and wealth picture of the prospect.

But there is a limit to what we can know. And when the prospect has deliberately placed information beyond public viewing, it is worth stating. After all, our prospects are just as entitled to their privacy as we are. To attempt to pull back the veil of privacy could be construed as disrespectful with the potential to damage the relationship.

I enjoy the tangled web of financial filings and the constant rebalancing of how exact to attempt to be when presenting the information. I hope this example made beneficial ownership just a little bit clearer.

Additional Resources

  • Want to dive in deep to insider SEC filings? Become a member and enroll in the Insider Stock and Compensation Course. >>Learn More
  • Wish you had an SEC filings reference book handy? Purchase the Insider Stock and Compensation Workbook and focus on filings and information that matters for fundraising. >>Learn More
  • Can You Really Hide LLC Ownership? You Betcha!| Jennifer Filla | 2020

Can you really hide LLC ownership? You betcha!

Research in Fundraising, ,

I was talking through a complex wealth situation with a member of the Prospect Research Institute. While the prospect was clearly wealthy, there were some transactions and entities mentioned in a public company filing that were curious. I said, “Why not look up the LLC to find the names of the members?” Wouldn’t you know… it was an LLC incorporated in Delaware.

“Sure, you have to pay for it, but the members of an LLC are public information,” I told her with certainty. So, she pursued the matter. The website told her that this information was available on the annual reports filed each year, and to obtain these documents you must call the Delaware Division of Corporations.

She called. The man who answered looked up the record and told her that the names and addresses were not on file. They would be known to the company itself (of course) and to the company that handled the registration.

What? Could this anonymity be legal?

Turns out that it is, and has been, legal to incorporate an LLC and have the owners remain 100% anonymous. “How is it accomplished?” you might ask.

I included a source below with states who do and don’t require public disclosure of LLC members, and I didn’t look into every state, but in the state of Delaware, when you form an LLC (limited liability company) there are three places where the members or managers might be listed and available to the public. However, if you authorize someone to create the LLC on your behalf, you can circumvent any public listing of the members or manager.

  1. Certificate of Formation: The person creating and filing the Certificate of Formation is the one listed in the public record. This person does not have to be the member or manager of the LLC, and Delaware does not require recording the members or managers anywhere.
  2. Registered Agent: Every incorporated entity must have a registered agent. The registered agent is the official representative of the company who can receive service of lawsuits or any other official business. It does not have to be a member or manager. The registered agent must have a contact at the LLC, but even that person does not have to be a member or manager.
  3. Franchise Tax: The owner of an LLC may elect an agent to pay the franchise tax so that there is no record of the member or manager name.

While a Delaware LLC can avoid any public listing of members or managers, this does not extend to creating a bank account. In order to prove ownership to open a bank account, the member can present an Operating Agreement for the LLC. The Operating Agreement is a legal, governing document and includes the names of the members and managers.

And while the members and managers of an LLC can remain anonymous to the public, officers and directors of corporations must be revealed when making franchise tax payments.

“U.S. Congress bans anonymous shell companies”

Tantalizingly, this headline appeared on Reuters.com just as the Institute member and I were investigating Delaware LLCs.

Could this be the end of anonymity? …not so fast!

Turns out that the Corporate Transparency Act passed the Senate and the House with a veto-proof, bipartisan margin in December, but it doesn’t really change anything for the general public.

According to the FACT Coalition, “The Corporate Transparency Act takes the simple, yet effective step to require corporations and limited liability companies (LLCs) to disclose to law enforcement and others with legally mandated anti-money laundering responsibilities (e.g. financial institutions) information on who is the real, natural person (a.k.a. beneficial owner) who owns and controls an entity at the point of formation and update such information upon any change.”

There are many reasons why the individuals behind an LLC might want to remain anonymous. Most often in the field of fundraising I hear people describe how donors are “hiding their wealth.” This has a negative connotation, and I would encourage you to consider and speak publicly in a way that recognizes that there are other reasons for being anonymous.

To name a few: family drama; competitive edge; and people who are private in every way, not just money.

And yet, there is at least one trick to finding those elusive LLC member owners. If the LLC is incorporated in Delaware – has a domestic incorporation record in Delaware – but is doing business in another state that does NOT allow anonymity, you might find the member names in a required foreign incorporation filing.

Of course, as prospect research professionals we like to be able to assemble as many of the facts as reasonably possible, but we know that the best information is going to come directly from the donor prospect.

