Category: Product Development

  • 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.

  • One Year Later — Launching the Fundraising Report Card!

    Back in October of 2015 I wrote an article titled Notes From Creating a New Product. In that post I shared my excitement about beginning to work with Greg Warner, the CEO of MarketSmart on a new software. Today I’m even more excited to share an update on our progress.

    If you’ve chatted with me in person, I’ve probably tried to explain to you what the Fundraising Report Card is. But, to be entirely honest, I most likely left you feeling confused — I struggle to describe what I’ve been working on for all these months. By writing it out here I hope that I’ll be a little more effective in sharing what exactly I’ve been up to.

    What is it

    The Fundraising Report Card is a business intelligence and data analysis tool. The Fundraising Report Card empowers nonprofits to make data-driven decisions.

    Data-driven decision making is such a buzz phrase, so let’s breakdown what it really means. And, more importantly, what it implies in the context of fundraising at nonprofit organizations.

    First though, I need to share a brief overview of how donations work.

    When you donate $20 to Save the Children (or any nonprofit organization) 35% (sometimes more, sometimes less) of that money goes towards overhead expenses. Overhead expenses include paying for consultants, investing in infrastructure, and sending letters to you asking for more money. (Yes, it’s a tough reality, but your donations are part of what gets invested in the “fundraising budget”). In a perfect world all $20 of your donation would go straight to the children that need to be saved — but in reality there are operating costs that need to be paid.

    Okay, with that in mind let me frame how important data-driven decision making really is.

    Right now, in this very moment your favorite nonprofit is spending thousands and thousands of dollars on direct mail appeals to try and raise more funds from you. There is nothing wrong with that (although some people might argue otherwise), they need to raise money and they need to ask you (and others) to help. Fine.

    Behind the scenes most nonprofits are relying on a consultant (or a consulting firm) to help them decide who to mail to and what to mail to them — should this letter with a picture of a starving kid go to this list of donors or that list? This makes sense, right?

    Like any good business the nonprofit wants a sound strategy before taking any action. Spending an extra $5,000 or $10,000 on a consultant to try and make sure you get the highest return on investment (ROI) makes sense.

    This is the current system — hire a consultant, send out a bunch of mail, wait for results. You experience it, I experience it, it’s kind of shitty from the donor perspective to be honest (you end up with a lot of letters in the recycle can). Of course there are different techniques for different segments of donors (major donors don’t get mailed letters, they get a fundraising officer at their doorstep), but the process is generally the same.

    It should be apparent that there are a few obvious issues with the current fundraising paradigm.

    The Fundraising Report Card disrupts this pattern.

    A user of the Fundraising Report Card (usually a fundraiser or executive at the nonprofit, but also consultants) uploads anonymous donor data to the Report Card. With this data the Report Card calculates fundraising key performance metrics. Also known as, “really important statistics we should have been monitoring and analyzing for the past few years”.

    Here’s an example, taken straight from the for-profit sector — customer retention broken down by engagement channel. Think about it for a moment, what do you think the odds are that Netflix keeps track of how many users they retain each month? High, right? They have shareholders to report to every quarter, and you better believe those shareholders want to know how many users Netflix has been retaining. (More on this here).

    Internally, Netflix may break down that metric even further. They might segment the data by plan type and demographic information. What is our retention rate among users paying $20 or more a month on the east coast?

    Answers to questions like these help inform strategy and are fundamental in setting realistic goals.

    Yet, when it comes to the nonprofit sector a void exists. Sure, data abounds, but how can a fundraiser, executive director, or director of development really be asked “what channel provides your best ROI?”, most don’t have the tools to answer that question. And if they have the tools, they are not easy to use. They are inconvenient and clumsy… not to mention expensive. This is the void that the Fundraising Report Card fills.

    By providing fundraisers, executive directors, consultants, and and even board members with access to easy to comprehend key metrics and interactive reports, we’ve created a platform that allows for data to be a vital part of decision making.

