Pareto – So Out of Touch…

pareto-principle-693315__480We have all heard of the Pareto principle that 80% of your income comes from 20% of your donors, and I have lived by that over the years, building income streams from donors that reflected his theory. It wasn’t always easy to segment donor-bases, the technology had to be capable, the segmentation levels had to be right and the top donors had to have a whole other level of attention; but when my teams persisted, the 80:20 principle held true, and eventually we had worked up that 20% into some very significant donors – occasionally we even exceeded that target.

Today it is a whole new ball-game with tiny minorities owning huge percentages of this country’s, and indeed the world’s wealth. According to Oxfam, put the right eight people on a bus and you have a bus-load worth more than 50% of the world’s wealth. What price a ticket? Well, you would need to be a billionaire who could afford to drop one of those billions out of the hole in their trouser pocket and not be that bothered.

The same pattern is running through countries, regions and cities around the world with the top few wealthy people owning a hugely disproportionate percentage of wealth, and of course it also comes down to what percentage of your donor-base should you be able to build into a massive income stream. That, however, is not quite the right question and very possibly misleading. It is one thing to thank the Office of Data Information for that, in the UK at least, we can no longer wealth research our donors without asking them first. This means, of course, that we are driven to research new people who may be in sympathy with our aims because they support similar charities and have the right level of wealth.

That certainly directs our attention in the right direction, away from our existing donors and into new much more profitable realms. If we are indeed to find those very, very rich donors then they are probably not lurking among our present donors, but out there waiting for us to knock on their doors. You know the classic reply to the question, “Why haven’t you given to us before?” – “Because you never asked me!” So, who haven’t you asked? That is the central question to start a re-evaluation of your targets and perhaps a move from 80:20 to 95:5 at which point you may not feel you are far off the eggs in one basket problem; but say, you turn over £1m in fundraised income then 95% is £950,000 and if you have 10,000 donors that may come from 500 individuals which is rather a lot of baskets and incidentally very unlikely to be all newly researched people. It is much more likely that you can find 100 prospects and whittle then down to say, 25 suspects and end up with 5 to 10 significant donors. Of course, going back the Oxfam model, that is all you need to massively increase your income. If your case for support is good enough.

In my next blog I will look at how to build a case for support no one can resist; but I know the burning question in your brain, “Just who are those eight people and what is their mobile number.” Oxfam lists the following with these backgrounds: Bill Gates, Amancio Ortega, the founder of the Spanish fashion chain Zara, and Warren Buffett, the renowned investor and chief executive of Berkshire Hathaway. Also Carlos Slim Helú: the Mexican telecoms tycoon and owner of conglomerate Grupo Carso; Jeff Bezos: the founder of Amazon; Mark Zuckerberg: the founder of Facebook; Larry Ellison, chief executive of US tech firm Oracle; and Michael Bloomberg; a former mayor of New York and founder and owner of the Bloomberg news and financial information service. Sorry, I don’t have them on speed dial and if I did…

John Baguley, Chair, GroupIFC.com