Hopefully, this micro investigation into Delaware LLCs helps save you time by knowing whether you might be able to find owner member names… or not!

Wish you could be a member of the Prospect Research Institute, chasing questions down rabbit holes? You can! Become a member today!

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Additional Resources

The Path(s) to Major Gift Fundraising

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The Path(s) to Major Gift FundraisingI will admit to being fascinated by, if not obsessed with, the path that leads to a major gift program for smaller nonprofits. What I hear and read about the most are large nonprofits, most of which are in higher education.

This frustrates me. It’s akin to walking into retail stores only to find nearly everything is focused on the top 1% ultra-high-net-worth individual. What about the rest of us 99%?

With the cost of research tools going down and their quality and usefulness going up, the world of major gifts is beginning to tempt the masses of nonprofits serving our communities. Whether it’s a wealth screening, look-up tool, or a database with CRM capabilities and built-in ratings, the small nonprofit can see those major gifts on the horizon.

But what is the path between starting and arriving in a major gift program?

Assuredly there is no single path to a major gift program, but research can provide illumination along the way. Over the past couple of years my consulting practice has become more focused on helping the smaller nonprofit – inside AND outside of a campaign.

The first step to major gifts is having a development officer who embodies relationship fundraising and has experience asking and receiving large gifts. Previous experience where there was access to and good use of research means things will move along much faster.

Start with the Data

The foundation of a sustainable major gift effort, whether that is larger annual solicitations or multi-year leadership gift opportunities, is good data practices. It really doesn’t matter how big or how small the development shop, without good data practices there is no sustainable progress.

Sometimes organizations are ambitious and reach out to hire a prospect research professional hoping that by using research early they will get a head start. But once hired they discover that the researcher must spend the first year or so doing nothing but getting the data practices in order. This can be very frustrating for both parties!

A well-run development office demands good data. Gifts are properly recorded, acknowledged, and thanked. Direct appeals are regularly mailed and emailed. Sponsors and guests are invited to a signature event. Grants are tracked and program results reported. Volunteers are tracked and supported.

Leverage the Data

Once you have good data practices, you can avail yourself of affordable research technologies such as wealth screenings. For quite a while now I’ve been helping nonprofits with wealth screenings in two primary ways:

  1. Screening the active donor base to assess fundraising potential for goal-setting and to prioritize the best prospects.

Many times I get called on by a fundraiser who has taken on a new development officer position. She wants to really organize and grow the nonprofit’s fundraising and puts a high priority on relationship-building with the best donors and prospects.

But working through the screening process is a big distraction. I help her get the screening results and understand the picture painted by those results. We walk through what kind of fundraising potential is there and how she can most effectively apply the results to her existing fundraising program.

  1. Screening all or a portion of the database and verifying the top-rated to identify major gift prospects.

Outside of a campaign, most often I do screenings and verification for newly hired fundraisers who are dedicated full or part-time to raising major gifts. The record count is manageable and I deliver new names monthly while reviewing past outreach.

With a skilled relationship-based fundraiser, this kind of project yields exciting results! Donor connections are made on many levels with leadership, board members, and staff. It’s an intense period of time, but once the list has been worked through I’m usually finished. Strong fundraising results mean staff is often added to assume some research duties.

Create New Procedures

With good data underpinning fundraising efforts, most organizations benefit next from slightly more formalized procedures. For most of the nonprofits I work with, even with some impressive total fundraised dollars each year, they are operating with skeleton staffing and very limited external resources.

Working with nonprofits to develop new procedures is one of my favorite activities. It’s a messy business as they try to figure out how to make things work best inside their organization and also with their constituents. I like to stick with them as they begin really calling on and building relationships with donors and prospects.

We work out what a good prospect looks like, talks like, is motivated by, and where a good prospect engages with the organization. Then I get to translate that into replicable procedures. I outline the way we used multiple data points to segment donors. I document how decisions were made about prospect assignments. And I offer advice and resources whenever appropriate.

Slowly a major gift program takes shape and begins performing.

Inform Cultivation and Solicitation Strategies

By far my favorite activity is researching prospects and having strategy conversations with the development officer. The bigger the gift opportunity and the deeper the research the more fun it is.

Doing this kind of work is like taking a tangled mess of jewelry and carefully and methodically unraveling it and polishing it until a glinting, sparkling necklace is revealed in all its glory!

