Growing Business – Scaling to Greatness

Coordinated and strategized growth advances business
by RaeAnne Marsh

A local startup that grew to international prominence and impacts industries across the business spectrum, GoDaddy is one of many Valley companies that have scaled up successfully. It was founded in 1997, and only five years ago began looking at international expansion as a core growth driver, according to Andrew Low Ah Kee, executive vice president international. “Today, 40 percent of our customers are located outside the U.S. in more than 100 countries around the world,” he says. “Taking GoDaddy global was a massive effort that has touched every part of the company.”

That concerted effort was begun because the company believed its online products and services could be valuable for customers outside its existing U.S. presence, according to Low Ah Kee, who reports GoDaddy now offers products and customer care in local languages in more than 50 markets around the world. Noting that, internally, there are more than 2,000 people focused on delivering online tools and solutions for these customers, Low Ah Kee relates, “Every function had to change to support our global expansion — from customer-facing areas like our products, our website and our customer care being offered in local languages, to building out a global platform, to the business-enablement corporate teams like finance and accounting.”

WebPT disrupted an industry as it scaled up. The steps to its successful growth were carefully considered and carried out, but Heidi Jannenga, D.P.T., who co-founded the company with husband Brad, admits it was, in many ways, unexpected.

“I was working as a clinic director and realized that I needed a better solution to cut one of our highest expenditures: dictation and transcription,” Dr. Jannenga says. “At the time, we were using pen and paper, and paying for manual data entry, which was expensive and time intensive. I began searching for a software program but, ultimately, decided to build the solution originally designed for my practices when we realized there wasn’t anything Web-based that would meet my clinic’s needs. It wasn’t until we completed market research and found that 80 percent of physical therapists were using pen and paper for documentation that I realized this was a much bigger opportunity — and that we could help many more therapists achieve greatness in practice. At this point, we knew we had stumbled onto something that could be used nationally.”

After taking two years to build the product, they launched it in 2008 at the largest physical therapy conference offered by the American Physical Therapy Association. Says Dr. Jannenga, “We made a conscious decision to bootstrap, and I continued to work full-time at my clinic. We had 12 paying clinics that were using the platform in our local area while we were in beta prior to launching the company during our first year. We sold WebPT to five clinics in our first month post launch and have never looked back, with each month after that being our best sales month ever. We recognized and validated very quickly that our product was resonating with a paying audience nationwide.”

Market research enabled them to thoughtfully strategize how best to price and market to more clinics, Dr. Jannenga says. Finding that small businesses accounted for 60 percent of the marketplace, with approximately 30 percent multi-site practices with multiple facilities and the small remainder large corporate enterprise companies, and that the small-business sector — clinics with up to five potential users — was the most underserved within that market, the Jannengas identified that as their primary focus and noted that a key characteristic of those businesses was not having big capital expense budgets. “That turned out to be a pivotal aspect of our initial success,” Dr. Jannenga relates. “We entered the market as an SaaS platform — meaning, customers pay a monthly per-user subscription fee. We found this pricing structure was appealing immediately because it eliminated the need for the expensive IT equipment, maintenance and manual upgrades that were often cost-prohibitive for this audience.”

Dr. Jannenga believes the success of the WebPT business approach was also tied largely to the value its members were getting in having maintenance and customer service included in the monthly subscription. “The other thing we did that was very effective — and unique among SaaS models — was not having a long-term contract, but rather a 30-day cancellation option. This put the burden on us to continue winning a member’s business month after month.”

She also notes the company has invested a lot of time and effort into educating and supporting the rehab therapy community — WebPT members and non-members alike — through content marketing. “All of this was driven by our deeper purpose of helping rehab therapy professionals achieve greatness in business and clinical practice,” Dr. Jannenga says. “This type of focus on customer service has been a key differentiator for us from the very beginning, which has allowed us to capture a national audience and garner close to 40 percent market share in nine years.”

