My second job as a software developer was at a SaaS company. I was employee number 4. Now there are over 50 people working there. The founder pulling in all the sales was a non-technical person. He was also the one who found his technical partner and pushed the company all along to market leadership.
He directed the company and grew it to a 7 figure business.
Now, after 10 years, I’ve realized that the story of my former boss and his company had a lot of lessons to teach. The story about someone becoming a millionaire with one single focused software product. The principles in it can be applied to any business.
#1 Know your unfair advantage and play it
All successful people have or have had one competitive advantage before they even started working on becoming what they are today.
~Yann Girard, on competitive advantage
An unfair advantage is a scarce attribute or asset. It is something that you have and the competition does not. In this case, it was existing education and relationships. The founder of ours began to acquire his assets 10 years before he even started building his company.
He himself said, he had “the right pedigree”. In 10 years of being a teacher, he had built relationships extensively and become knowledgeable in the industry. This got him the first 100 customers himself. He could talk to the school owners as well as the teachers (the users of his product).
He knew the smell of the industry in and out. He knew the problems. And he knew how decisions are made in a client’s company.
His competitor had superior software and they were already established at the time he started. However, customers bought them because they were too desperately they could use anything.
So when he came into the scene with a pitch like this: “I have worked in your industry for 10 years and suffered all these pains that you suffer now. I built something to solve that. Do you want to buy it?”
Imagine how easy it was for him!
#2 Make users love you
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Photo by Georgie Pauwels
In Airbnb’s case, these consisted of going door to door in New York, recruiting new users and helping existing ones improve their listings.
Paul Graham said every startup needs to do things that do not scale (read his post here). Other people refer to it as hustle. Some people say it is helpful marketing (Thanks to Kevin DeWalt for showing us the light). Whatever you want to call it, there is high cost involved if you do it.
Cost that can be higher than the customer lifetime value.
Some examples of the activities that our now-millionaire ‘enjoyed’ doing:
- Give free workshops for beta users. He mostly gave them himself while driving all over Germany visiting multiple locations in a row.
- When giving demos of the software, he educated his customers about internal process optimization.
- Free support for early adopters.
- Calling his customers when seeing a drop in the number of usage.
- Inviting the decision makers of his clients to parties.
- Write the manual and documentation himself.
One remarkable thing about his communication is he can always find a way to explain the most difficult things about the technology to his novice customers. For most of the users any kind of software was mysterious. He eased the pain by articulating it clearly and concisely in documentation and workshops.
He did it with style and metaphors. For instance, to explain a necessary downtime for a database upgrade, he told the customer: “Dwarfs are working in the undergrounds of the software and cleaning up the database to make it faster.The database is like a house, it needs to be cleaned and updated every once in a while.”
By understanding, the users contributed in helping the company grow. Without being backed by users the company would not have survived the first years while the software was in constant beta phase.
#3 Make lots of phone calls (and buy a headset)
I cannot think of one day when I have not seen him on the phone making cold calls. The customers were easy to be found through Google or official lists from the government. He knew he could get through to the decision makers since he was familiar with the typical structure of prospect companies.
During the day he did not listen to music. His work place was in an open space with the sales employees. There were no distractions apart from necessary communication.
A headset was his favorite item. He could be in long sales calls without the need of a closed space. When he called a prospect, the world around him seemed to fade away.
With a long list of prospects and the urge to grow your business, by ex-boss had perfect the environment to be most comfortable for him and the sales team.
#4 Promise big. And be willing to push your team to fulfilling them
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Photo by Georgie Pauwels
The software was in beta for years, and the customers seemed to stay with it. They overlooked the small defects as the process went. However, after a while the users started to ask for the next version. The developers estimated around 8 weeks with all the requested features. He went back to the customers and said:
“The next version comes in 8 weeks”.
And there it was, the big promise.
As many people know from their parental education: promises (and threats) are only powerful as long as they are fulfilled. And our founder knew it very well. He pushed the team hard to deliver. However, there was no manic control over people. It was a business goal, which he helped to achieve himself. He exercised pressure. He cut features out of version. He compromised his own time writing specification. He was there for the developers.
#5 Have a bold strategy
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Photo by Pascal
Before starting the business there was enough market research done. He knew who his team would compete with. He knew about the other players and the biggest threat: Microsoft Excel.
The bold goal was to become the market leader in Germany.
On one wall of the office there was a huge map of Germany. The biggest joy for my former boss was to put needles to every city where we got a new customer. In my 3 years at that company the map got crowded. The customer base had spread from local businesses to all over Germany.
The goal was not only his. Everyone in the company knew his strategy and shared the passion to conquer the Germany market. Everyone helped him achieve it.
#6 Give tough love
As in every organization, there are people that do not share the goals and just wanted an easy time. Employees who like to chat more than necessary. People who use the company phone for private things. People who call in sick to enjoy the beach.
Everyone was treated fair. People being sick got their time. People needing a time out got their sabbatical. Or continuing studying and working part-time. All that was possible for people who brought the company forward.
Only the not performing were let go quickly.
Employees who did not contribute to the company’s goals were not his friends. There was no mobbing involved, but people sensed a strong pulling force coming from the leadership. They left soon enough.
You cannot be friends with everyone. The determined ones appreciated that. In this case, being tough to employees helped the company. He formed a team of excellence.
I was employed shortly after coming back from Australia. Years after I stopped working for him I still got invited to the yearly party. I asked him for the reason and got an advice that I’m still using and appreciate. “Invite the ex employees to your parties, especially the great ones. You never know if they have intelligent friends who want to start working at your company.”
#7 Build a business model that fits your customers
There was one single best thing that propelled the company forward after the initial user base was captured. It was a drastic change in the business model. The key to the updated licensing model was the alignment to the client’s earnings.
When the client makes more money, we make more money.
The key to the client’s earnings were people administered in the software. The business model of a typical target company scaled with the people they administered in it. That means, for every additional sale a company makes, a fraction would go to the SaaS provider.
Align your business model to your customer’s business model.
For a prospect company starting out, this deal was a no-brainer. The software was very inexpensive and came a huge documentation and training database. As the clients grew, the SaaS earnings grew with it. As the customer was paid every month, so was the SaaS.
With this single change came recurring revenue, and the ground stone for his future million dollar business.
All these things are vital for any successful founder. Especially for Software-as-a-Service.
Which one is vital that I did not include?
Email me: till@tillcarlos.com (Yes, I do get emails on my posts, and yes, I respond to them.)
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