This is the work and these are the conversations that can’t be completed by algorithm or otherwise mass produced. It’s wonderfully and deeply personal for the development officer, the organization, and most of all, for the donor prospect.

Sometimes the development officer might be intimidated by the prospect, and I can offer validation, encouragement, and confidence. Sometimes the development officer is optimistic and ambitious, and I can offer grounding and multiple scenarios – just in case the biggest number isn’t possible.

It All Starts with a Relationship

Prospect research has been a good career fit for me. There is a wide variety of tasks to perform and being methodical and analytical just makes me happy. But understanding the importance and practice of relationship-building has come more slowly to me.

After being a research consultant for over a decade, I incorporate the tenets of relationship-building into my research approach to the best of my abilities. I have also learned to recognize development professionals and organizations that value relationship-building and those that don’t. These days, I only work with the former.

There are many paths to a sustainable major gift program, but every one of them requires a skilled relationship-builder.

Additional Resources

Not asking for Millions? Why should you care about HNWIs?

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NOT ASKING FOR MILLIONS? WHY SHOULD YOU CARE ABOUT HNWIS?I get it. Your organization is not going to ask for millions even if the prospect could give millions, so why should you spend your limited emotional energy trying to understand HNWIs (high net worth individuals) and global wealth trends? The clear majority of nonprofit organizations in the U.S., around 80%, have operating budgets of $1 million or less.

Nevertheless, there are three very good reasons why you should care.

1-Mission

I’ve been a consultant for over a decade and no matter what the mission, every organization is sure that fundraisers with a different mission – children, animals, environment – have it easier. That somehow someone else’s mission is easier to raise money for. The truth is that every mission has passionate donors, but it takes careful, skilled fundraisers to understand the donor base and position the messaging and gift opportunities to match.

Sure, you might not have the budget or opportunities to attract million dollar gifts now, but isn’t your mission worthy of receiving million dollar gifts? Aren’t you working together with leadership to grow your organization’s impact?

If you don’t know anything about HNWIs how could you possibly position your organization’s messaging and gift opportunities to grow into million dollar giving?

2-Career Growth

Especially if you are working for a small nonprofit on a thin budget, you need to be in command of your career training. With rampant content marketing your free learning choices can be a bit overwhelming. You’re reading this blog post so I know you care about sharpening and growing your skills. The next step is to find and manage learning sources that are related, but outside the boundaries of fundraising.

Local and global economics, including HNWIs should be on your list. Following are three really good (and very readable) resources with a hot tip from each:

Capgemini World Wealth Report

Besides having a fun-to-navigate website that lets you dig in to the data, you can download the report to take advantage of the table of contents and the executive summary. But it’s the attractive charts on pages 17-19 that I want to highlight for you here.

Figure9-CapgeminiWWR-2018

For the HNWIs that participated in this study in North America, 12.4% of their wealth is held in real estate. This percentage is excluding the primary residence, which is helpful because individuals who own multiple properties are more likely to be HNW. We don’t want to use our “back of the envelope” calculations on just anyone – only those that have investable assets of at least $1 million.

So, if you have someone who has multiple properties you can now perform some eye-opening “back of the envelope” calculations:

Real Estate ÷ 0.124 = Estimated Net Worth
Estimated Net Worth x 0.05 = Low Gift Capacity
Estimated Net Worth x 0.10 = High Gift Capacity

The New York Times – How to Get the Wealthy to Donate

Did you miss this article on “How to Get the Wealthy to Donate?” Did you hear about the underlying scientific research anywhere else? If not, you may find yourself frustrated and unhappy with the results of your conversations with HNWIs. It is squarely on your shoulders to understand and relate to donor prospects – in situ!

In this consumer-friendly world of content marketing, you don’t have to have a subscription to benefit from great resources like The New York Times. You can usually find a free e-newsletter or mobile app that will tease you with headlines. My favorite way of keeping up with multiple resources like this is to create a Twitter stream in Hootsuite of various topic lists I create from Twitter accounts that I follow.

Indiana University Lilly Family School of Philanthropy – Current Research

At Indiana University’s School of Philanthropy, the list of research projects creates a wonderful feeling of abundance! From Giving USA to the Study of High Net Worth Philanthropy to Women Give you can’t go astray.