Building a large-scale business was Matt Widdows’ goal when he founded HomeSmart, so, as he developed its operations and internal processes, he says, “I knew I couldn’t build something that would only work in Phoenix, but would be successful everywhere.” Following his motto, “Set ridiculous expectations and find a way to make them normal,” Widdows made service his top priority. He focuses on providing top-quality technology, tools and systems while supporting broker and agent growth and success throughout every stage of their business, and says, “High value and amazing service is who we are and guides everything we do.”

“Every entrepreneur has visions of grandeur when bringing a product to market. The ultimate goal should always be to go national and, ultimately, international,” says Tom Zummo — founder and CEO of True Nopal, a flavored water made from the fruit of the Prickly Pear cactus — whose company achieved that international milestone this past May. Observing that the more common path is to launch in a small area and see if the product gains traction and grows organically, he relates he did the exact opposite when introducing True Nopal Cactus Water to market — he launched nationally. Since its founding in 2013, the company has become a leader in the plant-based beverage market and is carried by major grocery chains and specialty grocers nationally as well as throughout Arizona. “The regional launch method does enable one to assess the process and allows for adjustment while things are still on a small scale,” Zummo says, noting that, if issues develop early on, it is easier and more cost effective to respond and correct the problems in an isolated area rather than the whole country. “I am not saying that the small-scale launch is a bad idea; in fact, in most cases it is the right way to go. I just knew that since I was introducing a whole new beverage category to the world — “Cactus Water” — we had to make a big statement and grab the attention of press, retailers and consumers alike.”

Soilworks’ challenge was, first, to overcome the stigma its industry had acquired of being a “snake oil” market. “As a manufacturer of environmentally-safe soil stabilizers and dust control agents, we faced many local competitors who provided customers the perceived added value of being able to apply the product as a turn-key service. Unfortunately, this service was leveraged by competitors to hide their secrets by delivering lower quality product and inappropriately stretching application rates to increase their profit margins without the customer knowing. Fortunately, their reach was limited to the local market, yet poor quality and performance hurt our entire industry,” says chairman and CEO Chad Falkenberg.

Falkenberg’s strategy was to strategically position the company to provide consistent and dependable products backed with expertise it readily shared, training applicators and end-users in how to apply the product themselves. “Unlike competitors, Soilworks was extremely transparent with our knowledge, including publishing application rates, methods and extensive third-party independent documents and reports,” Falkenberg says. As a result, he notes, Soilworks’ customers have become expert applicators, which has allowed them to minimize installation costs and ensure continuous successful performance to meet their goals. “Providing knowledge and expertise across borders is significantly more scalable than the capital heavy growth necessary to expand a construction division across borders.”

Outside Insight

Perfecting the product or service and then marketing it are certainly not the only aspects of a business that determine its success. “In the development years of business, from concept to startup and through the subsequent ‘getting our stride synchronized with growth as leaders while raising a business,’ entrepreneurs must be hands-on in all areas,” says Isabel Banerjee, who brings to her consulting business, GroYourBiz Arizona, her experience of founding a chemical distribution business and growing it from zero annual revenue to a global $14 million-plus. “The problem with working so hard in your business is that you don’t know what you don’t know yet, and you have a limited perspective based on your own life experience to date.”

Another problem entrepreneurs often face is recognizing their limitations — no one is best at everything nor can any one person do it all for any extended period of time. Business advisors or consultants can help with specific projects or needs, and Banerjee points to other options such as a board of directors — which “contributes exponential value in wisdom, perspective and resources, and inspires accountability — or peer advisory board.

Every area of the business needs an extra look at least every once in a while, notes Greg Head, CEO of Greg Head Consulting, former chief marketing officer at Infusionsoft and who consulted with WebPT during its first phase of fast growth. And within each broad category are a myriad of more specific areas: Customer acquisition encompasses sales, marketing, customer service and pricing; people encompasses culture, hiring, organization structure and leadership; products and services must include improving the experience as well as efficiencies; strategy encompasses planning and prioritization; systems encompasses software and processes; and finances encompasses a host of issues besides just money. “The reality is, the bigger you get and the faster you grow, the more you have to spend time working on each of these to keep growing,” Head says. “Most businesses stop growing because they haven’t taken time to keep building better foundations.”

