Qualifying

Before you read this, please read the page on prospecting.

You now know more than enough to build a robust prospect list. Most folks now find themselves with a delightful problem — what do we do with all of our potential donors? How do we prioritize them? That process is called qualifying.

Qualifying Based on Capacity

How should we prioritize the donors in our database? The process of asking this question is called “qualifying.” Qualifying prospects is crucial to determining where to focus your fundraising.

There are only two questions that should drive your qualifying work. The first is, “Do they have the money.” The next is, “Do they care.” Your donors are qualified prospects if the answer is yes to both questions.

Assessing financial capacity seems complicated, but the basics are relatively straightforward. It’s the psychology that makes people nervous here. If you’re dealing with folks you know personally, assigning a dollar amount can feel like you’re setting them a value as a person. Of course, this is so far from the truth. Sometimes amazing volunteers have minimal financial capacity. Sometimes the most helpful people make introductions but don’t have the financial resources to contribute. And sometimes, people are amazing even if they have little apparent monetary value to your organization.

Remember, it is the job of the fundraiser to raise money. We can get lost in the sauce when we start overthinking these processes. The dollar amount next to someone's name isn't their value, but it is your job.

I like to begin by tracking two variables - the amount of money we think someone can give and the amount we believe they can raise.

If you aren’t using a CRM, you can make this the first two columns next to each person’s name in your spreadsheet. The first column represents our estimation of personal donations, while the second projects the potential for raising funds from others.

It’s important to note the emphasis on “can give” for personal donations. This list concerns capacity, not inclination. Right now, we are identifying potential, not filtering for interest. In other words, if I’m a Democrat running for office and know a Republican who can give $500, I’ll put him down at the $500 level — even though I know there’s a slim chance he’ll donate to me.

The second column, “Ask to Raise,” is very important, especially for people still building their prospect lists. Although many nonprofits shy away from asking their prospects to raise funds, fearing rejection, those who accept the offer as volunteer solicitors can be invaluable allies, often contributing substantially. As the number of people raising funds for you grows, you can start building specific programming for them — gatherings, virtual calls, email templates, special material packets, and more. Do everything you can to remove hurdles for people who want to raise your money. If you’re unsure about the figures to assign in the “Ask to Raise” column, a practical guideline is to estimate two to five times the amount in the “Ask to Give” column, with the exact multiplier depending on the individual’s connections and willingness to leverage their network.

But what amount should we be asking people to give in the first place? Start with their giving history (if they have one). If they gave $20 last year, put them down for $20 or $25 this year.

If you’re not sure, you can take a guess - if you’re a teacher, you can probably give about $50, but if you’re married to a corporate attorney, you might be giving $5,000 or even $50,000. It’s challenging to determine an amount for people at the highest level.

Try to find where they’ve shared similar amounts to other organizations. When uncertainty persists, trust your instincts. Guessing is ok here; you’re better at this than you think. Subconsciously, our brain works overtime to slot people into social categories. Most of the time, it’s a destructive instinct, but here it will be helpful.

Another technique is to use income, which is often a reliable barometer; 0.1%-0.5% of annual pay is typically a reasonable ask. And consider looking them up in election finance databases, which are accessible online. For U.S. prospects, political donations, available publicly, can offer additional insight, although this becomes less reliable for those who can contribute above the federal limit for races.

Consider a paid service that provides estimations based on property holdings, previous contributions to other organizations, and other public records. Or, if the prospect is significant and you have the time, you can do that research yourself. All bets are off with people who have extreme wealth. For those people, I recommend specifying their single-gift financial capacity at around 0.5% of publicly listed net worth (which is almost always wrong).

Sometimes people say qualifying prospects is “as much an art as a science.” If we’re honest, what they mean is that it’s guesswork. Still, you can come closer to an accurate assessment by combining data-driven estimates with an intuitive understanding of your potential donors. Just don’t be surprised when you don’t get it exactly right. Write down these dollar amounts for your prospects. When that process is complete, we will combine the dollar amount and use these amounts to decide how to prioritize the donors in your work.

Qualifying Based on Interest

After their financial qualification, you’ll want to asses individuals based on their potential interest in your organization and your relationship with them.

