Blackbaud Brings Back Free Gift Pyramid Calculator

Fundraisers again have this simple tool for setting campaign goals by size of gift.  But users need to mindful of one pitfall. 

The software company Blackbaud has rebuilt the pyramid.  In designing a fundraising campaign, planners usually run through an exercise of identifying how many gifts are needed at each level of giving.  Getting the totals to add up can be a chore.  This online tool yields a simple answer that can be used as a starting point.

Back in my pre-blogging days, I asked the question whether anyone had ever done any research to verify that these are valid expectations.  I don't think any has been done, although the pyramid is based on the regular pattern that many distributions fall into, sometimes called a Zipf or Pareto distibution, which is sometime simplified to an 80/20 rule (20% of the donors will account for 80% of the donations).  This is the same type of distribution that is the basis for The Long Tail, by Chris Anderson. 

But caution to anyone using this tool: there is a problem with what is called the lead gift, the top gift on the pyramid. This calculator assumes that that lead gift will be 10% of the total, but that is not necessarily the case.  The lead gift can be much larger than 10% of the total, and there is no way to predict exactly how large it will be, even though the smaller gifts will fall into the Zipf/Pareto pattern .  But unfortunately, the top number in one of these distributions can't be predicted. 

An example that shows this is the distribution of population by country.  There is a pretty regular pattern up to the third largest country, the United States, with 300 million people.  But then the top two jump to 1.1 billion for India and 1.3 billion for China.  There's no way to predict how much larger a Microsoft or a Google will be than its next largest competitor, and the same is true for the largest gifts.   

So a lead gift can be 10% of the total, but it can be 40% or 50%, too.  So for a large campaign, don't use the pyramid to set the lead gift.  Research the level of the lead gift independently, based on knowledge of the prospective lead donor's circumstances.  Then use the pyramid only for the balance of the funds to be raised. 

Comments

[Tony Poderis]

Dan: Your caution is well advised regarding the automatic and fixed calculation table which, in this case revived, has the lead gift at about 10% of the goal. Following your reasoning, here is what I routinely send to folks contacting me seeking to establish a gift table with that base number.

The typical major campaign gift table development process is based on the traditional “80 - 20 rule.” That is, in any successful major fund-raising campaign, you should receive about 80% of your money from about 20% of your donors.

Thus, any campaign goal which is entered for calculation to that ratio, will result in one gift being needed to represent about 10% of the total goal --- and so on.

However, as you work to follow that time-tested guideline, be sure to consider that your calculations might need considerable adjustment depending on the size of your donor base. Circumstances might require that the 80 - 20 benchmark cannot be so rigidly adhered to in every instance.

For example, if an organization wants to raise $5 million for a capital or endowment campaign, the 80 - 20 rule would cite the need for one gift to be in the amount of $500,000, two gifts at $250,000, five gifts at $150,000 --- and so on down the line. Further calculations to descending amounts to equal the total goal, according to the 80 - 20 rule, would end up with the overall need for over 400 gifts to meet the goal.

Since every prospect cannot be expected to give, or to give in the amount requested, an organization in this case will require about three to four times the number of prospects for each of the required gifts. Here, the organization must have about 1,500 prospects identified and rated who are viable and likely prospective donors.

That’s OK for the organizations having a prospect base to be able to process prospects of that magnitude, but for those mostly many others not in that position, you can easily see that the top required gifts must be much larger if the goal is to be met. It those “top-heavy” gifts are not possible, the campaign will not succeed.

So, do work to the 80 - 20 rule, but watch out for problems if your prospect base is not able to support it.

Tony Poderis

[Bedford]

Thanks for the link to the gift calculator. A funny thing happens to the calculator once you hit $50 million: every campaign, even up to $1 billion, requires 1884 gifts from 7536 prospects. Odd. I sent them a note.

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