The biggest challenge Head sees for all “scale up” leaders is judging how much time to spend working on the business in any one of the key areas. “Some spend too much time perfecting their systems and building over-detailed plans, so their business lacks the execution and drive that is needed to move forward. Others are all action and no planning. It takes some judgement to know when to move out of constant action to sit down and sort through how to do things better and more efficiently,” Head says. “The brutal reality is that bigger businesses are more complex than smaller ones, at every stage. It’s the complexity that kills growth rather than ‘not enough capital’ or ‘not trying hard enough.’”

Funding Growth

“It is our scalability, strategic vendor relationships and laser focus on what we do best that have allowed us to continue to grow,” Falkenberg says, noting Soilworks is a private company that does not rely on investors. He made the decision to focus solely on manufacturing rather than adding turn-key service, which enabled the company to operate extremely lean as well as position it to develop strategic relationships with Fortune 500 companies around the globe that have the ability to produce Soilworks products and feedstocks — and thus be able to fulfill sizable global orders with ease for large organizations, including many governments, mines and militaries. “With the added resources and knowledge base from these strategic relationships, Soilworks’ R&D efforts significantly increased and continue to position us as knowledge leaders in our industry.

“These strategic relationships provided significant opportunity for rapid scalable growth without traditional capital-intensive investment,” Falkenberg adds.

Low Ah Kee credits GoDaddy’s solid business model for enabling the company to self-fund its organic growth rather than raising outside capital. Self-funding is the common approach, as well, of WebPT, HomeSmart and True Nopal, although Zummo came to it less directly.

“When the company was formed, I had financial partners, but I quickly realized that we had a difference in opinion of how things should progress. A long story short, I ended up buying my former partners out after about 16 months. From that point on I funded the company on my own,” True Nopal’s Zummo relates, sharing that, financially, he put everything on the line and had everything at risk. He emphasizes it was a calculated risk, because he believed in both his product and himself. “I had been here before, in other industries, and I knew that my work ethic, determination, common sense and never-give-up attitude would persevere.” Citing Gary Hopkins, “The only limitations are those that you impose upon yourself,” he says his philosophy is, “You must believe so much in what you are doing and who you are that, no matter what obstacles are presented, you must have the confidence in yourself to know that you will figure out a way to get it done.”

Widdows founded HomeSmart in 2000 with the belief that the real estate industry had fallen behind in technology and systems to support real estate agents in their everyday business needs. A decade earlier, he had created a technology company in the medical industry; this time, he aspired to combine traditional real estate concepts with innovation and a technology approach. “I believe in the HomeSmart vision, so I continue to make personal investments in the company to accelerate the success along with its organic growth.”

The Jannengas started with personal savings to fund WebPT’s growth. Says Dr. Jannenga, “We were completely bootstrapped initially, and maintained a very lean budget in those early days.” In fact, she continued to work full-time as a physical therapist while she put effort into designing what the product should do. Brad, as technology co-founder, worked full-time building the software platform. “That meant a lot of peanut butter and jelly sandwiches and penny-pinching, but this appreciation for resource efficiency had, and still has, a positive influence on the mindset of our entire company,” Dr. Jannenga relates.

Within two years of launching, WebPT was at a million-dollar run rate, and its existing infrastructure made it difficult to keep up with sales. Realizing their company had reached the point at which it needed to expand to meet demand was the impetus for seeking their initial round of funding. Says Dr. Jannenga, “Funding wasn’t even considered until we were profitable.”

During that period of rapid growth, she recalls, they constantly had to make decisions on how to use the money they were making, which meant focusing on one thing at a time based on business priorities — for instance, “Do we buy another server? Do we hire another customer service rep?” It was a situation that, she says, they started to see as an impediment to long-term growth.

“In 2010, we decided we wanted to ramp up the business infrastructure to meet current and future demand, but we needed more capital to do that. We were in an optimal situation to go after funding: The market was reeling from the real estate downturn and desperate for a positive optimistic opportunity in a different sector, and, most importantly, we didn’t need funding to survive, but wanted it to accelerate our success. And we had the upper hand in the sense that we were going into pitches with proof that we had a profitable business, which also validated our culture and business practices. So, we were only willing to entertain investors who wanted to get behind our mission and culture, not the other way around.”

