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
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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
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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?
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1. Capacity
Rating for Capacity
• This rating is
based on
statistical giving
trends and your
knowledge of a
potential
donor’s income
and assets
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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
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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
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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
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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?
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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.
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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.”
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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.
Name
Capacity
Next Ask
Amount
Joe
$1m
$10K
Mary
$25k
$15k
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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
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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
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Composition of Estates
With Assets of $600,000
Plus
1.
2.
3.
4.
5.
6.
Stock
Real Estate
Bonds
Retirement assets
Cash
Life insurance
equity and annuities
7. Other
•
•
•
•
•
•
•
(C) The Osborne Group.com
33%
28%
13%
12%
7%
2%
5%
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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
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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.
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Real Estate Values
• These are the
easiest to find
• Just go to
www.domania.com
• For most locations
you can find the
value of homes in
your area
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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
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“Right” Amount
• Capacity
• Liquidity
• Life stage
• Cost of “Right”
PURPOSE
• Level of
engagement and
commitment to
the cause
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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?
•
•
•
(C) The Osborne Group.com
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+
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Major Gift Inclination
Rating
* Individuals
• High = 10 - 12
points
• Medium = 6 - 9
points
• Low = 4 - 5
points
• Remote = less
than 4 points
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© The Osborne Group, Inc.
Criteria
Points
Philanthropy
0-2
Affinity
0-2
Degrees of
Separation
0-2
Giving
Frequency
0-2
Timing
0-2
Size of Gift
0-2
Planned Giving
Predictor Rating
* Individuals
• High = 9 - 10
points
• Medium = 6 - 8
points
• Low = less than
6 points
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© The Osborne Group, Inc.
Criteria
Points
MG Inclination Rating
0-2
Problem PG can
solve
2
Single/ Widowed
2
No dependent
children
2
55+ years old
2
3. Readiness
Readiness is an
Essential Code
• By when will this prospective donor say
yes?
• Not, by when will we solicit this donor.
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Rating
Level
Capacity
$500K - $1mil
Inclination
Medium
Readiness
6-12 months
© The Osborne Group, Inc.
Readiness
• One can only rate readiness by meeting
with donors and asking quality, strategic
questions.
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The Readiness Pipeline
F - Broad
Enagement/9-12mo
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E - Engagement/69mo
© The Osborne Group, Inc.
D - Focused
Engagement/3-6mo
C - Ready to be
Asked/0-3mo
BConsidering/Need to
Close
A- Gift
Closed/Stewardship
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
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Together…
• …these three
ratings provide you
with a powerful
management tool.
• Commit to all three
and manage your
prospective donor
pool with acumen
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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 914 428-7777 or
mail@theosbornegroup.
com
(C) The Osborne Group.com
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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 10604
www.theosbornegroup.com
• It cannot be copied, sold, or given
away with written permission from
TOG
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