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After the Start Up

Gabriel Goncalves, President and CEO, PeopleAnswers, Inc.

During PeopleAnswers' first year, while our developers were designing what would be our innovative software package for assessing job applicants, I was wracking up frequent flyer miles to visit recruiting firms around the country. Our business plan demonstrated quite eloquently how recruiting firms would jump all over our offering, leading us to the famous "hockey-stick" of compound revenue growth. In that first year, I actually secured several signed letters of intent from these recruiting firms, indicating that sales were good-to-go if the product worked as advertised.

In late 2001, when I went back to these potential customers with the finished product, I was surprised when they said "thanks, but no thanks". The market had changed: in a slow economy, recruiting firms weren't getting as many assignments. More importantly, however, they decided that - contrary to their previous thinking - they didn't want to handle the assessing of the candidates. They preferred that their clients undertake that task.

All of a sudden, what I thought was a secure customer base evaporated with the rest of the economy. Well, welcome to the stage two of launching a new software company. Your product is ready to go; all that is missing are the customers.

In my mind, stage one is about creating the vision, raising the money, assembling the team, and developing the base product. Stage two is about going to market and figuring out exactly who is going to buy your product, how you are going to price it, and how you are going to get the word out. Entrepreneurs, don't get too excited about all those great ideas that you had laid out in your business plan. Sometimes when it comes time to execute, you just have to be flexible.

Going to Market

In the second stage, it is all about getting customers to sign repeatedly on the dotted line for the product or service you're offering. Once we determined that our original plan wasn't working, even though we had conducted extensive research, we went back to the marketing drawing board.

A software package geared to analyzing individuals' personalities in order to determine the likelihood of their performing well in a job would be useful, not only to the recruiters, but also to companies doing the hiring. And for that matter, it would be useful to companies evaluating current employees, especially if they were preparing to lay off staff. Then, too, it might even be of interest to the job seekers themselves.

Which way to turn? That was the major issue for us to work out. After much deliberation, we settled on marketing the software to companies whose hiring managers were looking to hire. We quickly ruled out the job seekers, because we didn't want to handle 1,000,000 accounts at $19.95 apiece. We preferred 100 accounts at $199,500. In a tight economy, we thought companies would be less likely to focus on the soft issue of evaluating current employees, and, frankly, we could not get too excited about making downsizing efforts the focus of our business.

Hiring managers, however, as line executives, would be particularly interested in a tool that would help them recruit candidates who could perform like the best on their staffs. We would be able to pitch our software as a way for them to decrease hiring costs, increase productivity and reduce turnover.

The Right Price

Any new product needs to be priced right, which is the next issue you'll face in stage two of building your software company. Having settled on the corporate hiring manager market, we decided that our product would be available by means of a password on the Internet, the so-called ASP model, rather than as a standalone software package. That, in turn, meant that we would license our software rather than sell it.

Figuring out how to price our software was more complicated than I expected. We considered many alternatives. While explaining our pricing model "du jour" to an executive at PeopleSoft, we got the feedback that we needed. "Keep it simple. Let me explain how PeopleSoft does it..."

We decided to use the same approach as PeopleSoft. Sell only to large organizations, targeting departments within those concerns, and offer a fixed annual license for unlimited use of the software, based on the number of employees in that organization. Period.

Telling the World

Next, we had to get the word out. The issue becomes just how to do that given limited resources. Indeed, a lot of companies - PeopleAnswers included - don't have the budgets to retain fancy advertising agencies and launch big marketing campaigns.

Our focus was to land some name brand accounts, get some press from it, and then leverage the good word we got. The name brand accounts just took a lot of work and entrepreneurial perseverance. The press coverage was a combination of luck, contacts, and having a good story to tell.

To leverage the publicity, we focused on getting our web site up to speed and creating a high-end email newsletter. Here is our end-result. By leveraging our brand accounts and press coverage via our email marketing campaigns, we have been able to generate the sales momentum we needed to take us to the next level.

Recently, we also implemented a channel Value Added Reseller (VAR) program, targeting organizations that offer services that complement those we offer. We considered, but ultimately decided against, building a large internal sales force. Instead, we've just begun training independent dealers who will sell PeopleAnswers software on an exclusive basis around the country. We expect to sign up a number of these companies within the next 12 months.

Anticipating Stage Three

In the course of going to market, pricing your product and getting the word out, you will, during your second stage, be evolving as an organization.

Building a staff has involved wrestling with an issue familiar to dieters: it is easy to add overhead but difficult to take it off. Our challenge has been to hire just the right number of employees. Having the ultimate hiring software in-house makes things a lot easier. Now that our customer base has grown significantly, we've been busy also building our internal infrastructure, such as client relation managers and even an accounts receivable department to service the accounts that we now have.

Heady excitement, this second stage: it's a thrill ride, a time during which you have a lot of balls in the air. Make a wrong decision, and you'll be backtracking. Do it right and you'll be on your way. As PeopleAnswers enters 2003, a lot of those balls have begun to settle, and I sense that we are facing a new set of issues, such as how fast can we scale and get some legs. That must mean that we're on the threshold of stage three. But that's another story.

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