How to Calculate the Number of Major Gift Officers You Need
I am often asked for a formula for adding major gift officers (MGOs) to an organization. And while there are many variables to consider, they boil down to these four points.
1. What Kind of Return on Investment Do You Want and Need?
This area is tricky because major gifts is considered to be a high net revenue fundraising strategy, so uninformed leaders and managers will mistakenly think that the return on a major gift program should be higher than other strategies at the beginning of the program. For instance, let’s say an organization’s direct mail program is delivering a one-to-four return — for every $1 spent, $4 is coming back to the organization. In that environment, it might be difficult for a manager to agree that a major gift program should have a ROI of less than one-to-four in its first year. However, that is exactly what happens.
Managers either do not know about the slow startup of a major gift program or they choose to ignore the fact. My experience is that a new MGO will have anywhere between a one-to-two to one-to-four ROI in the first year. Why? Because it takes six to eight months to qualify a caseload of donors. And you cannot get a good ROI while qualifying donors. Therefore, on the subject of ROI, I suggest you set an expectation of one-to-two in the first year so that you do not put pressure on your new MGO.
I know that feels unsustainable and unrealistic. But plan that way in order to not be disappointed with the progress of your major gift program, which will eventually grow to one-to-four to one-to-six in its second year, one-to-six to one-to-10 in its third year and even higher than that in the fourth year and beyond. Start small and slow as relates to economic expectations.
2. Do You Have Enough Current High-Inclination, High-Capacity Donors to Justify Adding an MGO?
Only a third of the donors who meet your major gift criteria will actually want to relate to you. This is a fact. Sometimes it rises to a fourth. So, if you want to have a qualified caseload of 150 donors you will need, at least, 450 donors who meet your criteria in a caseload pool. In our judgment, your major gift criteria should include any donor who has given at least $1,000 cumulatively in one of the past three calendar years — the current calendar year you are in and two in the past.
Why $1,000 cumulatively? Because it will be hard to hit your ROI expectation, with MGO salary, benefits and operating costs, if you go any lower. Also, pay attention to capacity when selecting donors for the caseload pool noting that, first, the donor must meet current giving criteria then capacity, not the other way around. Too many major gift programs are built on what a donor could possibly give in the future versus what they are currently giving now. Big mistake. The measure of inclination is current giving.
3. Do You Have the Cash Flow to Support a Startup?
Since it will take three to four months to search for and hire an MGO, and that costs money, and since it will take six to eight months to get a new MGO fully functional, you will have a negative cash-flow situation with your new MGO during the first 12 months of operation. Can you support that with your current organizational cash flow? You must figure this out and plan for it so you don’t get into a situation where you are expecting more revenue from the MGO and then start to put pressure on the MGO to put pressure on their donors. This is a dead-end street. Do not do this.
4. Is Everyone on Board?
This is a critical question. If your chief operating officer or your board or anyone in authority is not on board with the startup numbers and pace, then forget it. By startup numbers, I mean the ROI and the cash flow. If they are not on board with a slow and deliberate ramp up you will have naysayers spreading negative vibes throughout the organization and poisoning the spirit of the MGO. It will not work. So be sure you have sent the right expectations with your leadership.
There you have it. A “formula” for adding MGOs. And I would add MGOs at a reasonable rate per year if these four points allow it. Remember, a donor with an MGO will give more and attrition less than one without an MGO. So, adding MGOs is a good economic decision although, on the surface, it seems expensive and risky, at least to start.
My point of view is it is more expensive and riskier not to add MGOs as part of your fundraising strategy. Think carefully about this. A personal relationship driving a donor relationship is far more effective than the alternative.
If you’re hanging with Richard it won’t be long before you’ll be laughing.
He always finds something funny in everything. But when the conversation is about people, their money and giving, you’ll find a deeply caring counselor who helps donors fulfill their passions and interests. Richard believes that successful major-gift fundraising is not fundamentally about securing revenue for good causes. Instead it is about helping donors express who they are through their giving. The Connections blog will provide practical information on how to do this successfully. Richard has more than 30 years of nonprofit leadership and fundraising experience, and is founding partner of the Veritus Group.