Building a $160k ARR Business

The world is changing. Wow, I don’t think I’ve ever started out a piece of writing with something that ambiguous and open-ended.

Everyday new technological advances come along. There are autonomous cars, AI that tickets you for jaywalking, and myriad other interesting (and scary) enhancements to our way of life.

There is an undeniable shift occurring on planet earth. Human beings (and computers) have more information available to them at all times than ever before. This information overload has led to some wacky and ingenious developments. However, one thing (at least in my four years of experience) has not changed with the times.

Since 2014, I have lived, breathed, and worked in the nonprofit sector. I haven’t been employed by a nonprofit, no, instead I have worked for a tech company building solutions for nonprofits. Over the past four years I have written nearly 100 blog posts, been interviewed on close to a dozen podcasts, and built one new product. It’s been a fun, interesting, and rewarding ride!

Information accessibility is at an all-time high, and it’s certainly impacting our society, but what I have seen from my professional career is that in the nonprofit sector we haven’t been able to keep up with our peers. As individuals, companies, and even governments evolve to exploit the benefits of information overload, nonprofits simply haven’t.

It was this realization, paired with some great foresight by my mentor, that our company, MarketSmart decided to build Fundraising Report Card. Some nonprofits would be able to catch the information wave, and others would not. With Fundraising Report Card we thought we could help as many organizations as possible get on board.

Information overload in the nonprofit sector

Not all nonprofits are laggards. Some organizations are incredibly forward thinking and robust. I always like to think about nonprofits such as the Internet Archive, or the National Trust for Historic Preservation.

These organizations (whose leadership I have gotten to know and engage with), are forward thinking. They caught the information wave and have been proactive in leveraging data. That’s not to say either organization is perfect — they’re both far from it, but they are at least leveraging data (information) to make strategic decisions.

traditional spray and pray fundraising

During this time of change there will be winners and losers. Just like their for profit peers, some nonprofits will figure out how to leverage data to grow their organization sustainably, while others will continue to go with “gut feel.” Those that rely on guesses will not sustain themselves, those that leverage information will.

Well known and well respected organizations that don’t hop on the data-driven train will be left behind. This isn’t my opinion, it’s simply the truth. Compare Charity Water and March for Dimes. One is leveraging data at every step of the donor journey, the other still sprays and prays their constituency like it’s 1980.

What is Fundraising Report Card?

Every product (at least those that grow and are profitable) needs to solve a problem. If you build something and it doesn’t help someone (or some organization) relieve some sort of pain, you aren’t going to have many customers.

With Fundraising Report Card, we set out to build something that made the barrier to entry lower for nonprofit organizations to leverage their data. You see, the issue nonprofits face is not in collecting information — they truly have plenty. Instead, the issue they face is making sense of all that information and turning it into action.

Business intelligence (BI) is an abstract and nebulous phrase within the walls of a nonprofit. To some BI means you need Tableau, to others, BI might signal the need to hire an outside consultant to produce a 50 page report. BI, for better or worse, tends to fall upon deaf (and unaware) ears.

This isn’t the fault of nonprofit staff however. Third party vendors in the nonprofit space (like the company I work for), are notoriously bad. The products they make are clunky, their systems are outdated and antiquated, they frequently tie up organizations in multi-year contracts that they cannot get out of, etc, etc.

For us, this created a unique opportunity to produce Fundraising Report Card.

Fundraising Report Card is essentially a simple version of Tableau that is geared towards fundraising data. Instead of building something overwhelming and clunky, we built something dead simple and easy to use. Users upload their anonymous donation data to the web application and then receive a series of reports, interactive dashboards, and insights.

You can read a full overview of the platform here.

For many organizations, what we created could help them reach the promised land (leveraging data) in a way that was respectful of their knowledge of data analysis, skill-level with software, and limited time and finances they could invest.

We had built something that solved a problem and people were buying it.