WebPT Finds Funding Partner

Dr. Jannenga is very forthcoming in sharing how WebPT evaluated the market for growth, and evaluated funding partners for a fit.

“We did some pitching in the local Phoenix market and received an overwhelming response. We were able to raise $1 million in our first angel round in the middle of 2010 from Canal Partners led by Jim Armstrong, founder of JDA software. We turned that $1 million investment into $17 million in two years and subsequently received quite a bit of interest from private equity firms who took notice of WebPT’s gain in market share and phenomenal SaaS metrics.

“The impetus to consider funding at that point was multi-faceted. Once again, we did not need money at all. A major stipulation to taking on another investor was finding a true partner — a firm that believed in our vision, the WebPT culture, and what we were doing. As a co-founder, I was concerned about losing control as a result of bringing investors in, and that’s why finding the right fit was so important.

“We used a methodology similar to what we do with hiring all our employees — a culture-focused approach. We found our ‘fit’ after quite a bit of searching and several meetings. We even came close to signing a couple of contracts before deciding to go back to the drawing board due to never really feeling comfortable that we had found the right financial backer, who could really be a true partner in executing on our vision. In mid-2014, WebPT took on a significant investment from Battery Ventures, a tier 1 Silicon Valley-based venture capital firm with experience in both healthcare and SaaS. We haven’t looked back. It’s turned out to be an amazing relationship — and pivotal to where the company is today.

“We had done our due diligence in terms of talking to companies that Battery Ventures had invested in previously. One piece of advice we acted on was talking to companies that hadn’t had good results with Battery Ventures. People’s true colors — and true opinions — come out when things aren’t going well, and I recommend that anyone seeking funding follow this advice. We tried to find as many of those companies as possible, and they provided a lot of valuable feedback. In fact, it actually strengthened our trust that Battery Ventures would stick to their word in terms of letting us continue to operate the way we wanted to. They assured us that they didn’t want to come in and take over or completely change the way we do things. They loved WebPT and the culture we had built, and they truly believed in our vision and our desire to stay within the niche market of rehab therapy.

“Ultimately, decisions about how and when to fund depend on many variables — industry, leadership team, location, product, audience, etc. — and it’s something every business needs to evaluate within the context of its own situation.”

Dr. Jannenga emphasizes the importance of not rushing into funding decisions, and having a clear idea of what the money will be spent on.

Reconciling with Regional and Cultural Differences

How important are regional and cultural differences when trying to expand into new markets?

It comes down, as Harold Hill famously said in The Music Man, “You’ve got to know the territory.”

For True Nopal, the issue of regional or cultural awareness had to be addressed with its initial launch. Explains Zummo, “In Arizona we are surrounded by Cacti, but most people around the world have never seen a real cactus let alone consumed one. We had to educate people about the Prickly Pear cactus and its amazing attributes.” The experiential approach through sampling efforts and attending trade shows provided the avenue to share such facts as its health and wellness properties — Prickly Pear is the only plant in the world with all 24 known betalain antioxidants, a substance with anti-inflammatory properties that can help with everything from skin rejuvenation and muscle recovery to helping reduce the effects of a hangover — and its environmental attributes as one of the most sustainable plants in the world — a pad can be simply chopped off a plant and stuck in the ground, and it will grow; in fact, it grows in the harshest climates in the world with little to no water.

“Many of the regulations we have to account for in our software are federal mandates that apply across the board,” says Dr. Jannenga. So, for WebPT, compliance demands superseded regional or cultural factors. She notes the company’s SaaS platform enables it to adapt relatively easily. “This is something that might look very different for other types of businesses — brick-and-mortar retail, for example.

“Also, we understood early on that we would be working across the entire industry,” Dr. Jannenga continues. “I had the advantage of being a PT who was quite active in the professional community. That said, we are constantly learning from our members. Listening to our members, understanding their needs, wants and pains has been paramount to our success. We work very closely with them and prioritize certain features and functionality based on their feedback as often as possible. Knowing all clinics and practices are not alike, we built exploration and collaboration into our development process.” WebPT gathers each member’s specific needs at the outset and then works with that member from the beginning on any necessary adjustments and training.

