Our first blog post of 2015 comes from Patrick O’Toole, Principal Consultant of Prospira Consulting, LLC.
Early in my career as a prospect researcher, I read Cecilia Hogan’s book Prospect Research: A Primer for Growing Nonprofits. I learned a great deal from this book, and I still have a dog-eared copy in my bookshelf. It is filled with book marks and Post-It notes pointing the way to information I still find useful a decade later.
I have always had a keen financial sense, and I learned quickly how to accurately assess a prospect’s wealth. And this area is where I always had difficulty with Hogan’s suggestions. In writing about philanthropic capacity based on annual income, she wrote:
Frankly, we cannot discover the annual income for most of our potential prospects. The only compensation figures available to us are the ones we find in proxy statements. … Although salary surveys have value for placing an individual within your vision for further research, they are speculative, not real. With that in mind, my philosophy includes quickly leaving the capacity formulas based on income behind.
I could understand Hogan’s reluctance to use estimates of annual income. By using a salary estimation, you were engaging in a bit of speculation. But by doing so in a logical and carefully researched manner, I thought, wouldn’t you bring something of value to your assessment of a prospect’s gift capacity?
I then read the white paper “Prospect Research for the Non-Researcher” by David Lamb in 2010. In this brief but helpful document, Lamb wrote:
Unless your prospect is an insider officer in a public company, you will almost certainly not find a definitive report of his or her salary. In some case, however, it is possible to estimate constituents’ income based on what else you know about them. Salary surveys abound and are easy to access over the Internet.
This buoyed my spirits greatly. I read extensively on the topic of annual compensation. I experimented with several salary survey websites and learned their idiosyncrasies. Before long, I felt confident enough in estimating annual income that I began including such an estimate in most of my asset assessments.
In speaking with other prospect researchers, I believe I am in the minority with this decision. By not providing even an estimate of a prospect’s annual income, however, I believe we do a disservice to our clients. To be clear, I would never consult a salary survey website and attempt to mislead a gift officer. I would never obtain an estimate of a prospect’s annual income and state anything like:
Mr. John Smith earns an annual income of $117,650.
Rather, I am fully open and honest by stating, “I am providing an estimate.” When providing an estimate of a prospect’s income, I always write something like:
According to Salary.com, a mechanical engineer living in High Point, North Carolina, with an education and job experience similar to Mr. John Smith, can expect to receive base annual income of approximately $117,650.
I then footnote my estimation and provide a link to my search.
I have found the inclusion of an estimated annual income to be incredibly helpful to gift officers. The gift officers I have supported speak with individuals from all walks of life. They speak with cosmetologists. They speak with veterinarians. They speak with financial advisors. They speak with plumbers. By providing an estimated annual income, I am helping them to better understand the individual with whom they are building a relationship. Income often determines life outcomes, and the estimate I provide gives gift officers a tiny bit more insight into their prospects’ lives.
Whenever possible, I determine an estimated annual income based on a prospect’s occupation, education, and location. I have found Salary.com http://www.salary.com/ to be a very helpful tool in this process. There are other salary surveys, and I use them regularly; however, Salary.com is my most-used tool. By using the U.S. Salary Wizard, and following on-screen prompts, you can determine the salary distribution for an occupation, skill level, and location. The wizard prominently displays the median annual base salary, but you can adjust your estimate using the 10th, 25th, 75th, and 90th percentiles. In other words, you can further customize an estimate to better fit the prospect you are researching.
When I do not know a prospect’s occupation, I sometimes provide a broad ZIP Code-based estimate of income. Trust me, I use this estimate with great caution. Summarizing economic information by ZIP Code can produce decidedly bad results. Used with caution and care, however, a ZIP Code-based estimate can provide a generalized sense of the prospect’s environment.
The United States Census Bureau offers a wonderful tool for this process with the American FactFinder http://factfinder.census.gov/faces/nav/jsf/pages/community_facts.xhtml. The FactFinder can use five-digit ZIP Codes to gather data. You can also use cities, counties, and states. For this purpose, ZIP Code is the smallest tract possible. When reviewing the results for a ZIP Code, the FactFinder provides numerous tabs, such as Education, Housing, and Income. Under the Income tab, the median household income is prominently displayed. Should you wish to research further, there is a wealth of more detailed information contained in linked Census Bureau reports.
And so I return to my original affirmation: Estimated annual income is an underutilized wealth indicator. Cecilia Hogan and David Lamb are both correct: We cannot know the annual income for the majority of prospects we research. I strongly believe, however, that we can provide an accurate estimate of annual income. To do so, skilled prospect researchers must remain mindful of the prospect and fully understand the tools they employ. And they must make it perfectly clear that they are providing an estimate of someone with education, experience, and location similar to the prospect. This extra bit of information, albeit just an estimate, can provide gift officers with a keener insight to the potential donor they are going to meet. And this insight can lead to larger gifts that close more quickly.