Start by identifying the people that you already have a relationship with. These are the folks who, if you picked up the phone and said, “Hi, this is Juanita from the Salvation Army,” would know who you are right away. It’s always a good idea to populate your portfolio with people with established relationships. This question, “Would they know me if I called them” is just a simple yes or no question; you don’t need to complicate it.

The next step - assessing interest- is trickier. Begin by thoroughly analyzing the individual’s background, including their public profile, work history, affiliations, and philanthropic involvement. Look for indications of past support for similar causes or organizations, which may suggest potential interest. Gauge the individual’s level of engagement with your organization more broadly. Have they attended events, followed your social media accounts, interacted with posts, or subscribed to your newsletter? Strong attention in these areas signals interest.

If you have the time capacity to do this, consider reaching out and talking to them. In these “qualification calls,” you’re looking for financial and interest qualifications. You can get this by keeping your ears open for the Three Fs: Family, Finances, and “F”(ph)ilanthropy. The family will give you an indicator of how they grew up and of the values they want to instill in their children. Finances are subtle indicators (“We took the boat up to the lake this weekend”) that the family is economically stable. Philanthropy is, of course, the type of organization they give to. If they remain an ally in your fight, they will probably offer similar gifts to others. Discuss their interests, passions, and values. Ask questions to understand their motivations for getting involved and supporting causes and determine alignment with your organization’s mission and values.

If the donor is high capacity and you’re still unsure of their interest, invite them to participate in a small, low-commitment project related to your organization. Their participation allows you to assess their interest and level of commitment. They could be valuable supporters if they show excitement and dedication to the project.

Unlike finances, qualifying for interest is an ongoing process. Donors can (and do) fall in and out of qualification. Their level of interest can change over time, so engaging with them and regularly adjusting your strategy is essential.

Prospect Research

You will notice that this qualification process is a virtual black hole. You can spend infinite amounts of time investigating everyone in your portfolio. Broadly, we call this professional practice prospect research, and I’ve found it incredibly useful.

Prospect research is the art of using available data to determine a donor’s interests and capacity. It plays a vital role in fundraising strategies, enabling the identification of potential donors who possess both financial ability and potential interest in supporting your mission.

You can optimize fundraising efforts and generate significant impact by aligning these prospects with your objectives. The potential for the work is infinite and expensive. Don’t let it get in the way of action. I’ve known many organizations who spent several months gathering information about a single donor when all they needed to do was sit down across the lunch table and make an ask. The balance of how much to research (and how much to spend) differs for each organization. Decide your limits before you begin prospect research for yourself.

The initial step in most prospect research is identifying potential donors, such as alumni, parents, faculty, local businesses, or philanthropic entities. You can obtain valuable information from paid databases, social media, and public databases. Reviewing past donations can also reveal individuals or organizations with a consistent giving history. Once you’ve identified potential prospects, prospective researchers will analyze their financial capacity to donate.

Resources such as public records, including real estate holdings, business affiliations, and SEC filings, can provide insight. Additionally, they will consider their previous charitable contributions to other organizations, which indicate their financial capabilities. As mentioned above, understanding a prospect’s philanthropic interests is as important as assessing their financial capacity.

Research their past giving to identify the causes and institutions they support. This knowledge allows you to tailor and align your approach with their interests. For instance, if a prospect regularly donates to science programs, consider how your nonprofit’s science initiatives can benefit from their potential support. A solid connection to your work increases the likelihood of a prospect becoming a donor.

Examine the prospect’s relationship with your programs, as this connection can significantly influence their willingness to contribute. Prospect research, when conducted meticulously and strategically, can be a potent tool for fundraising. It involves more than simply identifying wealthy individuals; it entails aligning a potential donor’s interests with your mission and establishing meaningful, long-term relationships. It is a meaningful tool if you can afford the time and financial cost.

Setting Gift Levels

As you build your list, you’ll notice that the individual strategies for your donors will need to be different. Someone who gives $50 per year will need a different approach than someone who gives $5M. Deciding how and where to engage those donors is done by establishing gift levels. These categories, serving as fundraising guidelines, allow organizations to appropriately recognize donor contributions and provide personalized stewardship while maintaining time efficiency. The typical gift levels in a nonprofit setup are principal, major, mid-level, annual, and planned gifts.