How we grew Fundraising Report Card

Growing the business didn’t happen overnight. Attaining $160k in ARR over two years is far from the most impressive business feat. Our growth isn’t staggering, and our customer retention could (and should) be better. How then did we grow to where we are today?

I did one thing, and I did it well. I became an expert in the field.

It may seem foolish to suggest this, but over the past 24 months I transitioned my career from designer, to developer, to nonprofit data guru. I’m not kidding either. My blog posts have been read over 100,000 times online, an article of mine was published in an industry journal, and I’ve even been paid to speak (what 21 year old knows what an honorarium is?).

This marketing approach (becoming an expert) wasn’t intended to boost my ego (although I’m sure it did), instead it was utilized to position Fundraising Report Card as authoritarian in a space that lacked any real leadership.

It worked.

If you look at our Google Analytics data you can see that thousands of individuals arrive at Fundraising Report Card via organic search traffic each month.

google analytics screenshot

This is great, because those individuals are searching for information, things like, “What is donor lifetime value?” and they end up reading one of my articles. After reading the article they may subscribe to the blog, sign up for the free version of the software, or leave the site. Regardless of their next action, they’ve begun to build some familiarity with Fundraising Report Card, and that’s a big win. Plus, visitors from organic search traffic are exhibiting a need — they’re obviously looking for information to help them solve some sort of problem.

Investing time, energy, and effort into original content has proven incredibly valuable for us to grow the business. But, marketing (lead generation) is only one half of the battle, the next is sales (closing deals). On our path to $160k ARR we did a few things well in this realm as well.

Closing deals

When you build something brand new you have a lot to learn. What are people willing to pay, how do they want to pay, will they even pay? The questions go on and on.

One of the things we did best, especially when we “launched” Fundraising Report Card, was that we got on the phone with our sales prospects. Fundraising Report Card has a freemium business model, which means there is a free version of the software with limited features and a paid version that provides more value.

Our first customer came from me getting on the phone with the (then free) user and discussing his specific needs and how we could help address them. This pattern of behavior has continued on to today. Just this past week I spent time on the phone with a development director of a nonprofit helping her understand what she has access to within Fundraising Report Card.

This high touch and involved sales process was heaven sent at first, but today it is one of the key contributors holding Fundraising Report Card back from more explosive growth.

There is a certain price threshold that indicates whether a product can be sold through a high touch sales model, and our price points (tiers ranging from $200 to $5,000 annually) are not high enough. When you come to this realization the first thought that goes through your head is, “How can we mitigate sales prospects from needing our assistance in order to purchase?” and myriad ideas come to mind. The issue with this is the realization that you have limited resources.

Our team on Fundraising Report Card was stretched thin. I couldn’t get engineering time to help me build a more friendly on boarding workflow. Adding seemingly small features that would assist users in selling themselves in the software was unattainable, thus high touch sales has persevered.

Unfortunately this hurts profitability (for two and half years my time has been spent selling when it could have been happening without me), but on the plus side it has allowed me to learn the exact roadblocks we face in truly automating the sales process.

For example, a lot of my conversations with sales prospects focus on what data to analyze. You may not know it (honestly, you shouldn’t know it), but nonprofits have different ways of “coding” their data in their database. From my high touch sales engagements I’ve learned the idiosyncrasies of hard and soft credits, pledges and pledge payments, and more. All of these (seemingly) minute details impact the value that Fundraising Report Card is able to provide. Since we are aware of them now, a salesperson can be prepared for these types of questions and provide workaround solutions, increasing the likelihood of a sales occurring.

High touch sales has its pros and its cons.

Retaining users year over year

Acquiring customers isn’t that important. What’s truly on the top of my list is retaining the existing base of paid users. Any recurring payment product lives and dies by retention rate and it’s no different with Fundraising Report Card.

Since the product has been on the market for over two years, we have learned a lot about retaining nonprofit clients. First there were two big realizations:

  1. The staff member that bought the subscription might not be there a year later;
  2. The credit card on file most likely will need to be changed.

