Rating Potential Donors A Resource of The Osborne Group, Inc.

Ratings are Critical Capacity to give Inclination to give Readiness to say yes –Capacity and inclination are based on factual information and best practice formulas –Readiness is a judgment call (C) The Osborne Group.com 2

How Ratings Help They help you focus on the “Critical Few” – those individuals, corporations and foundations with the highest financial capacity to give Inclination ratings add another dimension – who is more likely to give Together they help you plan your work and set you up for success (C) The Osborne Group.com 3

Rating Potential Donors Capacity -- If they were so inclined, how much could they give? Inclination – How closely affiliated, interested in your work, philanthropic are they? Readiness -- How much time is needed to engage the potential donor before he or she is ready to say “yes?” to the amount and purpose that you are seeking? (C) The Osborne Group.com 4

1. Capacity

Rating for Capacity This rating is based on statistical giving trends and your knowledge of a potential donor’s income and assets (C) The Osborne Group.com 6

Giving in the US The average American gives 3% of his or her income to charity a year The average philanthropic and affluent American gives between 3% and 10% of income annually and/or 4% to 7% of net worth over one to five years The super wealthy give a smaller percentage (C) The Osborne Group.com 7

Calculating Capacity to Give Therefore, we determine capacity conservatively at 5% of salary or net worth depending on whether you are seeking an annual gift or a pledged major gift of $25,000 or more (C) The Osborne Group.com 8

Example of a Capacity Rating Mr. Smith has total wealth estimated at $5 million. To determine capacity, we estimate 5% of income and assets for a gift over 1 to 5 years. His capacity rating, therefore, is 5% of $5 million, which is $250,000 over five years or $50,000 a year. (C) The Osborne Group.com 9

Other Factors Income and assets are not the only factors we have to consider. Are the assets liquid or are they tied up in the main residence or in a venture deal or stock that cannot be sold? (C) The Osborne Group.com 10

What We Don’t Factor In When determining capacity to give we do not factor in: –How well the donor knows us, –Or, if he or she is ready to give us a gift. Those factors come into play when we’re rating for inclination and readiness. (C) The Osborne Group.com 11

Don’t Negotiate Against Yourself! “Joe, our board member says that Mary is worth at least $20,000,000. Five percent of that is $1,000,000 but she would never give us that much. So what do you think we should use for capacity to give?” –“The most she’s ever given us is $1,000 so let’s rate her at $10,000.” (C) The Osborne Group.com 12

Capacity is Not Necessarily “The Right Solicitation Amount” It is an organizing tool and one piece of the puzzle for determining the “Right Amount” to request when the time is right. NameCapacityNext Ask Amount Joe$1m$10K Mary$25k$15k (C) The Osborne Group.com 13

Capacity Ratings Should have coded dollar ranges For example, C10 = $5,000,000 to $10,000,000 C9 = $2,500,000 to $5,000,000 It’s important to code with numbers and letters so that you can sort your reports electronically (C) The Osborne Group.com 14

When We Have Partial Information In 1996 the IRS published some very helpful information. They looked at the composition of estates of $600,000 or more at the time of death (C) The Osborne Group.com 15

Composition of Estates With Assets of $600,000 Plus 1. Stock 2. Real Estate 3. Bonds 4. Retirement assets 5. Cash 6. Life insurance equity and annuities 7. Other 33% 28% 13% 12% 7% 2% 5% (C) The Osborne Group.com 16

How To Use This Information While the information is dated, And stock portfolios depend on the current state of the market, And debt is probably a larger percentage for younger people than older, These percentages can be a helpful guideline in estimating net worth when you have only partial information. (C) The Osborne Group.com 17

Calculating Wealth Using IRS Information For example, if Mr. and Mrs. Jones own a home worth $3,000,000 and that is the only information you can find. You might say, as a guideline, that their real estate is probably about 28% of their net worth, And divide $3 million by.28 to estimate their net worth at $10 million. (C) The Osborne Group.com 18

Real Estate Values These are the easiest to find Just go to For most locations you can find the value of homes in your area (C) The Osborne Group.com 19

For Example Joe and Maria own a home worth $800,000 Using a conservative 25% for the portion real estate represents, we would estimate their net worth at $3.2 million (C) The Osborne Group.com 20

“Right” Amount Capacity Liquidity Life stage Cost of “Right” PURPOSE Level of engagement and commitment to the cause (C) The Osborne Group.com 21

2. Inclination Ratings

Inclination Ratings Rationale for Individuals Is the donor philanthropic –Gives to three or more charities at leadership AF levels + ($1,000+) Affinity –User of your service, touched by your cause How many degrees of separation? –Someone you knows, knows them well? Frequency of giving to your organization –Three years or more? The more years the higher the score or frequency in one year How recent was the last gift? –Current, last year or two years ago Size of last gift –Larger than your average gift or –$1,000+ (C) The Osborne Group.com 23

Major Gift Inclination Rating * Individuals High = points Medium = points Low = points Remote = less than 4 points CriteriaPoints Philanthropy0-2 Affinity0-2 Degrees of Separation 0-2 Giving Frequency 0-2 Timing0-2 Size of Gift0-2 © The Osborne Group, Inc. 24

Planned Giving Predictor Rating * Individuals High = points Medium = points Low = less than 6 points CriteriaPoints MG Inclination Rating0-2 Problem PG can solve 2 Single/ Widowed2 No dependent children years old2 © The Osborne Group, Inc. 25

3. Readiness

Readiness is an Essential Code By when will this prospective donor say yes? Not, by when will we solicit this donor. RatingLevel Capacity$500K - $1mil InclinationMedium Readiness6-12 months © The Osborne Group, Inc. 27

Readiness One can only rate readiness by meeting with donors and asking quality, strategic questions. (C) The Osborne Group.com 28

The Readiness Pipeline F - Broad Enagement/9-12mo E - Engagement/6- 9mo D - Focused Engagement/3-6mo C - Ready to be Asked/0-3mo B - Considering/Need to Close A- Gift Closed/Stewardship © The Osborne Group, Inc. 29

G and UK Readiness Rating “G” is more than 12 months but unsure how long –In “discovery mode” and will rate for readiness after completion of discovery visit and development of an engagement strategy You might want to have a code for Don’t Know -- UK (C) The Osborne Group.com 30

Together… …these three ratings provide you with a powerful management tool. Commit to all three and manage your prospective donor pool with acumen (C) The Osborne Group.com 31

Need More Information? If you would like to learn more about rating prospective donors, research, or any other aspect of fund development, contact us at or com com (C) The Osborne Group.com 32

Feel Free to Use… This information is the copyrighted intellectual property of The Osborne Group, Inc. (TOG) –701 Westchester Avenue Suite 205W White Plains, NY It cannot be copied, sold, or given away with written permission from TOG (C) The Osborne Group.com 33