Setting gift levels means recognizing your limits as a person. You can’t have a deep relationship with all of your donors. What’s more, your vital work requires you to value your time the same way you value your money.

Principal Gifts

A Principal gift requires a “principal” (usually an Executive Director or Board Chair) to solicit. They are often transformational gifts, where one gift can build the organization’s future. Principal gifts require an intensely personalized cultivation strategy, collaborating with your executive team. These gifts often reach the millions, yet the threshold varies widely depending on your organization’s size, nature, and executive time capacity.

Major Gifts

Major gifts are the most significant contributions an organization receives outside of principal gifts. The donors at this level substantially contribute to the nonprofit’s financial health, accounting for a substantial proportion of the total fundraising revenue. Everyone in a major gift category will be part of an individualized portfolio and have one assigned staff member to help steward the relationship and ensure it doesn’t drop. For some organizations, a major gift starts at $1,000, while others begin at over $100,000. Establishing the major gift threshold involves considering your organization’s annual revenue, typical donors’ giving capacity, and your funding objectives. If you need more clarification, start with $1k or $10k, depending on your existing giving.

Mid-Level Gifts

Mid-level donors bridge the gap between major donors and those offering smaller, regular donations. They are usually annual fund givers with high identified capacity who possess the potential to contribute more over time. A mid-level program aims to bring donors to annual gifts across the major gifts threshold.

Determining the mid-level gift range can be challenging. It should represent a significant step up from base-level annual gifts but remain clearly beneath your major gift level. For many organizations, mid-level gifts fall between $500 and $9,999.

Annual Gifts

Annual gifts are the foundation of most nonprofits. They are usually smaller but regular donations and don’t require personal staffing. They are stewarded and built over time, ensuring a steady and unrestricted revenue stream. A well-built annual gift program yields tremendous long-term benefits. Over many years, annual gift-givers will become your best prospects for major and transformational gifts.

One of my mentors tells me that 2/3 of his (very significant) principal gifts portfolio started in their small-dollar annual mail program. Pay attention to your annual givers. With them, consistency is critical. And over time, they become the engine that drives your charitable endeavors to success.

Planned Gifts

Planned or legacy gifts stem from a donor’s estate planning. They could include bequests in a will, life insurance policy designations, retirement fund allocations, or trusts benefiting the nonprofit.

Given their origin in end-of-life planning, planned gifts usually fall into higher categories, potentially matching major or principal gift levels. Encouraging such contributions requires fostering long-term relationships and providing estate planning assistance.

Establishing gift levels is a deliberate process, necessitating understanding your donor base’s capacity and characteristics and your organization’s financial needs. Clear categories shape donor engagement strategies, ensuring each donor is valued and appropriately recognized for contribution.

When to Focus on Bigger Gifts

Like most organizations, you have limited capacity. How should you decide where to focus? The question is all about timing. You’ll want to concentrate on other work areas at different points in your growth cycle.

Major donors offer strategic advantages that enhance an organization’s capacity to fulfill its mission efficiently. If time efficiency is paramount for you right now, you have the staff to be successful and your time. And if your most extensive needs are urgent, I recommend doubling down on engagement with major donors. Here’s why:

The Efficiency of the Pareto Principle

The Pareto Principle, or the 80/20 rule, asserts that 80% of effects derive from 20% of causes. For nonprofits, this often translates to 80% of donations from 20% of donors—your major donors. Concentrating on this group refines efficiency in fundraising and stewardship. While seeking smaller gifts from a larger pool may seem fair, it’s not the most effective strategy. Consider this: the effort to ask for a $100,000 donation is virtually the same as requesting a $1,000 one. Directing your efforts towards major donors ensures a more focused, judicious use of resources.

A Consistent Revenue Stream

Major donors frequently offer a stable income source. Major donors typically maintain their giving levels, unlike smaller donations, which might vary due to economic changes or donors’ finances. Their substantial gifts provide a steady revenue stream, empowering your organization to plan and implement its programs effectively.

