If you’re familiar with the Pareto Principle, or 80/20 rule, you’ll understand the need for fundraisers to focus their resources on the 20% of donors who are likely to provide 80% of organizational revenue.
Fundraising strategies abiding by this principle acknowledge that a nonprofit’s likely to receive most of its revenue from a minority of its donors. They highlight the importance of soliciting major gifts and how crucial major gift fundraising is to nonprofit success.
Accordingly, this guide will unpack everything you need to know about major gift fundraising. Here’s what you’ll learn from this article:
- What is Major Gift Fundraising?
- How to Conduct a Major Gifts Donor and Prospect Research
- How to Secure Major Gifts
- How to Steward Major Donors
Let’s start by diving into what a major gift is and what forms it can take
What is Major Gift Fundraising?
One organization might consider a $2,000 donation a major gift, while another’s threshold would be $200,000. Every organization will have a different definition for a major gift. However, research shows that the median response to the question “What is considered to be a major gift by fundraisers?” was $5,000 – $9,999.
Nonprofits can define a major gift by the percentage of revenue it accounts for. For example, a major gift could be any donation that constitutes around 5% of annual revenue or even 51% of a particular campaign.
Alternatively, in a donor-centric fundraising model, major gifts can be defined by personal significance. Of course, not every donor will be able to give $200,000. Still, they may be able to provide a gift of relatively large value to them. In this sense, a major gift may result in years of relationship-building ending in a legacy gift.
Additionally, a major gift could be defined by its relation to past gifts from the same donor. For example, a major gift could be classified as a contribution that’s five to twenty times more than a donor’s previous annual donation.
There are so many ways to define a major gift! Each nonprofit must develop a definition that’s unique to its organizational needs to guide its major gift fundraising strategy and identify major donors accurately.
Discover How Much You Can Raise from Your Major Gifts Donors
Types of Major Gifts for Nonprofits
1. Multi-Year Pledges
Some donors make scheduled, major donations over a few years, especially to fund a special project. Multi-year pledges provide nonprofits with financial security for their programs, allowing their fundraisers to focus on other initiatives. Additionally, this funding structure allows donors to track their contribution’s impact over a predictable period.
To support a nonprofit over the long term, donors may create an endowment fund. This fund is essentially a lump sum of money intended to create a reliable income stream. Endowments are invested, and a portion of their earnings are paid out each year to ensure an organization’s financial security.
3. Restricted Gifts
Many major donors will have a specific idea of how they want their money put to use. So, they’ll restrict their donation to a particular organizational purpose. Many pledges and endowments are restricted so they can be solely used for a specific purpose. Donors can assign a restricted designation to their gift through a note accompanying their donation or through an explicit legal agreement.
Last, donations can be temporarily or permanently restricted. Temporarily restrictions are usually time-bound. The funds will become unrestricted when a specific period has ended, or a set goal has been achieved. Alternatively, permanently restricted donations are earmarked for a particular purpose until the funds have been completely exhausted.
4. In-Kind Donations
Essentially, an in-kind donation is a non-cash gift given to a nonprofit. In-kind donations can be in the form of a good or service. In-kind donations, used as major gifts, include properties, real estate, vehicles, or expensive artworks. But, in-kind donations can essentially be anything that has a value equivalent to a major cash donation.
Nonprofit organizations must make a gift acceptance policy to communicate what assets they can and cannot manage. Check out the National Council of Nonprofits gift acceptance policies overview to find resources on crafting a clear and helpful policy.
5. Charitable Bequests
Last, nonprofits can receive a major gift by leaving a charitable bequest in a donor’s will. Also known as a planned or legacy gift, charitable bequests are a specific portion of a donor’s estate given to a nonprofit upon their passing. Planned gifts are commonly recognized as the pinnacle of a philanthropic relationship and should be recognized as such.
How to Conduct a Major Gifts Donor and Prospect Research
One of the most difficult aspects of major gift fundraising is finding prospects with the correct affinity for your mission, propensity to give, and financial capacity. By qualifying major gift prospects for propensity, affinity, and capacity, fundraisers can find major donors perfect for their organization.
A prospect’s general inclination to give philanthropically can be determined by assessing their donation history. If there’s no record of a prospect making a previous donation, they likely aren’t a strong prospect even if they’re extremely wealthy.
