Prospect research:
Fundraising prospect research: Where your current process is falling short
Prospect research is a powerful tool that can mitigate risk, uncover new donor opportunities, and support stronger relationships. But are organizations using it to its full potential?
Fewer than half of American households give to charity today, down from two-thirds in the early 2000s, according to a report by Indiana University’s Lilly Family School of Philanthropy.
A relatively small group of wealthy individuals and foundations are providing a growing share of charitable funding, while the number of individual donors is declining. This could have implications for fundraisers who rely on individual donors as their main source of funding.
If individual donors are becoming less reliable as a source of funding, nonprofits may need to explore new approaches to fundraising and consider tapping into the resources of wealthy individuals and foundations. But building relationships with these donors and securing their support may require different tools and strategies.
Only 36% of organisations saw new donor retention last year, according to the 2023 CCS Philanthropy Pulse. This underscores the importance of cultivating strong relationships with donors and implementing effective retention strategies to ensure long-term support.
Prospect research is the backbone of these relationships
Prospect research plays a critical role in identifying potential donors and mitigating risks. Not only does it help ensure donors are legitimate and align with the nonprofit’s values, but it also helps nonprofits grow their donor base and know their donors thoroughly. It can be the catalyst that takes a gift from transactional to transformational and encourages donors to give again.
Despite this, prospect research is falling short within some nonprofits, often due to a lack of time and resources. It’s natural that nonprofits want to keep their costs low, but it often leads to concerns about the expenses linked with prospect research.
However, this approach comes with risks, including the possibility of accepting unsuitable donations that deter future donors or catch the attention of the Securities and Exchange Commission (SEC). Or, even worse, lead to potentially suitable donors being rejected.
Comparing two approaches to prospect research
Let’s say a prospect approaches two different nonprofits with a substantial donation offer.
The first nonprofit relies on manual research methods and spends an hour researching the prospect using a search engine. It discovers the prospect’s business affiliations have fossil fuel links… and rejects the donation.
In contrast, the second nonprofit has invested in automated research technology and discovers in minutes that the prospect’s company is now a champion of offsetting, and has severed its previous ties to fossil fuels.
The second nonprofit accepts the donation and puts it to good use.
This scenario highlights the problem with manual prospect research: it’s prone to human error and limited by human ability. Few nonprofits have the resources to look down every rabbit hole when carrying out prospect research.
As a result, the research is often lacking in complete and up-to-date information, leading to missed opportunities for fundraisers and potential reputational damage to the organisation.
Prospect research vs wealth screening: What’s the difference?
Prospect research and wealth screening are two related but distinct processes that can help nonprofit organizations identify and cultivate potential donors. While the two processes share some similarities, they differ in their scope and purpose.
Fundraising prospect research is a more comprehensive process that considers the broader interests and values of potential donors, while wealth screening focuses more narrowly on wealth markers and identifying individuals with high net worth.
Fundraising prospect research is a process of identifying potential donors and understanding their interests and giving capacity. This research includes analyzing publicly available information about individuals or organizations, such as their giving history, affiliations, and professional background. The goal is to build strong relationships with supporters and tailor fundraising efforts to align with donors’ interests and giving capacity, as well as grow the donor database.
Wealth screening, on the other hand, focuses specifically on identifying individuals with high net worth who may be potential major donors. This process involves analyzing publicly available data to estimate an individual’s wealth and giving capacity. The goal of wealth screening is to identify potential donors who can make significant contributions to the organisation.
Shortcomings in prospect research
Slow process
In today’s fast-paced world, time is of the essence when it comes to securing funding for nonprofit causes. If your prospect research process is too slow, you may miss out on valuable opportunities to engage with potential donors, or they may decide to take their money to a nonprofit that says ‘yes’ faster.
Discovering key information about a prospect after you have invested time and resources into soliciting them, can be frustrating, demotivating, and, crucially affect trust in your non-profit.
