Presented by David Lamb Prospect Research Consultant Blackbaud Analytics

Goals of this session Develop a rationale for prospect research Researching in the real world Research subjects Public company executives Private company executives Foundation officers or directors Professionals Filling in the details Turing facts into information Profiling the prospects

I Spy NOT! Limitations of prospect research Public information sources Respect for the prospect Partner in building a relationship Time management Setting the ask at the right level Doing your homework Maximizing the prospect’s giving potential Anyone who systematically collects, records, and organizes donor data

What You Need To Know A good prospect has all of these characteristics Capacity Preference for appreciated assets Cash Inclination to give Evidence of philanthropic activity Interest in your mission Linkage Alumni Involvement Service

How Much Do You Need To Know? Depends on the progress toward solicitation Identification: just enough information to justify a contact Cultivation: “spot research” as needed 0-6 months from solicitation: as much research as you can get

Unequal Potential The 90-10 rule: 90 percent of your income will come from 10 percent of your prospects Most of the people on your database are not wealthy Some of the people on your database don’t care that much about your mission Start your efforts with the most capable and the most likely people

The Giving Tree Interest Ability

What You Can Usually Find Indications of wealth Stockholdings of public company insiders Salaries of top public company employers Real estate values Salary surveys Affiliations Doctors Lawyers

What You Can Sometimes Find Inheritances Affiliations Nonprofit Corporate Family Donations Biographical Business history Who’s Who Assets other than stock or real estate

What You Can Never Find Cash & bank balances Non-insider stock holdings Whatever the prospect wants to keep hidden

Public Company Insiders

Public Company Insiders Director Policy making officer – top 4-10 Major shareholders 5% holders report on Form SC13 10% holders report on Forms 3, 4, 5, & 144 Indirectly held stock reported for Spouse Children Trusts Retirement plans Foundations Investment companies or partners Any person or entity with a close relationship to the prospect

Sources for Researching Insiders Free tools SEC.gov Hoovers MarketWatch Company web site Fee based LexisNexis for Development Professionals 10K Wizard EdgarOnline

Forms Filed by Public Companies DEF 14A – proxy statement – invitation to the annual shareholders meeting 10K – annual report Form 3 – initial statement of holdings Form 144 – intention to trade stock, filed by the insider Form 4 – record of a trade Form 5 – annual statement of holdings S1 – filed prior to an initial public offering

The things to find Stock holdings of insiders Compensation of directors Compensation of top officers Stock options Other details (severance & retirement plans & more) Current value of stock

Interpreting Insider Data Directly held stock Appreciated asset Great way to make a gift Indirectly held stock – Belongs to someone else – may not be gift-able by your prospect To find out who owns it, read footnotes in proxy or most recent Form 4 Compensation Salary & bonus for top officers Stipend for directors Stock options (a potential asset) Exercised Exercisable Unexercisable Stock grants and restricted stock grants

Private Company Officers and Owners

Finding Private Company Affiliations The Challenge: Private companies are not required to disclose financial details Everything that you can learn comes from three sources Voluntary disclosure Government registrations News Your prospect’s ownership may not be disclosed in these sources

Finding Private Company Affiliations Voluntary disclosure sources The company’s web site Corporate directories Dun & Bradstreet Hoovers American Business Information Government registrations State corporations sites KnowX News Google Factiva LexisNexis for Development Professionals

Estimating Private Company Value When a company incorporates, it issues shares, known as “outstanding stock” The value of the company is divided evenly among the shares “Publicly held” stock vs. “closely held” Finding the value of public company stock is easy Finding the value of private company stock is difficult and expensive

Valuation in the real world To find out what a company is worth, sell it Value is partly (sometimes mostly) subjective Sometimes D&B provides a net worth figure Read everything you can about your target company – it’s not just numbers

Comparable companies Find a similar public company Downside: a public company is almost always valued higher than an otherwise equivalent private company would be Find a similar private company that sold recently Downside: the only commonly available metric is sales, and value is not always clearly tied to sales or even profit

Comparison to public companies Yahoo Stock Screener (http://screen.yahoo.com/stocks.html) Parameters that can be used Industry (SIC or NAICS) Sales Enter relevant info for the target company SEC.gov company search allows SIC search If you don’t know the SIC, check http://www.osha.gov/pls/imis/sicsearch.html If your search turns up no companies, try replacing the right-hand numbers with zero’s: 5261 becomes 5200 Once you know the company name, look it up on your favorite public company site (e.g. finance.yahoo.com)

