Using research to inform ask amounts is an essential part of major gifts preparation say Conor McCarthy, Molly Masiello and Charlotte Grimshaw in this extract from FR&C’s new book, Understanding Major Donors – A Guide to Prospect Research for Australian Fundraisers.
Major gift philanthropy is on the increase in Australia: both the size of the largest individual gifts and the amounts raised by specific campaigns have broken records in recent years.
Getting a good understanding of your prospective major donors is about examining the wider picture of giving in Australia as well as about specific research related to the individual.
With this in mind, in the extract below we look at some of the different figures available on individual giving in Australia, and how they might help us to answer that most difficult of questions for fundraisers: “How much should I ask for?”:
The Australian Centre for Philanthropy and Nonprofit Studies at QUT produces an annual report on individual donations claimed for tax purposes. Looking at these figures can help you understand how much Australian donors, in various categories, really give to not-for-profits (see Table 5, showing donations by income band for 2012 to 2013).
While the definition of a major gift will vary from one organisation to another, what this table shows is that, if your definition of a major gift is, say, $10,000 in a single gift, your prospective donor will likely need gross income of at least $500,000 to give in this category. Even those donors earning $500,000 plus give less than this on average, and average giving exceeds 1% of taxable income only when income exceeds $1 million.
Table 6 (not available in the current iterations of the QUT study) shows what percentage of their income taxpayers gave in 2009 to 2010. As we might expect, most donating taxpayers (2.45 million) give in the lowest category, and generally, the trend in this table is for fewer and fewer taxpayers to give as the percentage of income given goes up.
But there are two exceptions:
- At the 1-2% point, the number of taxpayers and amount given increases rather than declines. More donating taxpayers give in this category than in any other area except those giving under 0.25%.
- The downward trend continues until we reach the 10% plus category where, again, the number of taxpayers and amount given increases, this time very substantially. Here we see that a tiny number of taxpayers (47,000 or around 0.1% of all donating taxpayers) give more than 10% of their income, but in dollar terms, this small group was responsible for more than 25% of all individual donations in 2011 to 2012 ($606 million of $2.24 billion in total).
So what can we learn from this data?
Some key points:
- most individuals who donate give a very small percentage of income
- however, significant numbers of taxpayers give 1-2% of their income
- a very small number of people give at 10% plus of their income: this small group accounts for a huge percentage of dollars given
- the average gift for individuals earning under $500,000 gross income is under $5,000
- average giving exceeds 1% of taxable income only when income exceeds $1 million.
How much should we ask for?
There is no straightforward formula for an ask amount, though we might note that on the basis of tax data discussed earlier, 1-2% of gross income does seem a potential comfort zone for Australian donors who are reasonably philanthropic – though there are also donors who give 10% or more of gross income.
There are four major factors to take into account:
Wealth What do you know about the donor's income and assets, distinguishing between the two?
Giving What is their previous giving, to your organisation and elsewhere? Do they have a Private Ancillary Fund (PAF)? If so, do you know what the corpus and annual distributions are?
Timing Is this a particularly good or bad time to ask? Has the donor made a large gift elsewhere? Are they in the middle of getting divorced? Have they just sold their business? Or is their wealth largely in shares that have declined substantially in recent months? Factors like these can make a big difference to someone's immediate ability and willingness to give.
Project How much do you need to fund your project? Is this donor potentially funding all of it? If not, where is the other funding coming from? Is this a project the prospect is particularly passionate about, enabling you to make a higher ask than you might do otherwise?
There are instances where formulating an ask amount might be easy. If you need $10,000 for a project, and the donor has previously made gifts of $10,000, to your organisation or elsewhere, then you can ask for $10,000.
If you need $1 million, the donor is an ultra-high-net-worth individual and it is a cause they are particularly passionate about, then even in the absence of previous giving, if the ask is approached correctly, you might ask for $1 million. You may or may not be successful – it is unusual for someone’s first gift to be a large one – but it is not an irresponsible ask if you know the particular project is important to them.
If, however, you are approaching someone who is not a current donor, but has a PAF worth $1 million, distributing $10,000 per annum to 10 charities on a regular year-in, year-out basis, and you need $50,000, that may not be the right ask. Here, you may persuade the donor, who has clearly planned their philanthropy, to divert one of their $10,000 per annum tranches to your organisation, but it is very unlikely that they will move half of their philanthropic support to your organisation, dropping five other causes.
In this situation, you might think about:
- whether you can take a five-year pledge at $10,000 per annum to reach the $50,000
- whether you have other potential supporters if you asked this donor for $10,000
- whether this donor might support the cause from other funds outside their PAF (and whether they have done this previously for other projects).
These examples are not, of course, in any way comprehensive.
Each ask is different, and every ask poses challenging questions. But the more you know about your potential donors, through research and through direct conversation, the better placed you are to answer those questions and make the right ask.
Understanding Major Donors – A Guide to Prospect Research for Australian Fundraisers by Conor McCarthy, Molly Masiello and Charlotte Grimshaw is available priced from $30 on FR&C’s website at fundraisingresearch.com.au.
Fundraising Research & Consulting (FR&C) specialises in prospect and donor research, donor development and major gift/prospect management consultancy, and has worked with over 400 Australian clients since 2003.