Prospect Research 101 Presented by David Lamb Prospect Research Consultant Blackbaud Analytics.

Prospect Research 101

Presented by David LambProspect Research Consultant

Blackbaud Analytics

David Lamb | Page #2© 2008 Blackbaud


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

Inte

rest

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 – – Appreciated asset– 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



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

Estimating Private Company Value



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 Thumbhttp://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– 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– FEC

– Phone directory



Filling In The Details

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



Page #40© 2004 Blackbaud

Households whose net worth is between 1M - 10M (Source:2001 IRS data, published in 2006)

Distribution of Assets for Wealthy Families



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

Prospect Research 101 Presented by David Lamb Prospect Research Consultant Blackbaud Analytics.

Documents

Transcript of Prospect Research 101 Presented by David Lamb Prospect Research Consultant Blackbaud Analytics.