“Nonprofit boards that include a higher percentage of women tend to have board members who participate more in fundraising and advocacy. Members of these boards also tend to be more involved in the board’s work, new research shows.” –Indiana University

The next time you attend a strategic planning session or any other leadership meeting, you now have scientific research at your fingertips to help your organization continue to grow and expand its reach.

3-Success = Preparation x Opportunity

Notice how I changed the formula adage slightly from “Preparation plus Opportunity” to “Preparation multiplied by Opportunity”? I wanted to emphasize how rare and transformative Opportunity is in this world. According to the Urban Institute, as of December 2016, there were more than 1.2 million public charities and private foundations in the United States. That is a lot of noise! How will donors and prospects hear you?

When opportunity does come, will you recognize it?
Are you prepared to seize it?

If you wanted to compete and win at the Olympics, would you wait until you passed initial qualifying tests before hiring a coach? No way! You would have had a coach from when you were a mere tot expressing interest. Don’t wait to get a fundraising mentor or coach. Regularly consume information about communicating with all kinds of people, including HNWIs.

Sales training abounds and one of my favorite resources is Sandler Sales. They have great white papers, articles, and newsletters. Do you have any kind of commute to the office? Visit www.sandler.com or search on iTunes to find their “How To Succeed” podcast, which is about 15 minutes per episode.

One of their recent episodes was how to make “touch calls.” This translates easily to fundraising! After all, we want to retain our donors and becoming more systematic about it is part of the preparation that leads to success. In the episode there is a reference to the DiSC profile and how each client personality is likely to respond to your call, which you might decide to investigate further.

You can create a personalized coaching team by pulling together key resources, like a podcast, and having the discipline to schedule time every day to learn.

Why am I focusing on Wealth instead of Philanthropy?

It is easy to argue that if you needed to focus on only one thing, it should be philanthropy first. After all, a person can have great wealth and refuse to part with a penny. Hands down, if you are in a smaller nonprofit, focusing on philanthropy first is a winning strategy. I’m not suggesting otherwise.

What I am suggesting is that it is important to focus on philanthropy with wealth. Your organization needs dollars and is worthy of money to pay the electric bill, hire competent staff, and deliver programs that are making our world a better place.

It’s important for all of us to assess our feelings about money and any bias we may have about wealth accumulation so that we don’t neglect our education and skill building around philanthropy with wealth.

Additional Resources

After the Wealth Screening: Taking a New Direction

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Higher education and healthcare dominate the field of prospect research – and for good reason. They have income well above the funds they raise and these big budgets attract correspondingly big gifts. But those industries no longer dominate wealth/prospect screenings. Or at least, they don’t have to.

Prospect research tools such as wealth screenings have become affordable and accessible to the vast number of smaller budget (but not necessarily small) nonprofit organizations serving our communities, nationally and internationally. As I work with three intrepid beta testers in the new Essentials for Successful Fundraising Research course, it’s becoming clear that prospect research is changing shape and diversifying.

We can and should start talking about screenings differently.

It’s about time we recognize that one size does not fit all and the methods and practices of higher education and healthcare do not serve the majority of nonprofit organizations.

Misdirection #1:  Screening results should always be verified before being disseminated to development officers.

The very nature of the constituent records for the majority of nonprofits in the U.S. screams against this guidance. A local food bank has a much different relationship with its constituents than a university or hospital – and usually many fewer constituents overall. They may be attracting more people with mid-level income levels (net worth below $1M), who are local, and who may be very receptive to a phone call.

Screening information combined with a development officer’s knowledge of the community is frequently enough to start making phone calls. The development assistant or prospect researcher, if there is one, can help by looking up contact information as needed and making suggestions about what internal data pieces could be combined with the screening ratings to better prioritize the list.

Misdirection #2: Wealth screenings benefit major gift initiatives the most.

Smaller nonprofits usually know the wealthy people in their community. There might be a few hidden gems in their donor files, especially if the nonprofit is reaching a national audience through social media, but the real value in screenings is often the way the ratings can be used to improve the performance of nearly every fundraising activity.

When development staff numbers from one to ten, everyone in the office multi-tasks, so why should your screening results behave any differently? Your best donors are probably involved with your organization in multiple ways: volunteering, sponsoring, giving, and serving in leadership roles. Your screening ratings can help make your efforts more efficient.

For example, if you can only make phone calls to 50 or so people for a special campaign, or if you need to call people who haven’t RSVP’d for a big event, now you can go beyond past giving and also look at capacity to make a gift. You almost can’t help but raise more money by adding additional filters or prioritization to your efforts!

