Prospect Research: What You Don’t Know — and How It Can Hurt You

If you haven’t thoroughly researched prospective major donors before you meet with them, you might as well leave a wad of cash on the table when you walk out the door.

August 2007 By Margaret King

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To create profiles, researchers should only use publicly available information and follow the codes of ethics of both the Association of Fundraising Professionals and the Association of Professional Researchers for Advancement, along with following and understanding the Donor Bill of Rights. Researchers must be sensible, prudent and, above all else, sensitive to the donor as an individual.

Now what?
So you’ve done your research and now you need to evaluate the information you found and translate it to giving capacity. There are many sources of formulas for giving capacity and net worth, and they can be found online at APRA and AFP, and in publications like The Chronicle of Philanthropy.

But the definitive source of information on wealth in the United States is the Internal Revenue Service.

In the winter 2005-2006 publication of Statistics of Income Bulletin, the IRS released its latest statistics on personal wealth. The report looks at asset composition for estates of the top wealth holders in the country and gives insight into the more than 7.4 million individuals with assets greater than $675,000. The research, based on federal estate tax returns of 2001 decedents, is consolidated in Table 1 and shows a generalized composition of assets for the top wealth holders with assets in the range of $675,000 to $20 million-plus. Real estate, including personal residence and investment property, makes up nearly 18 percent of the assets. Stocks of publicly traded companies represent about 29 percent of the asset distribution.

Using the IRS data, we can estimate a prospect’s capacity if we know his or her total assets in any one category listed in Table 1 because we know that Americans typically give about 3 percent to 5 percent of their net worth.

For example, if we know from our research that Mary Patron owns shares valued at $1.5 million of publicly traded XYZ Company, we can estimate her total assets to be about $5.15 million by dividing $1.5 million by 0.291.

This figure is just the assets, though, and doesn’t include any adjustments for debt. To give a more realistic picture, we’ll need to subtract the debt. If we subtract 8.9 percent for debt and mortgages, we can estimate her net worth to be approximately $4.7 million. From her net worth, we easily can calculate her giving capacity.

The real question
Can your organization survive without donor research? Perhaps.

But imagine meeting with a constituent and learning afterward that he is the wealthiest person in his community! Imagine the advantages of learning as much about the person as possible beforehand. Also, imagine the edge you’ll have by knowing your prospect’s true passion, which coincidently aligns with one of your institution’s strategic goals. Lastly, imagine an easier path to securing the resources needed to further your organization’s mission.

• shared values,

• prospective donors’ friends and

• associates who can help form a basis for institutional involvement.

To develop donor profiles, researchers consult biographical and general reference books, scan journals and newspapers, and search computerized databases, and unpublished public records to cull the necessary information. As I’m sure you can imagine, the Internet plays a big role in research.

With access to the Internet, we are exposed to incredible amounts of information. In fact, a Netcraft Web Server Survey concluded that there were 80 million Web sites on the Internet in April 2006 — double the number from 2003.

Sorting through the vast amount of information can make prospect research a time-consuming and labor-intensive process.

Fortunately, there are some great tools to help researchers find information in a timely manner. Using good research tools can help organize your research and reduce the amount of time you spend searching for relevant and reliable information. (Click here for some fabulous free sites, or here for a handful of great, inexpensive and moderately priced resources.)

To create profiles, researchers should only use publicly available information and follow the codes of ethics of both the Association of Fundraising Professionals and the Association of Professional Researchers for Advancement, along with following and understanding the Donor Bill of Rights. Researchers must be sensible, prudent and, above all else, sensitive to the donor as an individual.

Now what?
So you’ve done your research and now you need to evaluate the information you found and translate it to giving capacity. There are many sources of formulas for giving capacity and net worth, and they can be found online at APRA and AFP, and in publications like The Chronicle of Philanthropy.

But the definitive source of information on wealth in the United States is the Internal Revenue Service.

In the winter 2005-2006 publication of Statistics of Income Bulletin, the IRS released its latest statistics on personal wealth. The report looks at asset composition for estates of the top wealth holders in the country and gives insight into the more than 7.4 million individuals with assets greater than $675,000. The research, based on federal estate tax returns of 2001 decedents, is consolidated in Table 1 and shows a generalized composition of assets for the top wealth holders with assets in the range of $675,000 to $20 million-plus. Real estate, including personal residence and investment property, makes up nearly 18 percent of the assets. Stocks of publicly traded companies represent about 29 percent of the asset distribution.

Using the IRS data, we can estimate a prospect’s capacity if we know his or her total assets in any one category listed in Table 1 because we know that Americans typically give about 3 percent to 5 percent of their net worth.

For example, if we know from our research that Mary Patron owns shares valued at $1.5 million of publicly traded XYZ Company, we can estimate her total assets to be about $5.15 million by dividing $1.5 million by 0.291.

This figure is just the assets, though, and doesn’t include any adjustments for debt. To give a more realistic picture, we’ll need to subtract the debt. If we subtract 8.9 percent for debt and mortgages, we can estimate her net worth to be approximately $4.7 million. From her net worth, we easily can calculate her giving capacity.

The real question
Can your organization survive without donor research? Perhaps.

But imagine meeting with a constituent and learning afterward that he is the wealthiest person in his community! Imagine the advantages of learning as much about the person as possible beforehand. Also, imagine the edge you’ll have by knowing your prospect’s true passion, which coincidently aligns with one of your institution’s strategic goals. Lastly, imagine an easier path to securing the resources needed to further your organization’s mission.

Margaret King is president of the InfoRich Group.

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