I always enjoy hearing from my readers. Sometimes, they give voice to questions that I suspect many others have as well. For example, I heard recently from the Development Associate of a small nonprofit organization:
Hi, Michael. I enjoy your posts and blogs very much. Do you know of any statistics which tell how long it takes to see any benefit from a planned giving program? I work at a small organization and they want to put a dollar amount to be raised in the annual fund raising plan. Doesn’t common sense say you cannot expect a definite planned giving amount EVERY year? We are very small and really only capable of pursuing bequests. Are there statistics to support this in writing that I could use to share with my Board and CEO? Many thanks for all your informative and helpful posts!”
Regarding the first question about how long it will take a new planned giving program to become effective, I’ll provide the standard consultant’s answer: It depends. I’m actually not being flippant. The answer depends on a great number of variables including, but not limited to:
- How many planned giving prospects are there?
- How educated are they about planned giving?
- What is the quality of the relationship that the organization has with prospective planned gift donors?
- How old are the prospects?
- How healthy are the prospects?
- Do your prospects tend to have children and grandchildren?
The good news is that while we cannot easily predict when an organization will begin to benefit from a bequest giving program or how much money the program will produce by a particular date, we do know that the organization will benefit sooner as well as later. Even with deferred commitments such bequest gifts, charities will often begin to see a return within three to five years.
The second question also does not lend itself to an easy answer. However, as the Development Associate suspects, it is “common sense” to say that most organizations “cannot expect a definite planned giving amount EVERY year.”
Nevertheless, I know that this issue is not limited to this particular charity. I also know that it’s not limited to small charities. Not long ago, I learned of a much larger nonprofit organization that always budgets to receive $1 million of bequest revenue annually despite the objections of the group’s planned giving specialist.
So, what is the answer? How much, if anything, should organizations budget for planned giving support?
While large organizations with mature development programs might be able to forecast planned giving revenue with some degree of accuracy and safety, there is no way a small organization with no significant prior planned giving experience can do that. Budgeting on bequest revenue is generally problematic for the following reasons:
- You don’t know how many individuals have already made a bequest commitment but simply have not told you.
- You don’t know how many people would be willing to make a bequest commitment.
- You don’t know how many people who have made a bequest commitment have changed their will to remove the charity.
- You don’t know when people who have made a bequest commitment will die. While actuarial tables can provide some hint at this, the reality is that such tables are more reliable with larger groups rather than single individuals.
- Many people who are willing to make a bequest commitment will not tell you the amount of that commitment. If the commitment is a percentage of estate, the donor will likely not even know how much will end up in the charity’s hands.
In short, with bequests in particular, there are too many unknowns. For a new planned giving program, regardless the size of the charity, projecting bequest revenue figures would simply be guesswork. Even for larger organizations with an established gift planning program, budgeting for planned giving revenue can be risky. For example, I know of one organization that budgeted for planned giving revenue but came up short resulting in an operating deficit. Ouch!
Setting a planned giving goal is one thing. Budgeting on planned giving revenue is an entirely different matter. While it is perfectly reasonable for the organization to set process goals (i.e.: number of planned giving conversations, number of events, etc.), it will be difficult to set a reasonable dollars-in-the-door goal unless the planned giving program is well established and the donor file is large enough.
Debra Ashton, in her book The Complete Guide to Planned Giving, suggests setting a goal by looking at the average bequest revenue received each year over the past five years and then adding five to 10 percent to that average. If there were any extraordinary gifts in that five-year period, you will probably want to remove them from the calculation. Again, this involves setting a goal and not a budget figure.
Others have suggested a more conservative approach involving a look at the average bequest revenue over the past five years and then subtracting five to 20 percent.
Larger organizations with an established planned giving program and a robust list of donors who have made a bequest commitment might be able to set reasonable revenue goals. However, before converting those goals into budget expectations, the organization should ensure that conservative numbers are used. It’s far better to be pleasantly surprised at the end of the year than faced with a revenue shortfall that results in an operational deficit.
By contrast, smaller organizations and those with new planned giving programs are dealing with too many variables and too many unknowns to be able to safely predict outcomes. Setting an aspirational goal is one thing, budgeting for the revenue is a very different matter.
There is another issue contained in the inquiry I received. The Development Associate believes that her small organization must limit its planned giving program to bequests. However, there are other types of simple planned gifts that any organization can seek beyond bequests:
- Beneficiary designations are an easy way for donors to make a gift commitment without the need for a lawyer. For example, a donor can designate all or a portion of an asset to the charity (i.e.: a life insurance policy, an IRA, real estate, etc.). The regulations associated with beneficiary designations will vary by state.
- Stock gifts are considered by many, including myself, to be a type of planned gift. Gifts of appreciated securities are good for the donor and the organization. And they are easy to arrange.
- Whenever Congress gets around to approving it again, IRA gifts will be another option.
So, how does your organization set goals or budget for planned giving revenue? Tell me below.
Finally, I want to thank my reader for contacting me with her questions. If you have a question or a suggestion for a future blog post, I invite you to contact me. I take requests.
That’s what Michael Rosen says… What do you say?
Michael Rosen Says... 