How to Grow and Stay Agile – Top 6 Business Decisions
A guest blog post from Dirk Paessler, Paessler AG, serial attendee at Business of Software Conference. Dirk considers six key business decisions that built Paessler AG to 160 people without external financing over the past 20 years.
Dirk Paessler’s Inside View
I have been founder and CEO of this company for almost 20 years. It started as a one person part-time shareware business, and today we are 160 people with 10 offices around the globe, serving 150,000 users every day.
I want to share with you some of the better business and software development decisions we have made in the past 15 years. I could tell you that everything went exactly as planned, but really it was an iterative process. We just did everything we could to grow the business—and then it did…
The reasons for our success are a combination of luck, good timing, grit, stamina, expertise, and a few important decisions along the way. When I look back, it was these decisions that shaped who we are today. This article series is not about the roads not taken, but about decisions that didn’t seem very important at the time and which had a big impact on our business later:
Decision 1: Bootstrap—Take Your Time, Not Someone Else’s Money!
Today everybody talks about startups, which pick up millions from investors and must conquer the world very quickly to become “unicorns”. But is that really the only viable path to success? Paessler started as a side project of mine in 1997. In the first four years, I worked about one day per week for this startup, developing software, handling PR, marketing, support, and also everything else. During that time I learnt so much in all departments. And it was fun!
In 2001 the dot-com bubble had just burst. Everybody got out of the Internet-and I started taking the business full-time. The profits at this time weren’t yet enough to pay my monthly bills, so my wife and I had to live from her salary for a few months, but the profits quickly went up, because I was taking care of things full-time. Since then, the revenues from one month have always paid for our wages and the development of the products that we would sell in the following month—and we soon made profits, too.
We never had a “burn rate”: At every point in time we were profitable and would have been able to continue the business forever—without being under pressure to reach a certain goal at a specific time. Starting slower and staying frugal in the early years means that today we have no external investors who demand a certain dividend or demand an IPO (Initial Public Offering). All I did was to turn up for work every morning. Every day. For almost 20 years. I’d never do it differently-to quote Thomas A. Edison: “I never did a day’s work in my life. It was all fun”.
Decision 2: Company Growth without Culture Is Futile
Four years after starting out alone in 2001, our company already had 6 employees. And it was this core group of people who has shaped the company culture we still live today—in 2016 with 160 employees. This is probably the most important aspect that helped us to manage our growth: to build and maintain our unique culture.
At Paessler we do many things differently: We look for people who will fit our culture. We won’t remodel our company culture to appeal to others. Our culture is not for everyone, but the ones that attach to our culture will flourish in it. Managing growth “guided by culture” beats having a lot of venture capital (VC) money anytime, because we are driven by purpose, not burn-rate. Our business success has a direct impact on our culture and vice versa: Whenever we celebrate a milestone or treat ourselves with a cool event, or get to move to a nice new office building, we always know: We have earned the necessary funds ourselves. It’s not a gift. It’s not VC money.
Decision 3: The Team Hires the Team
An integral part of our culture is our unique hiring process: All new hires go through our email-based assessment, an initial personal meeting with 1-3 employees, and a so-called “Schnuppertag” (I guess “get-to-know-each-other day” would be a fitting translation). On this day, the applicants spend at least 6 hours at our offices and can experience our culture themselves. They get to meet with up to 12 Paessler experts from various teams, can ask all the questions they like, and we as a team can see if the applicant is a good fit for us. After this trial day, we make our hiring decision as a team.
This process helps us develop a team of experts who fit into our culture. This enables us to foster long-term working relationship and, most importantly, to have fun working together!
Decision 4: Data-Driven, Analytics and Tracking
Whenever we can, we base our decisions on numbers. Correctly interpreted, numbers don’t lie and they provide a more reliable foundation for making a decision than mere gut feeling. When you start looking for business data sources inside a company you will be surprised about the possibilities that you will find. And you can learn so much about how your business actually ticks. This approach isn’t cutting edge—it is status quo. Running a software business in 2016 without this kind of data-driven approach is anachronistic.
Decision 5: Embrace Being a One-Product-Company
Being an independent software vendor, it was important for us to find a niche that was small enough that we could cover it, yet complex enough that Google doesn’t do it, and large enough for us to make a living. And with networking monitoring we found that niche by intuition, chance, and constant readjustment, not smartness alone. It translates all the following important aspects directly down to the product level: With PRTG Network Monitor we solve a generic B2B (Business-to-Business) problem that does not depend on a specific language, culture, legislation, business practice, customer company size, industry, or technology.
In our niche, focusing on one product alone isn’t a problem. It’s good. Everybody at Paessler has no other goal than improving our sales and bookings from this one product. In a time when everybody wants to be part of the digital gold rush, it’s a good long-term strategy to sell the shovels. Everybody needs to know what’s going on in their networks in order to provide reliable services. It’s a fundamental necessity.
If you have found your niche and a product that perfectly fits that niche, try to withstand the idea of adding other products to your portfolio. This also means no contract work and no OEMs (branded versions of PRTG). Once you have a winner, everything else is too much distraction. By the way, there are many successful one-product-companies, all of them offering a generic product: Uber, WhatsApp, Snapchat, Airbnb, Dropbox, Spotify, and Slack, just to name a few.
Decision 6: The Trial User Is the Decision Maker Is the User
A direct result of choosing your niche is your target group. For network monitoring, our target group consists of system administrators—and this is a great target group! System administrators are used to looking for solutions and products online, they have the ability (and the rights) to download and test software, and they are able to evaluate our product and make their decision based on what they really need. Since system administrators (mostly) have their own budget to spend, it’s likely they want to spend it on our product, which can relieve their stress and make their work easier. They are great customers from the get-go-and they continue to be so, as they are used to solving problems on their own: We receive less than one support email from each customer in 3 years. Also they are easy to support and communication is great, as we speak the same language: technology. This directly results in happy customers as our recommendation rate of 98% shows.