Misdirection #3: The more in the results file, the better.

A recent conversation with a screening vendor made me examine my own bias about the deliverables for smaller organizations. Overworked and underpaid development professionals take one look at that impenetrable spreadsheet or overwhelming software interface and go hemming and hawing into complete inaction. There is only so much the human brain can absorb in any one day, month, or year.

There are key data points in every screening that are very valuable. The various ratings are top among those. So why are they often buried? Why can’t you get more than one file from your vendor? How about a simple one for import and a more complicated one for your development assistant or prospect researcher to dig into?

If you can identify the key data points from the results and get those imported into your database – well, that’s the only way you are really going to be able to use the screening to improve your fundraising results overall.

Want to get the most bang for your buck out of screenings? Communicate!

Your screening vendors are nimble and eager to hear and listen to how their product could make you more successful. Tell them you want to import the ratings but don’t have dedicated IT staff – can they help? Tell them you need to start making phone calls immediately – can they give you a simple file you can work from?

Even better, your vendor likely has worked with many organizations just like yours. Do they have any success stories to share? Any innovative uses for the screening data? Any common pitfalls to avoid?

Where is Prospect Research in all of this?

Of the three participants in the Essentials for Successful Fundraising Research course, only one has “research” in his title. Nevertheless, these are the intelligent, resourceful individuals tasked with finding and understanding the data. Their organizations are going to have capital campaigns and all sorts of other fundraising initiatives no matter what title they give to these intrepid data explorers.

As part of their training, I created an “After the Screening”reference sheet that you can find in the Prospect Research Institute’s learning community. The reference sheet represents the beginning of the conversation. Once you’ve taken a look, hop into the Everything Prospect Research forum and let me know what you think about it!

Additional Resources

Lowering the Prospect-to-Donor Ratio

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Do you dream of creating the perfect prospecting system? A system so flawless that the ratio of prospects to donors drops to 2:1 or even (gasp) 1:1? I do! And yet, barring advances in ESP, a 1:1 ratio feels quite out of reach. We simply don’t have access to people’s complex, internal motivations for giving until they get visited and share. Even so, we still have plenty of room to achieve better prospect-to-donor ratios.

Interview with a Donor

I had the joy of interviewing Tim Horton, a venture capitalist for the Prospect Research Institute’s #ChatBytes podcast. About halfway through the interview he shared some of his philanthropic motivations with me.
  • Childhood sentiment – He gave to the March of Dimes as a child and still gives.
  • Family culture of giving – He was taught to give while young and now gives his time and money to mentor youth.
  • Political passions – He feels strongly that Africa has been left out of the capitalist economy and wants to remedy this.

Mr. Horton is a very private person and his giving is anonymous. If you research him you will find all of the usual public information, especially businesses where he is a listed officer. Isn’t it natural for us fundraising researchers to consider that given his venture capital history he might view his giving as an investment or wish to be involved in giving to entrepreneurial issues or causes? And yet, if we deduced his giving motivations from the data collected we would be all wrong.

Insights and Integration

Whether we are sourcing a fresh list of prospects or taking a deeper dive to qualify already identified prospects, achieving a lower prospect-to-donor ratio requires insights and integration.
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As an instructor at the Prospect Research Institute I have introduced “insights” as a capstone project in any course where it makes sense – because crafting insights takes practice. Usually we researchers are happy to craft insights from community involvement information. We can look at patterns of giving, nonprofit board service, and family foundation histories and provide suggestions about where and how a prospective donor might want to make a gift. But we often stumble over providing insights from wealth information.
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And yet, wealth information is where we researchers can really shine a light in the darkness! When we begin to learn and imagine how wealth and assets could affect a prospective donor’s ability to make a major or transformational gift we offer a tremendous service to the gift officer. Suddenly the multi-millionaire with 85% of her wealth tied up in her business becomes recognized for life stage and likely liquidity, opening up a long-term relationship that yields some major gifts now and an eight or nine-figure gift fifteen years later.
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So if your gift officer comes to you asking for estimated net worth or a liquidity percentage on his prospect’s wealth, take a deep breath and resist the urge to say that it isn’t possible. Instead consider this the perfect opportunity to integrate prospect research into front-line fundraising. Open the conversation. Discuss how we collect wealth information and how we might better inform the gift officer. Look to other fields, such as financial services, to find out how they evaluate liquidity or other facets of wealth. And provide those insights in some evolving format.
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Because once you become part of the team conversation around how a prospective donor’s wealth impacts ability and motivation for giving, you are providing the kind of insights your team desperately needs to bring the prospect-to-donor ratio down and to build deeper and more respectful relationships with constituents. You begin to drop the “cost center” designation and become integrated with the “revenue center” designation.
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And even better, you get to learn. You get to hear what happened after that visit. You get to find out how right or wrong your guesses were and speculate with the team on why that might be. You get to discover great new ideas on how to perform even better in the future.
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It’s time to step-up and lean-in to a new relationship with your data, your fundraising team, and your profession. It will take some practice, and perhaps a few mistakes along the way, but you’ve got this!

