The Fantasy of Net Worth

Dear Diary,

When conducting prospect research, a wealth indicator that we are all familiar with and include in our analysis is net worth. Net worth is defined as, “the value of the assets a person or corporation owns, minus the liabilities they owe” (per Investopedia). It is a helpful valuation and snapshot of financial standing.

However, some frontline fundraisers regard net worth as a sole indicator of wealth, and specifically, an indicator of giving. These two are not meant to be synonymous, they are complimentary, net worth and someone’s giving potential work together to formulate a conclusion (an estimated capacity range). Net worth works with additional indicators, including, past and current philanthropic giving to conclude on an estimated capacity. But to eclipse all other indicators, to only focus on net worth is to formulate a fantasy, a limited and misleading fantasy of a prospect’s capacity to give. This fantasy also places false confidence in the prospect’s ability to give at their net worth, which most donors hardly do.

Example: Mary Holiday has a reported net worth of $3.5 billion, she is considered an ultra-high-net worth individual (UHNWI), she is an heiress, and her wealth is solely based on her stake in the family business. Ms. Holiday has made a few 5-figure gifts, and prefers to serve on philanthropic and corporate boards. Financially, Mary Holiday has the capacity to give at over $100 million based solely on net worth, and from a bird’s eye view you could hold her to this amount because it is calculated by her stake in the company. Unfortunately, this is a limited analysis of her range. When you only utilize net worth, you miss the fact that her wealth is tied up in stocks, therefore, she is not actually liquid in the amount of $100 million+. Also, there is no summation of her compensation per her board services which could be readily available cash-flow, no review of the value of her real properties (hard assets), and no consideration for the philanthropic gifts she has made. I would estimate her capacity range below $100 million based on valuations/indicators and her stock, in this hypothetical scenario unless shown otherwise. 

I would also highlight for consideration, the organizations she serves, and where she has been a donor? She may have a superb financial standing, but would she be inclined to make a gift to your organization, at a 9-figure amount?

Through this entry, I want to drive home the point that the golden ticket is not solely knowing net worth, don’t cling to this number as though it will answer every question. What matters is knowing the full-picture of someone’s giving potential. The full-picture is developed through all the publicly available information that may not be flashy and controversial as “net worth,” a combination of all that makes a person a prospect, and turns them into donors.

There is no doubt that net worth is valuable information, however, it is not the only piece of information that matters. Please think about this.

Until next time, December 15th!