There is notoriously high turnover amongst nonprofit professionals, and that has been a retention challenge for Fundraising Report Card. Imagine Jane purchases Fundraising Report Card, trains herself, and then moves to a different position 8 months later. A year passes and the organization gets an invoice for a product that no one else has ever heard of. What do you do? You have to start the sales cycles all over again. This happens too frequently.

Another common challenge we face is out of date payment information. You’d be amazed how many company credit cards go out of date each year… at times it feels like Fundraising Report Card has gotten all of them. Even when credit cards are still in service we run into “do not honor” rejection codes from banks. Too frequently we have to engage with our point of contact at the organization to ask them to talk with their billing department to approve the charge.

All fun stuff.

Where is the future and how big can it get?

There’s a lot of potential with Fundraising Report Card. Over the past two and half years more and more nonprofits have jumped on the data-driven train, but there are still plenty that have yet to come on board. In particular, smaller nonprofits (think those that raise less than $1M a year) could benefit from Fundraising Report Card.

One of the biggest problems Fundraising Report Card solves is one that we did not recognize when we initially built the software, that is for reporting key metrics to the board. Unfortunately, not much of our marketing or product are geared towards board reporting.

When we initially built the software we focused on business intelligence, for example you can click into segments of the reports, manipulate them, and then export data. However, what users really want is a better way to print key metrics in a presentation-ready fashion. We didn’t know that at the time, and since then we haven’t invested the engineering time to make it happen. Nonetheless, hundreds of nonprofit professionals use Fundraising Report card to do just that.

There is an awesome opportunity to take what we’ve learned over the past 24+ months and re-imagine Fundraising Report Card. With a focus on board reporting, providing more actionable insights, and removing some of the most unused features, we could (and should) be looking at a $1M ARR business.

As I have taken over a new role at MarketSmart, I no longer solely focus on Fundraising Report Card. Plus, with our limited engineering resources we are not in a position to modify things immediately, however, if I still was in charge, and if I did have engineering resources to make changes, here is what I would do:

  1. Reposition Fundraising Report Card as a database agnostic add-on;
    • For example, a competitor in the space offers their own solution that is positioned as an add-on for specific CRMs. Fundraising Report Card should do the same. Imagine Fundraising Report Card for Raiser’s Edge. Fundraising Report Card for SalesForce. Etc. This would help with recognition amongst existing CRM users and it would also position Fundraising Report Card as complementary, and not competing against existing platforms (ie, we make your existing reporting even better, give us a try).
  2. Focus high-touch sales efforts on a chapter-based organization;
    • Instead of signing up $200 here and $500 there, I’d engage with leadership at chapter based organizations (think Boys and Girls clubs, or YMCAs) and try to provide a comprehensive solution to their network. This could (and should) be a five or six figure annual agreement.
  3. Make it easier to get to the “aha” moment;
    • Right now, for more than 50% of all paid users, they required some human touch to reach their “aha” moment. That’s not sustainable, unless you drastically raise prices. For many users the “aha” moment is realizing that they have so much interesting and compelling data in their database that they previously weren’t aware of, but the issue is, they currently require some handholding to make that connection. Well designed software should mitigate that need, but someone needs to scope that out.
  4. Re-up marketing with cornerstone content;
    • It’s been a year since I published an e-book on Data-Driven Fundraising. That e-book was one of our best marketing efforts, and Fundraising Report Card could greatly benefit from providing existing users with more content of that nature. This would help with retention and acquisition because both existing users and new users could refer to it to help make sense of all the information they have access to through the software.

What do you think?

So that’s that. In two and half years Fundraising Report Card has grossed over $200k in revenue, assisted nearly four thousand nonprofits, and has allowed me to become an industry expert with no real qualifications. I told you it’s been a fun ride!

If you’ve made it this far, what do you think of the little business we’ve built? I look forward to hearing your thoughts.

About the author

I'm Zach Shefska, welcome to my personal website. I'm currently working on CarEdge. I like to travel, write, and make pottery.