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Can You Trust Gift Capacity Ratings? 5 Things Fundraisers Should Know

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capacityGift capacity ratings were a marketing moment for wealth screening companies. Suddenly thousands of records could be matched individually to wealth records and assigned a score. Your constituents could be assessed by their potential capacity – in the form of dollars. And everybody loves money. Have gift capacity ratings lived up to the hype? Yes!
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With the sophistication of fundraising analytics we now have ever more ways to evaluate our prospect portfolios, but gift capacity ratings remain an important tool for the fundraiser. To get the most out of your gift capacity ratings, following are five things you should know.
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1. Prioritizing your prospect pool saves you from yourself.

We are all human and that means we prefer to call upon and visit people we like – people who are more like us. Unless you are a major gift donor yourself, your prospects are not like you. Assigning numbers, gift capacity ratings, to your prospect pool helps you overcome your natural tendencies and allocate your time based upon the impact someone can have on your organization.

You will spend as much (or more) time on someone who can give $10,000 as someone who can give $100,000 or $1 million. If you want to excel in major gifts, capacity ratings will help you focus.

2. Ratings and scores are never exact unless it’s the Olympics.

Gift capacity ratings don’t have decimal points! Or at least they shouldn’t. Typically a gift capacity is expressed as a range, such as $250,000 to $499,999. The range should clue you in that this is not an exact science. The goal is NOT to pinpoint a solicitation amount. The goal is to categorize your prospects by their capacity or ability to give.
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A successful solicitation strategy requires much more than a gift capacity rating. A $1 million+ capacity rating is exciting … until you visit and discover he believes philanthropy is bad for the economy. A $1 million+ capacity rating is exciting … until you discover she has been harboring fantasies of making a transformational gift to your cause. Then it’s a DREAM COME TRUE!

3. You must know your prospect types.

You and your prospect research professional are not usually high-net-worth-individuals (HNWIs). You are not usually doctors, lawyers, or investment bankers either. Recognizing and being able to categorize how different prospect types accumulate, manage, and give away their wealth is for you and your researcher to discover together.

Know that HNWIs are generally UNDER-valued by gift capacity ratings. The more wealth there is, the more likely that wealth is hidden from view. Prospects outside the U.S. frequently have wealth indicators that can’t be assigned a number.

4. Not knowing produces anxiety. Embrace the unknown.

Before you get frustrated with how little we can really know about the prospects we want the most – HNWIs – remember that gift capacity ratings were never meant to be the final word. As you evaluate your prospect pool by its capacity ratings and any other tools available to you, embrace what you don’t know.

Create a checklist of what clues you in to prospects of great wealth. Use this to create a strategy for your discovery and cultivation visits. Use what you don’t know as a roadmap to discover your prospect. If you know a fundraiser that came of age pre-internet, find out how s/he prepares for visits!

5. Your researcher is your best ally.

Prospect research professionals have as much fear of ambiguity as gift officers. Calculating capacity ratings fills us with anxiety and angst! This is also to your advantage. Engaging your researcher in conversations about gift capacity ratings, wealth indicators, and what you might discover in your visits will only make you both better in your professions.

Some of my best conversations have been with confident fundraisers who wanted to better understand how I arrived at a gift capacity rating or how a particular type of wealth factored in to the prospect’s ability to give. Prospect research professionals want the donor to give a major gift, too!

Gift capacity ratings are not going anywhere anytime soon. Learning to use them to your advantage will help you achieve success as a fundraiser.

Do you have advice for others on pitfalls to avoid, or tips on how best to use gift capacity ratings? I hope you’ll share!

