12 Things More Important Than Features When Purchasing a Donor Database

fundraising CRM

The last three decades of providing the best in nonprofit donor database systems has enabled detailed insights into just about every system selection process possible. Those selection processes have included two inch thick requests for proposals to spreadsheets with hundreds of columns/rows to massive demonstration scripts resulting in day long demos.

Virtually all of them are severely flawed!

Why?

They all focus of the single aspect of the various systems that now changes radically every year, namely the product’s FEATURE SET.

Since 99% of all newly implemented nonprofit donor database systems are hosted on the Internet as a web application, they are easily modified weekly, if not daily! Such rapid and real time modification allows feature sets to change so fast that printed documentation is rendered useless within a month or two of being published.

So why do so many organizations make the the current feature set 90% to 95% of their decision making process rather than the 20-25% it should deserve? There are two primary reasons:

Old habits are hard to break. Back before the turn of the century into the year 2000, virtually all systems were installed on-site and change was slow so the main features were mostly in place for the 7-10 year average lifespan of a single solution.  Fortunately, that is far from the case now!

Deeper insights come from penetrating questions. Asking the key 12 questions below requires peeling back the external layer of the relationship with the system providers. It involves asking several questions those providers are often reluctant to answer because the answers tell a different story than a flashy demo does for most.

However, taking the time to look beyond what your donor database can do also serves in assisting to build a deeper relationship with your system partner as mentioned below.

Preparing For A 7-10 Year Relationship

Well enough for the historical background, let’s outline the questions, which truly reveal who your organization would like to have a 7-10 year close relationship with, and more importantly who to avoid:

  1. What is your customer retention rate?
  2. Is your company profitable?
  3. Does your company have a top-notch CPA firm?
  4. Is your company carrying any debt?
  5. Are they funded by outside investment capital?
  6. What is the company’s year over year growth rate?
  7. Are they supporting any custom versions of their application?
  8. Do they have a 1-2 year product roadmap?
  9. How many times have they increased their prices in the last 10 years?
  10. What percentage of their employees have previously worked at a nonprofit?
  11. What are the majority of the customer reviews on 3rd party websites saying?
  12. What percentage of the company’s business comes directly from nonprofits?

Hopefully, a relationship devoid of surprises, such as being forced to switch to another product halfway through the relationship or worse yet witnessing your partner go out of business a few years in.

Here are our 12 best questions. Please let us know in the comments section any others we should add based upon your experiences.

1. What is your customer retention rate?

Perhaps no other statistic is a better indicator of the type of customer satisfaction you will experience than knowing this fact. Churning through customers by being less than 95% retention means previous users dislike the customer service, the day to day usage of the product and other vital factors. Plus, this is the sum result of satisfaction for all customers, not just the 2-3 pet references given to you to call…

2. Is your company profitable?

Unless this business has a long list of patient funders, being profitable is the ONLY way they can stay in business for the full 7-10 years of your future relationship!

Just ask to see the most current Annual Income Statement based upon the most recent 12 months to properly verify. Be careful not to have them tell you about cash flow or cash on hand due to investors providing funds or worse yet due to large debts. Those funds have many strings attached as you will see below.

3. Does your company have a top-notch regional, or better yet, a national CPA firm do a full Certified Audit each year?

This is strongly tied to the second question above. Without such a certification, the financial statements could be far from accurate or worse yet even fabricated in some manner. The various footnotes in such a certified audit can also provide fruitful insights.

4. Is your company carrying any debt?

There are many long-term providers of nonprofit CRM software that cannot cover their expenses without maxing their credit line or the usage of a multitude of credit cards. You should be aware of that because the loss of 2-3 larger customers might be the end of the line.

Next, keep in mind many newer startups issue a large amount of debt instruments that may or may not convert to equity ownership. Just like below, this may mean their very existence is based upon the success of the next round of funding. You need to know this before committing to a 7-10 year relationship.

5. Are they funded by and existing on outside investment capital?

If your possible partner for your new system is not profitable their very existence could be via the meager runway of a certain number of months provided by investment capital.

This means within your potential provider’s business there are owners who often have no relationship whatsoever with you the customer and have as their main objective the largest return on their investment possible.

In many cases, the investors own “Preferred Stock”, which means they and they alone decide the fate of the company. They can sell the business at any time to whom they choose, even if it means the product development, and day to day support are ended abruptly!  (This has happened over and over with key vendors serving the nonprofit sector.)