Comparison considerations Market Capitalization is one good measure of public company value Your target company value is probably considerably less, even if otherwise equivalent Public companies tend to be much larger than their private counterparts Ratio of annual sales to market cap provides a multiple for the relevant industry The more examples the better Read the profile to see if the comparison company is similar in purpose to the target If the public company has flat or negative earnings, it may still have value

Comparison to other private companies Business Valuation Resources (www.bvmarketdata.com) Pratt’s Stats Database of over 9,500 private company sales from 1990 to present Deal price ranges from $1 million to $14.4 billion Updated monthly with about 100 transactions added / month $595 Bizcomps Database of over 9,500 private company sales from 1993 to present 61% of the companies have gross revenues less than $500K 18% of the companies have gross revenues over $1 million $395 INC. Magazine’s Ultimate Valuation Guide

BizStats Rules of Thumb http://www.bizstats.com/reports/valuation-rule-thumb.asp

Business Classifieds Bizbuysell.com GlobalBX.com

Real Estate

Researching Real Estate The value of every property is public information Source is individual counties or townships Information to look for: Sale price Sale date Mortgage amount Market value Assessed value Reources: Lexis Nexis NETRonline The Tax Assessor Page Zillow

Interpreting Real Estate Data The researcher’s job is not to appraise real estate Real estate can be an indicator of other assets – or not Real estate can be the gift itself – especially if the prospect owns multiple properties $1 million buys more real estate in some area than others Someone who owns valuable property may not be wealthy Property may have appreciated in value over a long period of ownership Property may be heavily mortgaged Recently purchased property is a good indicator of capacity Can work backwards to an estimated minimum salary figure Use mortgage calculator to figure monthly payments Lenders will generally require that a person’s income be at least 3x the mortgage A person who purchased a valuable property recently convinced the lender than he or she has the wherewithal to pay the mortgage

Foundations

Foundation Research Types of foundations What to look for Public charities file 990s Private foundations file 990 PFs What to look for Year covered Contact information Asset value Officers, directors or trustees Salaries paid Any large gifts made to the foundation Guidelines Grants paid Future grants committed

Interpreting Foundation Information If your prospect is a director of a private foundation, this might be another source of a donation Pay special attention to the guidelines – go to the foundation’s website if possible The grant history will help determine the kind of projects the foundation actually funds Getting a grant from a foundation requires the same personal cultivation as that needed for securing a gift from a person Family foundations can be a way to hide assets but… The foundation must give away 5% of its assets every year

Professionals

Researching Professionals Ziggs Search for Professionals Zoom Info ZabaSearch Doctors AMA Physician Select AIM Docfinder Medical Salaries Lawyers Martindale & Hubbell FindLaw

Filling in the Details

What If You Don’t Know… Where the prospect works FEC Hoovers Google Zoom Where the prospect lives Phone directory

Filling In The Details Foundation Affiliations Public Records Donations NOZA FEC State Political Donors One Step Birthdays Biographies Online Landings (Airplane Owners) Salary Surveys Google or Altavista Foundation Affiliations Guidestar Grantsmart Foundation Center Foundation Directory FC Search Taft Foundation Reporter Public Records

Making Sense of the Data Gift capacity is a portion of net worth and income Net worth=assets-liabilities

Distribution of Assets for Wealthy Families Households whose net worth is between 1M - 10M (Source:2001 IRS data, published in 2006) Page #40 © 2004 Blackbaud

The Art of Prospect Rating Philanthropic history Income based Slightly more than 2% of income goes to charity 5 year pledge=10% of income Asset based Make best guess of net worth >> philanthropic capacity is 2-5% of net worth Philanthropic capacity is 5% of total identified assets Average annual gift x 10 Consider places where the prospect may be influential

Prospect Research Resources www.lambresearch.com Prospect Research: A Primer for Growing Nonprofits APRA (www.aprahome.org) International Conference Great Plains Chapter Prspct-L (www.yahoogroups.com/prspct-l)

Tools You Might Buy LexisNexis for Development Professionals FC Search: www.fdncenter.org Waltman’s Donor Series: www.donorseries.com 10K Wizard: www.tenkwizard.com KnowX: www.knowx.com