This post was originally produced for Forbes.
Tim Kachuriak, founder and CEO of NextAfter, one of the 500 fastest growing private companies in the U.S., is helping nonprofits raise more money using sophisticated data analysis.
Kachuriak expects to hit $4 million in revenue this year with 77 percent gross margins and 31 percent net margins, making the fast growing company highly profitable as well. Launched little more than five years ago, the company is listed as number 422 on the Inc. 500 list.
Kachuriak explains NextAfter’s approach to helping nonprofits increase online donations. “Our business exists to create a more generous world by using behavioral economics and applied research testing to discover what inspires people to give.” This allows nonprofits to increase donations by constantly A-B testing—comparing nearly identical ad copy to determine whether the difference between two ads will make a difference in giving.
The results of much of its client work is posted almost in real time on the research page of the company’s website, allowing any nonprofit—large or small—to benefit from the analysis they are constantly doing. In August, for instance, they compared the performance of two Facebook ads intended to capture email addresses for the firm. Both ads are shown on the page and the conversation data for each is provided. One of the nearly identical ads converted nearly twice as much. The statistical validity of each comparison is also shown.
The problem that nonprofits face is that charitable giving has not increased even as our society has become more prosperous, according to Kachuriak. “By almost every measure (income, wealth, GDP) we are living in the most prosperous time in modern history. However, the percent that people give to nonprofit organizations has been stuck at the same 2 percent of household income for the past 40 years. So the question is, if we are more wealthy than we have ever been, why are we not more generous?”
Kachuriak would like to change that.
So, NextAfter is constantly experimenting to learn what makes people give. “One way may be to better understand what motivates and inspires people to give. We believe that if we can decode what works in fundraising, we can then engineer a more generous society.”
“To accomplish this, we are using the greatest behavioral laboratory that has ever existed–the internet–to virtually peer inside the minds of donors and find out why they give,” he adds.
The biggest challenge he faces, Kachuriak says, is that nonprofits have limited overhead funding. “The greatest challenge is that nonprofit organizations by nature suffer from scarcity of resources– they do not have big budgets for Research and Development. So in order to fund our research into what makes people give, we help organizations optimize their fundraising efforts by applying the principles testing and conversion rate optimization that is being pioneered in the for-profit sector.”
In other words, the experimentation is done in real time in a live fire environment. By driving improving results it is easier for nonprofits to afford the effort.
The problem remains, however, that only large nonprofits are good candidates as clients. Small nonprofits simply don’t have the traffic to provide statistically reliable data from which to draw conclusions.
As Kachuriak notes, “One of the biggest limitations is the composition of the nonprofit market. 84 percent of nonprofits have annual budgets of less than $1 million. This means that they most likely do not have large donor bases, lists, or even web traffic which means that only the larger organizations have enough volume to actually statistically validate our results. This means that we are really only able to do our field testing with the upper 3.6 to 16 percent of the market.”
Kachuriak sees three potential benefits that can come from NextAfter’s success.
First, he hopes to see the creation of the most generous generation in history. “If we are successful in our mission of decoding giving–understanding what motivates and inspires people to give through real-world testing–then we can radiate our learnings out to the greater nonprofit community which may intern lead to a renaissance in modern fundraising and unleash the most generous generation in the history of the world.”
Second, he believes that by extension the work of nonprofits will expand and grow to the benefit of millions around the world who are aided by nonprofits. “You can imagine what [more giving] would do for the causes that the nonprofit community serves–more clean water for people that so desperately need it, more food, medicines, and support for those that can’t afford it, greater access to education, freedom, and information–and the list goes on and on.”
Finally, he believes that donors themselves receive an inherent benefit from giving. “Perhaps the greatest benefit to our world would be experienced by the donor herself–the more that we give to care for the needs of others, the less selfish we become and the more experience true happiness and contentment.”
On Thursday, October 20 2016 at 2:00 Eastern, Kachuriak will join me here for a live discussion about how nonprofits can improve giving—in some cases dramatically—by using more data driven approaches. Tune in here then to watch the interview live. Post questions in the comments below or tweet questions before the interview to @devindthorpe.