Please ask who owns what percentage of the business, do they work there and is preferred stock involved. You will be glad you did in the long run!

6. What is the company’s year over year growth rate?

You truly want to know if your organization is one of the few nonprofits investing in this company’s technology and vision for the future. The growth rate is a key indicator of their ability to stay in business and to provide you and your team with innovative new ideas and proper support for the next 7-10 years.

Be especially careful of any company growing less than 10-20% per year, and truly avoid those potential business partners not growing at all or worse yet, shrinking. I am surprised this question is seldom asked since it is a barometer of so many items!

7. Are they supporting any custom versions of their application?

Supporting various customized versions of any application multiplies the complexity enormously of any system provider’s business. Even for basic day to day support, the exact customized version must be verified before any help can be rendered.

On the product development side, such customized versions elongate product innovation and development. In fact, virtually all innovation ceases!

Going down the custom version route, simply begs for more customization focused in on a few vocal customers, who are willing to fund keeping their internal processes the same year after year, no matter what innovation and breakthroughs are happening around them!

8. Do they have a 1-2 year product roadmap?

One of the best indicators of proper product leadership, future innovation and overall company maturity is a properly documented and researched product road map.

Such road maps provide a direct look into how rapidly your existing solution will be improving each month. During the introduction section of this post we mentioned the weekly changes web based applications have, asking for and evaluating your prospective partner’s product road map is infinitely more valuable than verifying what might have been in place for ten years or longer.

The lack of a strong road map points to lack of innovation and therefore your ability to radically improve the funding of your mission over the 7-10 life of your system.

9. How many times have they increased their prices in the last 10 years?

Such increases are not inevitable in today’s technology world!

The costs of providing the infrastructure for web based application continues to be more economical year after year. Add to this, the pure economies of scale that adding and supporting a large number of new customers to the existing customer base brings and you can see that a pure web based system provider with a decent growth rate should have no need to increase prices.

Seeing such price increases should raise your awareness that perhaps the answers to questions # 1, 2, 4, 6 and 7 are not what they seem.

10. What percentage of their employees have previously worked at a nonprofit?

The amount of sector related knowledge, insights and perhaps most important empathy are directly related to your system provider partner’s staff experience.

Dealing over time with people who have walked in your shoes facing the nonprofit world’s unique challenges during all aspects of your 7-10 relationship, ranging from the sales process, through implementation, to day to day support, will be a superior experience.

11. What are the majority of the customer reviews on 3rd party websites saying?

We are in a connected world. Do you check the reviews of a new restaurant before going there?

Please take full advantage of this key evaluation criteria for selecting a system provider partner for the next 7-10 years!

(It is far more important to your future than what features you check mark in an evaluation spreadsheet!)

Such reviews provide insights into the type of partner you will be spending up to 10 years with.

12. What percentage of the company’s business comes directly from nonprofits and what percentage comes from the product you are considering?

Many nonprofits learn far too late that the majority of their system provider partner’s resources are being focused on other products and services rather than the ones they are using. Introducing a new nonprofit product is often an attempt or just an experiment with diversification. Many are not still in existence a few years down the road.

If the system provider just decided to rename some version of a product as their nonprofit version without truly building it from the ground up to serve nonprofits engaged in fundraising you will always be the voice seldom heard.

In some situations, such companies do not even provide direct support for the nonprofit version forcing customers to search out high priced consultants, who do not receive product revenue, therefore needing to fully support themselves via higher hourly fees. Keep in mind such consulting firms come and go, often changing to some other market that is hot in the future.

Find the exact percentage and apply your common sense to help pick your long term partner.

The 12 questions above are essential in providing insights for your selection of the very best partner for a potential 10 year relationship. Please keep in mind so many aspects of your future happiness is based on far more ranging aspects of the relationship than the product’s current features.

Please let us know if the above are beneficial as you undertake the process of finding your next long term system provider partner. May happiness and monumental increases in your fundraising be part of your future!

The Buyer's Guide to Fundraising Software

Jay Love

Jay Love

Co-Founder & Chief Relationship Officer at Bloomerang
A 30+ veteran of the nonprofit software industry, Jay Love co-founded Bloomerang in 2012. He currently serves on the board of the Center on Philanthropy at Indiana University and is the past AFP Ethics Committee Chairman.
Jay Love
By | 2018-08-27T11:41:55+00:00 June 7th, 2018|Nonprofit Management, Software|

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