Affinity can be measured by researching donations a prospect has made to similar causes or by studying a prospect’s interests or their family’s interests.
When searching for major gifts, fundraisers need to ensure that their prospects have the resources necessary to make one. Fundraisers can measure capacity by identifying wealth indicators such as the ones listed below.
- Real estate ownership: A prospect will $2 million in real estate is 17 times more likely to give philanthropically than the average person. Also, keep an eye out for other big-ticket items like yachts or expensive cars.
- Previous donations: Someone who’s previously donated $110K to a similar nonprofit organization is about 32 times more likely to contribute than someone who hasn’t.
- Political campaign contributions: A prospect who’s given at least $2,500 to a federal political campaign is about 14 times more likely to donate to a nonprofit than someone who hasn’t.
To uncover these wealth indicators, a fundraiser will need a wealth screening tool such as Windfall, DonorSearch, or WealthEngine. These tools have massive philanthropic and wealth indicator databases that allow fundraisers to identify donors’ capacity and inclination to give.
By putting a contact’s information into a wealth screening tool, fundraisers can get the information they need in a matter of minutes. What’s more, these tools often provide suggestions for donor cultivation based on previous donor behaviors.
How Well Do You Know Your Donors?
How to Secure Major Gifts
Once you find a prospect with the right propensity, affinity, and capacity, you’ll need to create the right solicitation strategy.
Here are a few best practices for making major gift appeals:
1. Be Patient
One of the most important elements of major gift fundraising is that the process shouldn’t be rushed. Don’t expect to receive a major gift after your first conversation with a donor.
Also, don’t expect their first gift to be massive. You’ll need to slowly develop your relationship with a major donor prospect over time. Additionally, as major donor prospects understand the impact of their gifts, they’ll feel more motivated to increase the significance of their donations.
2. Find Areas of Alignment
It’s important to relate a prospect’s potential donation to an impact area they’re passionate about. So, review their affinity indicators to see what type of organizations and campaigns they’ve given to previously. This insight will start you down the right path to soliciting a major gift and developing a meaningful donor relationship.
Additionally, justify the specific donation amount you ask for by connecting it to your program outputs or outcomes. For example, ask for $26,000 that will help ten underprivileged children attend school. Or ask for a $1,000,000 endowment to fund the salary of 3 teachers for the next 20 years. This detail will allow a donor to envision the impact of their donation.
3. Ask on a Sunny Friday
Although this may seem strange, research shows that Friday’s the most charitable day of the week. It seems like donors are invigorated to give when the weekend’s around the corner! Additionally, a study found that a decrease in temperature from 12.5 degrees Celsius to 4.5 degrees Celsius resulted in a 24.6% decrease in charitable giving. So, warm weather may just help you in your next appeal.
More, It can’t hurt to apply both tactics simultaneously, so book your next major donor appeal on a beautiful Friday afternoon.
4. Use a Donor Predictions Tool
Tools like KIT will uncover valuable insights in a matter of seconds:
- What the perfect ask amount is
- When the right time of year is to make an ask is
- Which donor you should reach out to next
- How to contact a donor
- Who needs your stewardship the most
By automating these insights with KIT’s software, you can spend less time researching and more time reaching out to donors.
How to Steward Major Donors
Major donors typically require more attention and recognition than other kinds of donors, as they’re often providing highly impactful contributions. It’s vital for you to personalize your communications with major donors and be thoughtful when nurturing them through the donor journey. With a stewardship plan, fundraisers can organize their communications and measure success.
Here are a few stewardship activities that fundraisers can use to recognize major gifts donors and communicate the impact of their contributions:
Showing Recognition to Major Gifts Donors
- Give them a plaque
- Add them to a “donor wall of fame”
- Send out a handwritten letter
- Invite them to a “thank you” dinner
- Send them a personalized impact report
- Invite them to meet your team, volunteers and beneficiaries.
- Share your ROI analysis with them
These strategies will allow donors to fully understand the meaningfulness of their gift and encourage them to give again. Also, don’t forget to keep your donors’ preferences in mind! If they have a specific type of recognition in mind, try to accommodate it.
Want To Uncover Valuable Donors Hidden In Your Database?
Major gift fundraising is fundamental to your nonprofit’s success. Major gifts and donors allow fundraisers to be more efficient with their time as they implement their campaign strategies. So, consider following the tips shared in this guide if you want to be more efficient and effective as a fundraiser.