Shares Low Ah Kee, “One of my colleagues, James Carroll, has a great saying: ‘Go global, then go local.’ What this means to GoDaddy and our customers is that you need to make sure your technology platform, processes and systems can be configured to accommodate the differences across markets, and then you need people on the ground who really understand the local context to consume that capability.” Emphasizing, “Local really does matter,” he points out that the marketing and advertising campaigns GoDaddy runs in its markets around the world are created uniquely for each market. “For example,” he says, “in Brazil, the GoDaddy Pug has become a favorite character on its own.”

HomeSmart and Soilworks also recognize the value of knowing the local market. Says Widdows, “We go to great lengths to accommodate the different regulations of each state’s boards and MLS systems. HomeSmart has proprietary technology that provides consistent and excellent customer service to our brokers, agents and customers. We also have teams in place that know the differences in each market, so they can support agents properly.” And Falkenberg, noting Soilworks’ products are environmentally safe and non-regulated for transport, says, “We work with a global distributor network that allows distributors the ability to grow their respective markets much faster due to the fact that they know their markets, customs and regulations while providing a local presence.”

Keeping Focus, Measuring Growth

“I get a text message four times a day showing how we are doing on sales for the day in our markets,” says Low Ah Kee. “I know what I expect each day, and the ‘ping’ sound on my phone is a regular reminder of whether we’re getting it done.” What to look at are the basics: what matters in the given business. “Design the business to see those metrics regularly, understand what drives them, and go take action.” He notes the pace at which a business can try new things and learn from the experience and the data presented dictates its ability to drive growth. “We encourage our teams to take risks and stay close to our customers to help move our business forward,” he says.

Zummo says he — “of course” — charts True Nopal’s growth of new store acquisition and product turns, and looks at total revenue and net profit, but “the most telling aspect of how I interpret, really, how we are doing comes from the incredible feedback that comes flooding in from our customers about the way our product helps invigorate and makes them feel good.” Says Zummo, “To me, each time that occurs, there’s no better measure of success and growth.”

Soilworks closely monitors volumes through its existing customer base and continuously communicates with them to ensure its business is growing with theirs, Falkenberg explains. “Likewise, detailed sales plans for each dedicated vertical market focus on growth benchmarks paired with significant compensation incentives for our team to encourage goals are achieved.”

WebPT looks at its stakeholders as the key to unlocking success and growth, and assesses internal as well as external indicators to monitor the health of the company and nurture it in real time. “To ensure we’re delivering value to all our stakeholders — including customer members, team members and partners — we built the concept of continual improvement into our culture,” says Dr. Jannenga. “That means setting goals, continually measuring data, and taking action on the information we collect in order to reach those goals.”

Some of the metrics WebPT uses to ensure the company is moving in the right direction are customer loyalty and retention, employee happiness and retention, sales revenue, cost of customer acquisition, churn rate, monthly recurring revenue, annual recurring revenue, lifetime value of a customer, gross margins and monthly profit (or loss).

Part of the strategy HomeSmart follows is, “If we do it twice, we automate it,” Widdows says. The company also measures everything it does — and reports those statistics. Also, noting he motivates the Phoenix brokerage to answer 92 percent of calls without going to voicemail, have all paperwork processed and prepared for broker review within 24 hours, and have all paperwork reviewed by the broker within 48 hours, he says, “Efficiency is key to running a successful brokerage.”

Evaluate Opportunities

“There is no shortage of ideas, opportunities and distractions for business owners,” Banerjee says, observing the challenge is deciding which to work on and which to discard or table for later. She suggests running each through a filter of alignment with core values, current capability, capital need, how well it complements existing revenue stream — and a high-level SWOT analysis by the company’s board of advisors or objective third party.