Opportunity for Increased Donations

Significant donors often can give more. By engaging these individuals, nonprofits can foster deeper relationships, understand their philanthropic interests, and align these with the organization’s goals. This personalized connection can lead to more significant contributions over time, bolstering the organization’s financial stability.

Expanding Your Influence

Major donors are significant contributors and influential advocates for your cause. They can amplify your mission within their networks, drawing in other potential major donors. Nonprofits can expand their reach and impact by fostering relationships with major donors. This network effect is especialyl significant when your work relies on politics.

Unlocking Planned Giving

Major donors are frequently prime candidates for planned giving, a commitment to support the organization through financial or estate planning. These contributions can substantially enhance a nonprofit’s long-term financial security. By investing time in major donors, nonprofits boost the chances of securing these crucial gifts.

While every donor deserves appreciation, strategic engagement with significant donors is crucial for most nonprofits. It’s about more than the size of their gifts—it’s about leveraging the efficiency, stability, and long-term financial health they bring. This focus should be balanced with the continuous engagement of all donors, fostering a thriving, diverse, and sustainable fundraising ecosystem.

When to Focus on the Smallest Gifts

Sometimes, we concentrate on the need in front of us and neglect the long-term needs of our organizations. Do this at your own risk. Over a lifetime, investing in an annual fund will build the foundation for your success. This investment is the strategic choice when your time horizon is 30 years instead of 3 years.

Building a Solid Support Base

Small donors collectively provide a sturdy base for your nonprofit’s operations. While their contributions may seem minor, the accumulated effect forms a steady income stream. Focusing on smaller donors widens your donor base, enhancing financial stability and resilience. This broad support also creates a positive public image, reflecting widespread community endorsement of your mission.

Nurturing Future Major Donors

Major donors typically start their philanthropic journey with small gifts. As donors familiarize themselves with an organization, cultivating these relationships can lead them up the giving ladder, potentially to major donor status.

Regularity in Giving

Small donors often adopt a recurring giving pattern, usually facilitated by automatic monthly transfers. This consistent revenue allows for more precise income forecasting, leading to more effective planning and budgeting.

Community Advocacy and Engagement

Small donors, often locals with a personal connection to your mission, can act as community advocates for your cause. They can promote your work, attend events, and participate in advocacy activities, expanding your reach and influence.

Mitigating Financial Risks

A diverse donor portfolio can shield your organization from economic uncertainties affecting significant donors. A broad base of small donors distributes financial risk, ensuring your nonprofit isn’t overly dependent on a few substantial gifts.

Harnessing Micro-Fundraising Campaigns

Small donors respond enthusiastically to micro-fundraising campaigns, such as giving days or crowdfunding efforts. These initiatives offer an engaging way to attract new donors at a reasonable acquisition cost.

When to Focus on Mid-Level Gifts

What about mid-level gifts? As a former mid-level gifts officer, it pains me to say this, but it’s rarely the top priority. However, organizations with a robust database and the ability to staff major gifts donors effectively should consider these programs a top priority.

Mid-level gifts officers have much larger portfolios (200+ people) and always qualify and build relationships. This process is a very effective way of increasing the count of significant gift-givers in your portfolio. To identify potential significant donors within your mid-level cohort, segment them into portfolios around 2-5 times larger than their major gift counterparts. Prioritize those contributing at the higher end of your mid-level range and consistent givers, even if their contributions are minor.

Kickstart your engagement with a simple qualification phone call or survey. Begin by saying thank you, but use this opportunity to express gratitude for their support and transition into a discussion about your organization’s future, seeking their input and insights. These efforts aren’t just essential for donor stewardship, but it’s also valuable tool for gauging their interest and identifying those keen on more profound engagement with your organization. The insights gleaned from these calls and surveys will guide you in pinpointing the individuals worthy of increased stewardship efforts. Start inviting them to significant donor events, or host exclusive events. Treat your best prospects as major donors, though with a more measured pace and a more straightforward strategy. When you sense the timing is right, confidently ask them for an increased contribution to elevate them into the major gifts bracket.