Does your nonprofit organization already offer donors the opportunity to give through Charitable Gift Annuities? If so, is your organization realizing its full CGA potential or are you leaving a lot of money on the table? If you’re currently not offering CGAs, is your organization’s CGA potential sufficient to justify making this giving instrument available to donors and prospective donors?
In my book, Donor-Centered Planned Gift Marketing, I wanted to help development professionals answer those questions. So, I developed a “CGA Potential Worksheet” after getting some terrific insight from the legendary Frank Minton, Senior Advisor at PG Calc and former Board Chair of the American Council on Gift Annuities. In a previous post, I shared my “Charitable Bequest Potential Worksheet.” In this post, I’ll share my “CGA Potential Worksheet” with you.
First, let me very briefly explain what a CGA is. A CGA is a gift planning instrument that allows older donors to make a current gift to a nonprofit organization and, in return, receive an income for life and a tax deduction on a portion of the gift.
While an initiative to secure CGAs will enjoy greater success or less success from time to time depending on a number of variables including the state of the economy and interest rates, we can estimate what an organization’s potential is over time. To truly project how much a CGA initiative can produce, one must understand as many of the variables as possible including the nature of the prospect pool, the wealth of prospects, the age of prospects, the passion of prospects, the history of the organization, past service performance, the purpose of the fundraising effort, the nature of the cause, the community, past philanthropic performance, the marketing effort, and so on. Collectively, this makes it difficult to forecast actual results. However, one can fairly easily gauge an organization’s estimated potential given a mythical, ideal set of circumstances. The following worksheet is meant to provide development professionals with an understanding of the broad potential impact of a CGA initiative for their organizations.
While this is not a scientific forecasting tool, it can nevertheless help with forecasting by outlining aspirational targets. This worksheet looks at one of the most common, easy-to-market types of planned gifts.
Charitable Gift Annuity Potential Worksheet:
Step 1: Size of database = ________ Records
Since the core prospect market for a CGA program is people over the age of 65, you should count or estimate the number of donors to your organization who are 65 or older. Depending on your organization, you might want to include other loyal supporters such as volunteers.
Step 2: Number of records x 0.83% = ________, number of potential donors
There were an estimated 400,000 CGAs in the United States in 2010. However, this does not mean that there are that many CGA donors. Many such donors make multiple CGA donations. No one really knows how many CGA donors there are in the United States. For the sake of this exercise, we will estimate the number at 300,000. Presently, there are approximately 36.3 million Americans over the age of 65. That means 0.83 percent of older Americans are CGA donors. If you feel the number is lower, use a lower factor. If you feel the number is greater, use a larger factor. This will give you the potential number of donors for your organization given the current market penetration of CGAs in general. This does not include those who would be willing to consider, but who have yet to take action. How does your organization compare?
Step 3: ________, of potential donors x $________ = $________ potential dollars
Take the number of potential donors and multiply it by your organization’s minimum CGA value or current average CGA value to calculate the dollar potential that exists. How does that compare with your current program? If your organization doesn’t have a CGA option, use your state’s minimum CGA value.
Step 4: Summary
Number of potential donors = ________
Potential dollars = $________
After completing all four steps, you will have an estimate of your organization’s potential for support through CGAs over time. While this is not a forecast, it does provide some indication of the potential results for your organization. How does your organization’s current CGA marketing performance compare? Is the potential great enough to justify your organization investing more in CGA marketing or creating a CGA initiative if it hasn’t yet had one?
CGAs are not without some risk to charities. This is particularly true in a down economy. However, the CGA remains an instrument worth exploring. Organizations can either offer CGAs on their own or work through a local community foundation that may offer a CGA program that organizations can market for their own benefit. By considering the CGA potential for your organization and by understanding the risks and how to mitigate them, you and your colleagues will be well positioned to determine if a CGA initiative is right for your organization and, if so, how much effort to put behind it.
That’s what Michael Rosen says… What do you say?
UPDATE NOTE (9/16/11): A correction has been made to the above worksheet. Where it now uses a factor of 0.83 percent, the original post mistakenly used a factor of 8.3 percent. My apologies for the error.
Michael Rosen Says... 