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4 Tips for Finding Major Donors for Your Next Capital Campaign

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Guest Post by Ryan Woroniecki, Vice President of Strategic Partnerships at DonorSearch

Before we dive headfirst into tips for finding major donors for a capital campaign, let’s briefly back up and discuss capital campaigns on the whole.

On a very general level, “A capital campaign is a combination of fundraising and outreach strategies that is designed to raise money for a specific need.”

On a more practical and concrete level, capital campaigns are most commonly associated with funding such projects as:

  • Building renovations
  • Purchasing pricey equipment and/or supplies
  • Acquiring new land
  • Fresh construction
  • Adding to an endowment
  • And other similar, large-scale endeavors

Needless to say, you can’t really think about organizing a capital campaign without having a strong system in place for securing major gifts. And that’s when you need prospect research.

This site is already brimming with excellent information about prospect research, so we’re not going to retread well-covered territory here.

Instead, we’re going to propose four key tips to help your organization find and cultivate major donors for your next capital campaign.

The four tips are as follows:

  1. Look to your annual fund.
  2. Reach out to your feasibility study participants.
  3. Seek out donors whose interests align with your campaign.
  4. Come up with creative ways of engaging your candidates.

Let’s get started.

1. Look to your annual fund.

DS_Aspire_Look to your annual fund

For the first point on this list, we’re going back to the basics.

We know that past giving is the greatest indicator of future giving. In fact, DonorSearch’s research found that a donor who has made a gift between $5k-$10k to a nonprofit organization is 5 times as likely to donate in the future as an average person is.

That correlation trickles down to donors of all giving levels, including your annual fund.

As you embark on your campaign’s quiet phase and attempt to secure roughly 70% of your goal before going public with your efforts, you should start your search by looking inwards. The proof is in the data.

Loyal, annual fund donors might be just the prospects you’re looking for. Cross-reference your list of annual fund donors with databases that can clue you in on donor wealth, and you could discover that some of your best major giving candidates were right under your nose.

For instance, someone who donates $500 regularly to your cause might have donated $5,000 to a political campaign. You won’t know until you look.

And once you find those donors, you can leverage the momentum behind your capital campaign’s timeline to encourage them to make those kinds of contributions towards your organization.

2. Reach out to your feasibility study participants.

DS_Aspire_Reach out to your feasibility study participants

A feasibility study is performed prior to an organization ever launching a capital campaign. During the study, the nonprofit surveys a group of around 40 community members to test the interest in and likelihood of success of their possible capital campaign.

What does this have to do with major donors?

A portion of the people you’ll be surveying for your feasibility study will be major giving prospects.

After the report is complete and you’ve decided to move forward with your campaign, consider reaching out to the study participants who:

  • Had a positive reaction to your campaign.
  • Are high-quality prospects.

In order to sift through the group and figure out whom your major gift officers should reach out to:

  • Perform a screening of your participants.
  • Find out who meets the wealth and affinity requirements.
  • Complete prospect profiles on those donors.
  • Pass the information along to the right fundraisers.

The donors on that list will have already given you affirmative feedback; don’t let their enthusiasm go unchanneled.

3. Seek out donors whose interests align with your campaign.

DS_Aspire_Seek out donors whose interests align with your campaign

One of the biggest benefits of fundraising for a capital campaign is that you are fundraising for a very specific purpose.

That specificity can make a huge difference in your ability to sway donors to contribute.

Take stock of your major donors and prospects. Then, use the information you’ve collected about them to segment them into groups that would or wouldn’t be interested in supporting your capital campaign’s particular cause.

Once you’ve done that, solicit major gifts from those who are most likely to be open to contributing to your campaign.

There are two benefits to this kind of selective segmentation:

  1. You’re making better use of the limited time and resources of your major gifts team.
  2. You’re offering support opportunities to those who are most likely to want to hear about them.

If you study your donor data with an eye for past giving patterns such as:

  • Frequency of giving
  • Average gift size
  • Common reason for giving
  • And so on

You’ll be able to piece together a solid list of prospects for your capital campaign’s major gift efforts.

Just remember, in order for this kind of selection to work, your prospect profiles are going to have to be top notch!

4. Come up with creative ways of engaging your candidates.

DS_Aspire_Come up with creative ways of engaging your candidates

The truth of the matter is, even when you find major giving prospects for your capital campaign, you’ll then have the challenge of cultivating and soliciting them.