    For example, we generate a retention analysis report, just like the one Netflix would use internally. And, one of the great things we do right off the bat is segment that data by giving level. Users can take it one step further and upload historical data based around specific appeals, and before they know it, they are taking a peek under the hood of their fundraising machine.

    How is our donor retention among mid-level donors who have received our end of year appeal letter? With the Fundraising Report Card the nonprofit can answer that question, and depending on the answer they can adjust their strategy. Ultimately the nonprofit cuts costs and invests in fundraising efforts that prove to have the highest ROI. Cool, right?

    You can learn more about the Fundraising Report Card here, and you can read a short case study from one of our early users here.

    What I’ve been doing

    Since August of 2015 I’ve been working with Greg to develop our strategy for the Fundraising Report Card. Beginning in January of this year, I was given the resources (money, time, people) and the responsibility (hit deadlines, set product demonstrations, build my network) to take this idea and make it into a reality.

    On April 4th 2016 we launched the beta version of the Fundraising Report Card. Leading up to that event I spent most of my time focused on product development. I consider this my “product manager” phase. A lot of my time was spent on:

    • developing a product road map
    • determining which features would be included in which release
    • managing expectations of key stakeholders
    • learning about software as a service business models
    • reaching out to industry leaders who were interested in providing feedback and testing
    • designing the logo and front-end of the application
    • and writing a lot of Angular and JavaScript code (user interface stuff)

    The objective early on was to get a minimal, functional, viable product in the hands of our potential users. We started working towards our April 4th release date at the end of February. We hit our deadline and we got plenty of engaged users to test it out. We found a lot of bugs, got a lot of great suggestions and learned a ton about the market we were trying to position ourselves in.

    After the initial product was out in the wild I pivoted my focus towards getting people to use it. And, most importantly, getting those people to talk to me. This was, and still is part of the “collect feedback” phase. I’ve spent a lot of time…

    • reaching out to people on LinkedIn
    • setting up screen-share demonstrations
    • holding phone calls with existing users
    • hosting webinars with industry groups
    • configuring automated emails to nurture and engage users
    • and playing the role of “support agent” on our live-chat widget

    Today my role has evolved even more. Elements from the product management, and collecting feedback stages are still part of my day-to-day, but now I have started the transition into “sales”.

    This stage has involved a lot of…

    • researching pricing psychology
    • developing relationships with potential “partners” (consultants, consulting firms, data CRM companies)
    • organizing sales materials
    • building the foundation of a sales funnel (deal stages, workflows, etc.)
    • writing marketing and sales copy
    • talking with more and more users
    • and getting people (nonprofits) to give me their money

    Sounds kind of fun, right?

    Moving forward

    Taking the Fundraising Report Card from idea to fruition has been an educational, challenging, and unbelievably fun process. Yet, the most exciting and compelling moment so far has been receiving supportive feedback from users.

    For example, I recently I completed our first case study. The client, the Director of Philanthropy at a multinational relief organization with over $60 million in annual budget, used our beta tool and had a great, positive experience.

    Creating that case study meant talking with the client and learning how they used our platform. Hearing their Director’s comments and learning how powerful our software was for them made me feel vindicated.

    Receiving positive feedback is some sort of validation for all the work our team has put into this project. For me personally it has helped frame how important what we are working on really is.

    Learn more

    If you’re interested in learning more about the Fundraising Report Card please take a look at our website (press play on the video and you’ll even get to hear my voice!).

    If you have any questions for me, like, “Zach, how the hell did you end up making some data analysis tool for nonprofits?” please don’t hesitate to reach out.

    And finally, if you want to learn more about the nonprofit sector and how you can make an impact check out some of these resources…

  • Agile Modeling & Activity Diagrams

    Recently I have been spending a considerable amount of my time developing an idea for a new business. I am working with the CEO of MarketSmart to develop an innovative application that could potentially reshape a niche portion of the non-profit world.

    Greg, the CEO of MarketSmart who I am working closely with has been giving me guidance during this process.

    For the past month or two I have been working on a “scope” document. (More on that below.) But now, I am beginning the process of creating activity diagrams and focusing on agile modeling.