Lack of detail
The flipside of slow research is research that’s lacking in detail. With the amount of publicly available information growing exponentially, researchers working manually are unlikely to be able to delve into sufficient detail when researching each potential donation. This can result in vital information being overlooked, potentially leading to donors being rejected or exposing the nonprofit to risk.
Benefits of effective prospect research
Mitigate risk
Prospect research helps ensure donors are legitimate and that their contributions are not tied to any illicit activity, nor any activity that is not aligned with your organisation’s values.
Identify new donor opportunities
Prospect research can lead to more donations. Perhaps a prospect is worth more than initially thought, has a hard-to-find link to the cause, or is a friend of someone else who could be approached as a prospect.
Build stronger relationships with donors
Armed with a detailed and nuanced understanding of a donor’s motivations and interests, nonprofits are better able to solicit transformational gifts and boost engagement, loyalty, and long-term support.
How Xapien improves prospect research
Xapien automatically generates fast, affordable, and comprehensive risk reports on individuals and companies in minutes.
These reports are helping nonprofits transform prospect research from a time-consuming task that slows fundraising to one that boosts it. Nonprofits can gain the transparency they need around a donor’s source of funds while developing productive relationships.
Using AI, Xapien scours the length and breadth of the internet, reading and analyzing millions of results, from websites, the media, company information and more, to deliver a concise, meaningful report that highlights risks, wealth estimates, assets, and associates, enabling due diligence teams to pinpoint their efforts to drive lasting revenue.
Information in over 130 languages is compiled, translated into English and scanned for risk.
Prospect research without Xapien
- Input relevant keywords to return results specific to identified risks
- Trawl and filter results for relevant individuals or companies
- Read all of the findings to identify potential risks or opportunities
- Conduct additional searches to find new insights and associates
- Write up a report that summarises the relevant findings
- Make decisions based on the information gathered
Prospect research with Xapien
- Enter the subject’s name into Xapien
- Review the generated reportand make informed decisions
Now, let’s see how Xapien has improved prospect research in practice.
48 hours done in 10 minutes at Cambridge University
Previously, researchers would spend up to 48 hours generating reports. But with Xapien, the process takes less than 10 minutes. This improvement has provided fundraisers with more time to approach high-value and high-potential prospects, resulting in increased fundraising opportunities.
The risk of having to turn down a donation after solicitation has begun has been eliminated as due diligence now takes place before a potential donor is approached.
“Fundraisers know that if they’ve been assigned to a potential donor they have met the due diligence standards and they don’t need to worry about wasting anyone’s time.”
– The University of Cambridge
A centralised approach to due diligence and reputational risk at Dartmouth College
The college’s donor prospect management team conducts research on more than 1,000 potential donors each year to learn about a prospect’s philanthropic interests, ambitions and objectives. The five strategic analysts used to run background checks on every prospective donor during the solicitation cycle to understand their profile.
Due to a large volume of prospects, analysts had to limit research to only one hour per prospect resulting in incomplete reports that just scratched the surface of an individual’s profile. Despite this, PDF reports on prospects that were up to 10 pages long was often sent out to committees.
By the time a due diligence check was conducted, the solicitation process might have progressed significantly, leading to potential awkward conversations if any problematic information was discovered. Furthermore, in rare cases where uncovered information resulted in the rejection of a donation, it resulted in wasted time for both the primary fundraising staff and the donor.
With Xapien, due diligence now takes place year-round, so fundraisers and prospects can proceed with confidence as soon as a prospect is identified.
Over 1000 hours of work are saved annually, which are now being redirected towards discovery work in the alumni, friends, and parents database, creating more fundraising opportunities and empowering fundraisers to approach more high-potential prospects. This has led to a greater focus on BIPOC alumni and funding for DEI initiatives.
The work of the prospect management team at Dartmouth has been recognized across the university, and they are now leading as experts on background checks. This has resulted in a more coordinated and centralised approach, raising standards in other departments.
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