You should certainly employ the standard solicitation best practices, but, as well all know, you really need to go the extra mile when it comes to major donors.

Especially with a capital campaign, where you’re under a strict timeline and chasing a firm goal, major gift solicitation is of the utmost importance.

That’s why this last tip emphasizes the need to find inventive ways of engaging your major donors.

What qualifies as creative is in the eye of the beholder, but suggestions include:

  • Asking your major donors to volunteer.
  • Seeing if they’re open to advocating for your cause.
  • Inviting them to special events.
  • And generally, any step you can take to make their time with your organization more meaningful.

When you go out of your way to engage with your major donors in a manner that other nonprofits aren’t taking the time to do, you set your capital campaign apart from the crowd.

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Capital campaigns take careful planning and a strong focus on the future. And your capital campaign simply won’t survive without a strong major gift showing during the quiet phase.

Take these tips, mix them with the ideas you’re already using, and go forth to secure that 70% of your fundraising total!

About the Author

ryanRyan Woroniecki is the Vice President of Strategic Partnerships at DonorSearch, a prospect research, screening, and analytics company that focuses on proven philanthropy. He has worked with hundreds of nonprofits and is a member of APRA-MD. When he isn’t working, he is an avid kickball player.

 

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3 Steps To Social Media Major Gift Prowess

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Were you aware that social media is a competitive edge in major gift fundraising? You must have heard by now how organizations are leveraging giving days and crowdfunding as well as incorporating social media into annual fund drives – but what about major gifts?

As a fundraiser who asks wealthy individuals to make gifts to your organization, deliberate and professional use of social media will not only separate you from the pack, it could put you in league with your prospects. It’s time to own your participation in social media!

Start with Prospect Research

If you have a prospect research professional on staff, it’s time to have a talk about social media. Agree on the social media sites you want to know about and ask your researcher if channel participation and user ID can be added to the profile, or better yet, put into a database field that can be pulled into a report.

prospect-research-perspectives

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To get on the same page with your colleagues, you could order copies of the Prospect Research Perspectives: On Social Media and have informal discussions about articles over lunch or coffee.

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Every organization has a unique constituency. Global and national statistics on social media use may or may not apply to your donors. As your prospects get researched, you will begin to see which social media channels are preferred.

Audit Your Personal Social Media Presence

You are probably on social media already. It’s time to audit your presence. Accept that there is no privacy online, no matter how diligent you are with your privacy settings. Decide how you want to be perceived – what your personal brand is – and make that uniform across every platform from LinkedIn to Facebook and beyond. Don’t underestimate the power of a professional head shot.

Consider what would happen if a seven-figure prospect invited you to connect on Facebook. What will your Facebook presence communicate to the prospect? You should also expect that prospects will explore your work history in places like LinkedIn.

You can get ahead of the requests and craft an action plan that will best demonstrate your personal brand and interests and your organization’s brand and giving priorities.

What does that mean? Take one channel at a time. Following are two easily accomplished examples that demonstrate channel-appropriate activity:

  • LinkedIn: Liz picks two days a week when she catches up on industry reading, posts about something she has read, and links to the article or commentary. Whenever she learns new information about a giving priority, she shares the related press release, video, or other content. She decides to write a short article this year about integrity in major gift fundraising to post on Pulse and have it show on her profile page.
  • Facebook: Liz uses Facebook to connect with friends and family, but colleagues and donors have requested to friend her. She’s a foodie and a country music fan so she decides that each time she goes out to eat or hear music she will find something unusual about the experience to share on Facebook. She also shares related articles, videos, and pictures on those topics. She still shares things like family and vacation items, but she’s careful not to share deeply personal information, saving that for offline. She posts occasional pictures from work events and office fun, too.

Now Get Your Edge On!

Once you know which social media channels have a critical mass of your prospects and donors, make sure you have an account on those social media sites. You can’t be everywhere, so choose carefully based on the data.

Now you are poised to use social media for cultivation. Many fundraisers successfully reach prospects through LinkedIn, but you could do much more.

When you discover a prospect is very active on one or more social media channels, connect with him or her there and regularly post content that is of interest to the prospect, as well as engage the prospect by sharing his or her content and making comments. This builds trust and rapport through genuine interactions – and all from your laptop, tablet, or smart phone.

Social media isn’t the way to reach out to every prospect, but if you polish your online brand and use prospect research to guide your social media activity you can sharpen your major gift edge.