In the development world, as in many other models, 10-20% of the donors are responsible for 80-90% of the donations. The trick, of course, is to find the 10-20%.
Over the past few years, we conducted back studies to identify what data identify that 10-20%. By analyzing information from over 400 non-profits covering 2 million individuals who gave over $5 billion, we’ve identified the top five markers that best predict future philanthropy. Those five markers, in order, are:
1. Previous Giving To Your Nonprofit
The old adage that your past donors are most likely to be your best donors is still true. An initial major gift can take a long time to cultivate, while someone who already supports your mission is much more likely to continue to support your mission. The best news: if you’ve been doing a good job of tracking donations, that data is free. A quick but effective way to gauge donor loyalty is to score donors on a scale of 0-100 (where 100 is best) in three areas:
- Recency (the last time someone gave to you)
- Frequency (how often someone gives to you
- Money (lifetime dollars donated).
Someone who just gave you a donation? Recency = 100. Given every year for 20 years? Frequency also = 100. Has given $10k over those 20 years? For your organization that would mean an RFM score of 300, indicating a top donor who’s extremely likely to give you a larger gift if properly approached.
2. Giving to Other Nonprofits
Despite how obvious this may sound, it is typically overlooked by most automated reviews. This is because gifts in public records do not list addresses, so it may be difficult to match donations with donors, especially for more common names. In the back-study when a gift of $5k-10k was found elsewhere, the likelihood the same individual made a known gift increased about five-fold. When a gift of $50k-100k was found, the likelihood they made a major gift elsewhere increased over 25-fold. Below is a chart to show how dramatically the likelihood increases as the large gift range grows.
3. Participation as a Foundation Trustee
Foundation trustees are statistically more philanthropic themselves than those flagged for traditional markers of wealth. Why? because foundation trustees understand the value and role of philanthropy. Foundations are organizations designed to give away money to charitable causes, and by law a charitable foundation must donate 5% of its assets to charitable causes every year. The good news: the names of foundation trustees are reported to the IRS and collected by GuideStar (and often listed on an organization’s website), which means the information is available for free.
4. Federal Political Giving
Since the Federal Elections Commission (FEC) reports all federal political giving, the data is easy to obtain and correlate with philanthropy elsewhere. Our back-testing showed:
- An individual who has made a one-time FEC gift of $250 or more comprises 6% of the country.
- An individual who has given a one-time FEC gift of $1,000 or more has done something 99.9% of the country has not.
- An individual whose life-time FEC giving is $10,000 or larger is almost undeniably wealthy.
- An individual whose life-time FEC giving is $15,000 or larger has almost undeniably made a five, six, or seven figure charitable donation. There is nearly a one to one correlation between the two markers.
When trying to determine who is a likely major gift prospect, looking at those who have been large political donors is one of the best places to start. Not only is political giving at high levels a knock-out indicator for wealth, but at the higher levels it is an incredibly predictive marker for philanthropy. In our back-study, when charitable and political giving were combined, those that had given over $2,500 total in lifetime political giving were responsible for over 54% of all philanthropy.
5. Real Estate Ownership
When an individual has $2 million or more in real estate he/she is statistically much more likely to be philanthropic. The upside is this information is freely available at any local tax assessor’s office. The downside is this information may be hard to identify in various parts of the country as record keeping may be poor. Additionally, in various parts of the country, fractional assessments are used so the value of a property may seem to be far less on paper than it is actually worth. One free site available to try and identify estimated real estate values is Zillow.com
That’s it for the top markers of philanthropy. There are lesser markers, such as business owners and SEC insiders, but those markers are far less predictive than the information listed. If you have any questions about the study or have any inquiries into the research solution proposed by DonorSearch, please don’t hesitate to reach out, [email protected].