    I whole hardheartedly intend to start my own business in the near future. My personal Big Hairy Audacious Goal (BHAG) for the next 3-5 years is to be operating my own company.

    The first day I interviewed for the web developer position at MarketSmart I mentioned that desire to Greg. In between working on client related tasks I have found myself making progress on this new product. I occasionally remind myself how fortunate I am to be working with a seasoned entrepreneur who is not only willing, but wanting to teach me anything and everything involved in this process.

    Staying late at the office to make progress on this project feels like I am taking night class. Who knew school could be fun.

    A few weeks back I posted a short article called Notes From Creating a New Product. I touched on four key theories I had picked up on during my first month of working with Greg on the new product.

    During that month I was focused on developing the product scope. For that I found myself using Microsoft Office Outline. In Outline mode I created headers that represented pages, and sub-headers that related to page elements and page functions. In addition to writing thousands of words in Outline mode I created a series of page mock-ups in Adobe Illustrator. The mock-ups showed how the user would sign up, enter their data and view their “dashboard”.

    Now, a few weeks later I have moved on from scoping out this idea, to modeling how users will interact with it. The goal here is to create a presentation that can be shared with technical professionals. These people should be able to look at this presentation and suggest what tech stack options are in play, and how long it would feasibly take to develop. I started to engage in this modeling process when I created page mock-ups in Illustrator, but that simply was the tip of the iceberg.

    Here is what I have been learning and researching. I plan to implement these new techniques for this project within the next two weeks.

    Activity Diagram

    Greg has a large network of friends, business partners and advisers. He took the scope document I created in Outline and the mock-ups I put into Powerpoint and shared them with two highly technical people. Their response was to have me create activity diagrams.

    So I researched and figured out what activity diagrams are.

    UML 2 activity diagrams are typically used for business process modeling, for modeling the logic captured by a single use case or usage scenario, or for modeling the detailed logic of a business rule. Although UML activity diagrams could potentially model the internal logic of a complex operation it would be far better to simply rewrite the operation so that it is simple enough that you don’t require an activity diagram. In many ways UML activity diagrams are the object-oriented equivalent of flow charts and data flow diagrams (DFDs) from structured development.

    State Diagram

    Next I was instructed to look into state diagrams. This was another term I had never heard before and more researching ensued.

    UML state machine diagrams depict the various states that an object may be in and the transitions between those states. In fact, in other modeling languages, it is common for this type of a diagram to be called a state-transition diagram or even simply a state diagram. A state represents a stage in the behavior pattern of an object, and like UML activity diagrams it is possible to have initial states and final states. An initial state, also called a creation state, is the one that an object is in when it is first created, whereas a final state is one in which no transitions lead out of. A transition is a progression from one state to another and will be triggered by an event that is either internal or external to the object.

    Unified Modeling Language

    After researching activity and state diagrams I did a google search for “uml”. The acronym was coming up a lot in my reading, and although it had not been mentioned by Greg I thought why not read more about it.
    Unified Modeling Language (UML) is a standardized modeling language that (from my research at least) is mainly used for software development. UML enables developers to create models of highly complex processes that can be easily interpreted by others.

    Agile Modeling

    After researching UML I found myself stumbling upon the phrase “agile modeling”. I have frequently seen the word agile and scrum pop up on hacker news, but I had never taken the time to research what either meant or referred to.

    While reading about both agile and scrum methodologies I found myself thinking about activity diagrams. Applying th ideas of scrum product development are further down the line. For now, my main priority is modeling user interactions with the application. For that, agile activity diagrams seem to be the way to go.

    Wireframes

    The last request Greg’s friends had of me was to create a wire frame sitemap. Although I enjoy designing in Illustrator, creating 50+ pages will be a task that I reserve for software more well suited. I plan on using Balsamiq to create a site map and show user flow throughout the app.

    And that is what I have been learning over the past few weeks. Fun stuff. Important stuff. Practical stuff. I can’t wait to put it in action!