There are times to say, “No,” says Head, who explains, “When your business is starting out and you are trying to survive, any customer that will pay money seems like an opportunity. This quickly turns into a nightmare when your business starts to grow.” Saying “yes” to every opportunity is a sign of impending problems and frustration, he cautions, noting that companies need to deliberately create a clear focus to define what they say yes and no to. “Surprisingly, you say ‘no’ to opportunities more often when you grow fast and get bigger.”

 

Growth – Organic or by Acquisitions?

Reputation and goals influence growth strategies.

GoDaddy – Leveraging Cash Flow

“We have a solid business model and we’ve been able to self-fund our organic growth vs. raising outside capital.

“Recently, we took advantage of the strength of our balance sheet and the predictability of our cash flows to acquire Host Europe Group. With the closure of this acquisition, GoDaddy is now one of the market leaders in Europe.” —Andrew Low Ah Kee, Executive Vice President International, GoDaddy

HomeSmart – Identifying Strategic Markets

“We grow organically and through acquisitions.

“In February 2008, we acquired Phoenix-based Dan Schwartz Realty, bringing our agent count to 3,300 agents in Arizona, at the time.

“We announced the acquisition of Cherry Creek Properties on May 31, 2017. This deal makes HomeSmart Cherry Creek the No. 1 brokerage in Colorado, based on agent count. We now have a total network agent count of more than 13,000 and have increased our footprint to 123 office locations in 16 states.

“We are actively looking to continue that activity in strategic markets around the nation.” —Matt Widdows, Founder and CEO, HomeSmart

Soilworks – Sharing Knowledge Opened Opportunity

Soilworks has completely grown organically, without any acquisition. Our philosophy is different from many others in our industry because we focus on growing and developing the pie of opportunity, rather than simply dividing up the opportunities that exist today. As a pioneer for growing opportunities globally through education and sharing knowledge paired with our ease of scalability, acquisition has not been attractive for us.

Our transparency has its challenges, including helping competitors learn from us, but the overall success is obvious for Soilworks and continues to position us as a global leader. Ultimately, Soilworks’ ability to share its knowledge has allowed us to develop long-term loyal relationships that continue to rapidly expand around the globe. —Chad Falkenberg, CEO & Chairman, Soilworks LLC

True Nopal – The Power of Disruption

“Up until recently, the brand has grown organically through word of mouth and through a lot of free press. Any time an innovative product that disrupts the category goes to market, naturally it will garner a lot of attention. I feel that True Nopal has been fortunate that the beverage industry stood up and took notice. This attention has created opportunities and discussions about acquisition and partnerships with some of the largest beverage companies in the world.

“In March 2016, the attention led to True Nopal finalizing an exclusive distribution deal for the United Kingdom and Ireland with Lucozade Ribina Suntory, a division of Suntory, the third-largest distilled beverage company in the world. Working with LRS and Suntory over the past year, and seeing that they shared the same passion for the brand and their belief that the heartbeat of the company is in the founder, demonstrated to me that, together, we are perfectly placed to achieve our goal of having True Nopal Cactus Water in the hands of consumers around the world. On May 26, 2017, True Nopal and Suntory International finalized a joint venture for global growth of the brand.” —Tom Zummo, Founder and CEO, True Nopal

WebPT – Driven by Innovation

“WebPT has grown both organically and through acquisition. We’ve always been focused on being a true partner to our members by providing a business-critical software and service. However, at our core, we are an engine of innovation, and we’ve continued to build new products and features to not only scale our own business, but also empower our members to scale theirs.

“Most of those innovations have come as a direct result of listening to our members. We also focus on proactively addressing impending regulatory and compliance needs, which has led us to — in some cases — make strategic acquisitions. As a startup, we built the foundation and main platform on which we have now been able to add on functionality and modules garnered through acquisition. We analyze the buy vs. build decision with each feature or new product that we want to add to our platform, taking into account cost, time to market and competitive advantage.

“Two examples of such acquisitions are Therabill, a Web-based practice management software, and WebOutcomes, an online outcomes-tracking tool for physical and occupational therapists that we modified and integrated with an existing WebPT application to then launch WebPT Outcomes.“ —Heidi Jannenga, D.P.T., WebPT

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