Specialist
Former executive at Ministry Brands LLC
Agenda
- ChMS (church management software) sector trends, overall operating environment and demand trends
- Competitive dynamics among key players such as Rock, Pushpay, Planning Center Online and Blackbaud
- Product differentiation, pricing power and sales expansion strategies
- Customer acquisition and switching dynamics, touching on key decision-making criteria
- 2023 outlook and roll-up trends
Questions
1.
Could you give a brief overview of the faith-based software or ChMS [church management software] sector? What top 2-3 key trends or drivers do you think are most important for the investment community to pay attention to when thinking about this sector?
2.
Do you think that the giving solutions tools are the main landing point in the platform for ChMS or faith-based software? Might membership or event management tend to be the introduction for most customers? Which applications are we mainly talking about in the suite and what are the main landing or most critical points?
3.
Could you expand on what the adjacent product categories are and explain everything in the suite that can be attached on?
4.
How can a key vendor go about identifying who the decision-maker is and then marketing tools to them respectively, starting at the mega-church or large religious organisation level? You mentioned it can get a bit complex, and this seems to drive a lot of the key unit economics for adoption of these solutions in general.
5.
What are the typical procurement cycles for faith-based software or ChMS? If we’re talking about whether or not this is a particularly long sales cycle, given what you described, it seems as though there’s a lot that goes into finding, identifying and convincing the key decision-maker for an organisation or for any large religious organisation. Is the sales cycle pretty comparable to what we see in the public sector, with a longer sales cycle across the board?
6.
You seem to suggest the cost to acquire the customer is generally very variable, depending on what exact products they’re looking for and who exactly you’re selling into, whether it’s a more established IT department or a volunteer within a smaller religious organisation. Do you think it’s more difficult to locate, find and sell to the small end or the long tail of the market, typically independent churches or religious organisations? What do the unit economics look like there? Do you think vendors have to go and build out a high-velocity sales organisation to focus on calling and convincing smaller customers? Is this part of the market relatively under-penetrated compared to the larger end of the market, as you described earlier?
7.
Where do you think the economics of the faith-based software market make the most sense in terms of acquiring new customers? There seems to be a lot of disparity across going after certain types of customer segments, religions and products. What is the most feasible way into this market or the best way to make the most ground? Could it be focusing on medium-sized to smaller mega-churches, or should vendors look for more opportunities sourcing from a lot of different deals among smaller organisations? Is there any best strategy?
8.
How would you segment the various competitors within the ChMS landscape, given there have been a good amount of acquisitions in this sector? Who do you consider to be the leading players in this category? Could you break them out into separate buckets based on their strengths?
9.
Where might the most competitive saturation be today among point solutions providers? Do we have more competitors fighting for share in giving vs parish management or core ChMS, or is it still relatively fragmented today?
10.
You said not all background checks are created equal. Are there any other key product categories that you think certain competitors can differentiate themselves more so than others? I would imagine a lot of giving and streaming solutions are pretty similar.
11.
You touched on church attendance trending a bit down over the past few years. Coronavirus seemed to have an impact there. How much has this trend impacted the OPEX that your average church or faith-based organisation has for discretionary or critical software? Do you think more faith-based organisations could be reluctant to spend on additional software modules? How might demand for this be trending?
12.
What might be the key differentiating factors from the customer’s perspectives when selecting vendors? As you mentioned, there doesn’t seem to be a lot of greenfield left for net-new logos from a vendor’s perspective. What is most important for customers at the time of renewal and when they might be looking to switch vendors? Could it be pricing or functionalities?
13.
You said that you think we will continue to see some increased consolidation in the faith-based software market. How much runway do you think we have left for inorganic vs organic growth opportunities for faith-based software companies? Might consolidation mostly be larger competitors consuming smaller competitors? Are players still looking to purchase new products and add things to upsell and cross-sell their customers on?
14.
You said we’re seeing some competitive pressure from home-grown solutions and larger vendors, and that seemingly increased consolidation could increase some of these competitive pressures. Are we also seeing any competitive threats from overlapping ERP [enterprise resource planning]-like solutions or vendors? Thinking about vendors within the membership management software space or the franchise-specific software sector, have you ever seen competition come up in any respect in this sector to the core faith-based management software providers from players such as Jonas or Clubessential or any other core ERP vendors?
15.
How has the industry standard margin profile for faith-based management software systems trended in general? To what extent are these types of competitive pressures and consolidation trends weighing on the abilities for these vendors to go about expanding margin in the future?
16.
How would you size the TAM opportunity for faith-based software? We’ve talked about all of the different product categories, adjacencies and some of the demand trends that are driving adoption of these solutions. Do you think this is mainly a function of calculating increases in dioceses or parishioners relative to what they’re willing to spend on software?
17.
You said we’re at a very high, probably 100% penetration rate for faith-based software in the US among at least the large portion of the market that’s spending capital on these types of software. Do you think the international opportunity is largely greenfield? How penetrated is this opportunity in terms of their adoption of modern faith-based software tools?
18.
What do customer switching dynamics typically look like, given we discussed replacements in the domestic market in the US? How difficult is it to rip and replace a faith-based software system or ChMS when it’s integrated with a customer? I would imagine it’s much easier to remove or convince a customer to switch out a legacy system or home-grown solution for a cloud-based faith-based software. How difficult is it when going head-to-head against an account on which a competitor, a high-functioning or modern faith-based software tool, is already integrated?
19.
What overall growth rate or CAGR might be sustainable or achievable for the faith-based software market or ChMS sector? What growth could we see in this sector in the next 1-3-5 years?
20.
Is there anything that we haven’t covered in detail or at all around faith-based software? Are there any other points that you’d like to highlight?
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