Determining Giving Ability
Giving Ability =
total giving ability over 5 years, across all philanthropic lines.
General Rule of Thumb
5% of known assets
Using Age and Income to determine Giving Ability:
http://www.uvm.edu/~prospect/rating.htm
Using Past Giving to determine Giving Ability
{2 or 4} x annual gift size x 5 years
Gift size x 20 – for strong history
OR
Gift size x 10 – for weaker history
Using Real Estate to determine Giving Ability
Northwestern University:
5% x primary residence if < $1M
OR 15% x primary residence if > $1M
Plus
15% of each secondary residence
- Include commercial properties with company evaluation.
University of Virginia
Property > $400K – x 5 x .05 = Giving Ability
Property < $400K – x 5 x .03 = Giving Ability
9% x Property >$400K = Giving Ability
15% x Property > $600K = Giving Ability
General rule:
5% to 20% of real estate holdings
Using Salary to determine Giving Ability
10% to 25% of income = Giving Ability
5% of (age x total income) ÷ 10 = Giving Ability
Estimate salary based on market or purchase value of home
25% to 40% of total purchase price or current market value of primary residence. Understanding of prospect's profession as well as locale's real estate market is required. Depending on profession, use 30% to 40% of the value. This formulae seems to work best with sole owners of propeties, private company owners, financial-types, and physicians. This can be used alone, but also offers a nice benchmark to compare with data gleened from a reputable salary survey.
Stanley-Danko Formula
Age x Total Income ÷ 10 = Net Worth x .05 = Giving Ability
Using Stock Holdings to determine Giving Ability
If direct holdings are < $600K (or if most of found assets are stock)
Holdings x {1, 2, or 3} x 5%
If direct holdings are > $600K (or if clearly affluent)
Holdings x {3, 4, or 5} x 5%
General rule:
Giving Ability is 0.05% to 15% of stock holdings
Another UVA Rule for Stock Holdings
1% to 4% of holdings $499,999 and below
5% to 9% of holdings between $500,000 and $999,999
10% of holdings $1million and above
Using Private Company ownership to determine Giving Ability
25% to 50% of holdings (or sales) x 1.5% to 5% of that = Giving Ability
(Corp value OR sales) (% of ownership) x 1.5% to 5% = Giving Ability
(1.5% to 5% of private company equity = Giving Ability)
Example: $10,000,000 valuation x 50% ownership x 5% = $250,000
For sole owners:
$100,000 in gift capacity for every $1 million in company sales.
For multiple owners:
For shareholders, calculate the percent of ownership and adjust the sales and gift capacity accordingly. For example, for a 50% owner of a $10 million company - $50,000 in capacity for every $1M in sales, but only using 50% of the sales (so $5M), would be $250,000.
Be aware of:
company growth; increasing revenue; revenue per employee; second-round funding for venture capitalists (indicates long-term growth potential).
Corporate & Foundation Ratings
2% of corporate revenue
-adjust with other assets, revenue, and reported giving
5% of total foundation assets
-adjust with other assets, revenue, size of organization and other grants.