Major Gifts: Defining and Enhancing Your Strategy

October 12, 2017 Katherine Swank, J.D.

Over $400 billion in combined charitable donations were given to nonprofit organizations in the U.S. and Canada in 2016. It was a record-breaking year that some attribute to an uncertain global political climate.  No matter the reason, we’re generous! 

The clear majority of giving is made through one of three methods: direct mail, online and special events. Online giving is growing exponentially year-over-year as younger donors become supporters and older donors adopt the easy-to-make-a-donation strategy. Committed monthly donors, also known as “sustainers”, are on the rise as well. Many organizations are embracing these coming-of-age fundraising strategies, but it may be to the detriment of what we’ve traditionally called “major gifts”.

Benchmarking Major Gifts

According to a new benchmarking study sponsored by the Association of Philanthropic Counsel and funded by MarketSmart “major gifts” haven’t yet found their equitable place among donors or the non-profits that receive them. Released in September, the 2017 Major Gifts Fundraising Benchmark Study (MGFBS), asked more than 600 organizations in the U.S. and Canada about their high-end donors and fundraising strategies focused on them. Asking questions like “How large is a major gift at your organization?” and “What methods work best to raise these gifts?” The information, in my opinion, is both interesting and downtrodden.

The term “major gift” isn’t new. Yet, our industry still knows remarkably little about major gifts largely because we don’t call a major gift the same thing from one organization to the next.  Suffering from a lack of identity, major gifts, have and will, continue to under-go misinterpretation and misunderstanding.  That’s why this report is so important. Until we know if we’ve got a toe-may-toe or a toe-mah-toe, we’re destined to follow the separate paths we’re already on, rather than to find the common one, down which, as an industry we can use common data to drive our donor-focused decisions, staffing and budgets.  If we want to collectively elevate these gifts of impact, we need to understand where we are, so we can plot out where we want to be.

Major gifts make up as much as 80 percent of a typical nonprofit organization’s charitable income in a year—and come from 20 percent or fewer of the donors. Yet, despite the fact that fundraising is studied widely, we still know remarkably little about major gifts. For instance, how large they are, what tools organizations really use, and what methods work best. — 2017 Major Gifts Fundraising Benchmark Study

In its Ready Reference Series, the Association of Fundraising Professionals defines a major gift as “a donation in an amount that is significant to the organization, whether it’s $100 or $1,000,000 or some amount in between.”  The 2017 Major Gifts Fundraising Benchmark Study asked the question of its respondents and found that 26% of organizations say that donations between $1,000 – $2,499 are considered a major gift at their organization.  The median answer (19%) was $5,000 – $9,999. Less than 10% said a major gift was at least $50,000.

What constitutes a major gift seems to correlate to annual budget. Organizations with larger operating budgets set higher minimum amounts to qualify as a major gift. Yet even organizations with budgets of $25 million or more, most commonly reporting that a gift of $9,999 is the minimum amount.  Leading the vertical view, Arts and Education organizations set the highest amount for what counts as a major gift with 50% of them stating their minimum major gift at $4,999.

Does Major Gifts Fundraising Get Enough Attention?

Target Analytics studies donors and fundraising data. We’re uniquely positioned to assess what these set-points really mean for our industry and your organization.  I’m going to use an imaginary Arts organization for illustration, though the data behind it is real. Let’s say that our invented organization is called Arts Now and that it has a development database of 10,000 individual constituent records – not counting any foundation or corporate entities.  Imagine that 5% of these records are current donors – that’s 500 people.  According to the benchmarking study 80% of their funding may be coming from 20% of their donorbase – or 100 individuals.  If the average Arts organization defines a major gift at around $5,000, minimally, major donors account for $500,000 annually.  With the remaining 80% of the database (400 people) generating 20% of revenue – the total raised by Arts Now must be around $625,000.  These means that the rest of the database is generating only $125,000 – at an average gift of $312.50 per person.

In 25 years of front-line fundraising my experience has been that more than 75% of the fundraising budget and staff attention is devoted to lower-end donation efforts such as direct mail and special events.  While these are important ways to raise funds, are they given higher priority because we can benchmark them more easily than major gifts?  I believe that MGFBS in combination with this little exercise point out the dilemma and unintended consequences when we don’t understand “What’s a major gift?”

Enhancing Your Major Gift Strategy with Analytics

The role of an analytical analysis is to help you identify and strategize the right individuals and target audience for specific types of gifts, as well as how much to ask for and who to prioritize. When embarking on one, be sure to keep your goals and objectives first and foremost. If you’re looking to identify major gift prospects, you need to be ready to execute your plan to engage, cultivate, upgrade and solicit them.  An analytic analysis can also help you to truly define a major gift at your organization – based on data – and taking into account the number of staff, leaders and volunteers you have available now and into the future.

Defining a major gift at your organization should be statistical and not subjective. It should depend on our database’s revenue potential capacity rather than an arbitrary definition based on one’s comfort level in asking for gifts. Let’s look at another example of how this works.

Remember, Arts Now has a database of 10,000 individual records. Through an analytic assessment, 10% of the full database has been identified as a major donor prospect.  This increasing the true prospect pool ten-fold.  Capacity indicators on these 1,000 records supports the fact that the average major gift potential is $25,000 per person– not $5,000.  Even with a 5:1 identification-to-gift success ratio (or 200 gifts) annual revenue from this major gift prospect pool could reasonably be set at $5,000,000!

You can read more about enhancing your major gift strategy with analytics here.

Embracing Change

Benchmarking studies, analytic assessments and capacity indicators all mean one thing: change. The information we garner is powerful. But information alone won’t raise money. 

Gift officer performance and management’s involvement in the major gift program are key indicators of success.  When gift officers have plans and goals that are worked out in advance with managers, and when communication is strong, the resulting team can produce powerful results. Veritus Group, a major gift consulting firm, has published a very useful article on evaluating and rewarding major gift officer performance. 

The interesting thing about major gifts (this is a generalization) is that most nonprofits do not measure cause and effect. And if they do, they do it wrong. It is not enough just to say “we have a 10% increase over last year in our major gifts category” and really feel good about it. Much more is needed. — Veritus Group

They also say that when a donor is engaged and managed by a gift officer, giving goes up from that donor or is, at least, retained in equal value from prior years.  They contend that there’s is a direct correlation between the gift officer involvement and retained value.

Getting Started

Sharon Leighty, Assistant Treasurer and Membership Committee for the Association of Philanthropic Counsel said it best in her quote first published in the MGFBS.

Invest first in getting your database in order. The information you have already about existing donors and recent past donors is a goldmine. – 2017 Major Gifts Fundraising Benchmark Study

With this study in hand, analytics on your mind, and the willingness to institute change for the common betterment of your organization and community, you’ll know a toe-may-toe when you see it!

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