6 Lessons I Learned Growing a Self-Funded SaaS Company

Today, I’m the CEO of a SaaS company I founded in the early 2000s. Bringing value to people’s lives, through a software product, is truly a symbol of modern times. Everybody wants to make an impact. But the reality is, establishing yourself is a real challenge, and it can’t happen overnight. And that’s even harder without institutional funding behind you.

My company, eSkill, has grown every year of its 15 year existence. We’re profitable. But we’re self-funded and had to struggle for years to develop, hire, and grow on less than 10% of the startup investment of our venture capital-backed competitors.

Since we didn’t have the luxury of throwing millions of dollars at every product, sales, and marketing possibility, we had to learn to grow leanly, project ourselves larger, and become profitable even when we were at only $1M in revenues.

So here’s a set of lessons we learned on growing efficiently. The first three took us years to figure out, and the next were starting strategies that turned out to be sound.

First, what I wish we knew sooner:

For B2B SaaS, Sales Beats Marketing and Product

For the longest time, I hired salespeople who were decent at giving demos and making volumes of calls, but they didn’t have the industry background or subject-matter expertise to sell a six-figure testing package credibly to a decision-maker who had a testing budget that large.

My bigger concerns were Marketing (e.g. how good our website looked, how consistent our fonts were, and how many leads, of any kind, we were getting) and Product (making sure our product had more features than anyone else’s).

Yet after 10 years, we were still much smaller in revenue than our biggest competitors, who frankly had poor websites and products that were more basic. This lesson came from one of their CEOs, who, after selling his company for over a billion dollars, told me, “Your product was always better than ours…we simply out-hustled you.”

From that lesson, we used our growing revenues and new connections with formerly competitive executives to build a new sales organization that doubled the average size of our transactions and took our product to much higher-level decision-makers at our target organizations.

Launch with a Minimum Viable Product

As a skills testing company, I had to decide how many test subjects to develop before launch.

We started by developing over 100 subjects pre-launch – like what I saw our biggest competitors offering. But, I could have just built a strong niche business by focusing only on the 5 subjects of Microsoft Office and Windows. Or Typing and Data Entry. Then I could have expanded our content from that core, post-revenue.

However, for a long time, I believed I needed to be ready in order to start. But as I learned afterwards, success comes when you start doing something before you are fully ready – when you have 80% of what you need to start. It took over a year to build what I thought was “enough” to launch…and that was a costly pre-revenue delay.

Separate Signal from Noise

Related to the above points…it is easy to waste precious time and cash chasing improvements that really don’t produce more sales. Once my company was up and running, so many things seemed important to rectify ASAP. Addressing every customer feature request, every marketing idea, and every competitor’s publicized move seemed equally critical to success vs. failure. I wasted a lot of resources optimizing things that really didn’t impact our prospects’ evaluation and purchase process.

I now see that most customers do not read too deeply into your marketing copy, or stop using your product because your user interface clearly isn’t perfect. Hiring a persuasive, far-reaching, and trustworthy salesperson to sell for you will far outweigh focusing on the minutiae of moderate product deficiencies, such as visual details, that can be easily addressed later.

Therefore, for every improvement on the roadmap, it is important to get a true sense of whether the typical customer will encounter it or change their mind about their purchase decision because of not having it.

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Now, let me describe a few of the things we did that seemed no better than intuition at the time, but turned out to be enduring drivers of profitability and growth:

Outsource Globally for the Best Talent and Price

When our first local team of fresh-from-grad-school programmers failed to produce a viable platform after 4 months of full-time work, I had to throw all their coding – and the related investment – away.

At that time, in 2002, I was referred to a Romanian-based development company who had hired very experienced people in multiple cities. That growing team has been producing reliable product results for us for the last 15 years, at a competitive cost with no compromise in technical execution. This talent organization, now with years of testing tech expertise from working on our products, is bound to us legally and ethically and has given us a huge competitive advantage.

Make “Friends” with the Senior Executives of Your Competitors

When we were in a much earlier stage, I took a call from the CSO of our biggest competitor. He wanted to discuss our pay-per-click campaign and how he felt it was unfair for us to target the searchers of his product. We quickly came to an agreeable solution, and, in doing so, started an infrequent but trust-building rapport that became quite collegial.

When his parent company was sold a few years later, triggering many executives to leave, he called me immediately to see if we could collaborate. As he had been the most successful sales executive in our industry, I welcomed the chance.

He eventually started a different kind of company, but, before he did, he shared many of his old company’s winning strategies and helped me hire two excellent sales executives he had worked with before.

I have had other enlightening conversations with former competitive executives who have moved on and who now regard my company and myself in a positive way. The bottom line is this: form relationships with people, not companies. People are more fluid. Your marketplace nemesis one day could be your ally the next.

Attract and Retain People with a Culture of Kindness and Trust

As a self-funded company, for a long time, we could not compete with well-backed startups on the salaries we could offer to our best employees. These other companies just seemed to throw six figures at everyone.

Our payroll may have been leaner than some, but, in all our years, eSkill has lost barely anyone to other job opportunities. Today, we can attract executives away from much larger employers.

I attribute this to three factors: 1) having continued potential for fast growth, 2) keeping staff communication constructive, positive, and objective, and 3) being flexible with employees when it costs the company virtually nothing yet is meaningful to the employee. I’ll elaborate on these latter two:

• Before I started my own business, my favorite boss was a principal at a product development consulting firm I worked for when I was just out of business school. He was intelligent, productive, and always supportive, no matter how well or poorly I was doing on a task. His firm’s informal motto was “We take our work seriously, but not ourselves.” In effect, that means there were no “bruisable” egos, no dumb questions, and room for humor while working on the most urgent of tasks.

• I found that, despite middling compensation and projects that were not my favorite, I was excited to come to work each day…highly motivated, not by fear of failure or of being berated but by wanting to please my colleagues and represent our company well to the client. In my inexperienced 20s, that was a refreshingly positive work environment, which cost the employer nothing to create.

So how did that affect me as a manager?

I encourage everyone to stay constructive in tone…even to the moment of having to let someone go.  I touch base with many of my staff individually, to check in on their happiness and alignment with their job goals. Everyone is taken seriously at all-hands meetings…though of course final decisions are made hierarchically.

Working from home is another great perk that’s a powerfully attractive job feature if managed correctly. From the beginning, eSkill had to get used to employing remote workers and using online tools for virtual collaboration and accountability. We’ve used Skype and JIRA since the early 2000’s. Salesforce.com’s powerful task-tracking tools came later.

Today, over half of our US-based workforce works remotely from home or local, self-supervised offices. We’ve set up weekly all-hands GoToMeetings to keep the feeling of being together, and everyone has Skype open during their workday for casual exchanges.

Overall Advice

The lessons I learned came from necessity as I was trying to build a globally competitive B2B SaaS company with millions in profitable revenue on the back of less than $1.5M total investment. These lessons can be applied to any similar business that’s trying to become more profitable – focus your cash on what’s important.