Who doesn’t love to get paid? It’s a basic premise of work and one we’re quite fond of! In fact, we now help over 7000 businesses across Canada and around the world pay their staff. It’s made us one of the largest and most loved payroll and payments services. We make people happy – we pay them. I often get asked how we started the company and what it took to get to where we are. Well, this is our story (it’s an abridged version of a talk I recently gave at a startup event).
We started a bit more than 5 years ago. I had just left Microsoft and was looking to start a business. The effects of the financial crisis were being felt around the world. Institutions both large and small were being hit. Northern Rock – a mid-sized British bank fell. Lehman Brothers did the same just a few months later. I had worked on Wall Street and everyone I knew was either being laid off or being told that salaries were being drastically cut. Michel van Leeuwen, who was my former boss and former CEO of a large financial services firm told me that this was the worst industry downturn he had ever seen. People were comparing this decline to the Great Depression and all the smart folks were leaving the financial services industry. So we did what any sane entrepreneur would do – we started a company focused on finance …. But with a twist. My co-founders, two brothers Nirav and Ameet who had, in their own right, created successful IT firms, and I were looking for ways to make small business owners more productive. We wanted to solve some of the headaches they had around paying their staff and we wanted to ensure they had access to the best tools to do so. It helped that the payroll industry in Canada was a backwater serviced by incumbents who hadn’t changed their code-bases in over 30 years. We started with a simple vision – we wanted to democratize payroll and paying staff. Small businesses could never afford the capital cost of an SAP implementation but it didn’t mean that their needs were any simpler. In fact, if you think about it – it’s small businesses that need the ultimate flexibility when it comes to paying their staff. Your neighbourhood convenience store has folks working on shifts while your dentist has hygienists who may get paid by the cleanings they perform. Every small business has a unique way to pay and incentivize its employees and we wanted to build a platform that made it dead simple. 
We found, however, that getting started was tough. There was very little funding available to build real business software. Aside from skittishness of potential investors still reeling from the financial crisis, any little money that was available was funnelled into social networks because of Facebook or into projects supporting Second Life (remember that?). Nobody thought backoffice software for payroll was sexy but we knew the pain every small business owner faced each payday. So we bootstrapped and started building the core of our payroll service. We had a handful of businesses that volunteered to use the service in its infancy. These were folks we knew and trusted to give us useful feedback. Or so we thought. Back in ’08 most small businesses were still running their businesses on PCs (if you’ll remember, the “netbook” was all the rage that year) so most of the feedback we received said we should build a desktop Windows based payroll software. This was tempting – on one hand, we had a sure market in selling licenses of a desktop-based solution. On the other, we knew that the desktop was on life-support. Had we listened to these early clients, we would be stuck with a desktop-based software in a world that has fully embraced cloud services. Our mistake was not really knowing our audience. We thought it was the small business owner who needed to run payroll every two weeks. Our feedback from these folks was that they needed some software to run on their PCs. It’s true, they needed a tool. But we also had to consider the person being paid. Their pay experience was horrible – they were likely paid with a cheque and given a paper paystub. Larger organizations had a leg up on small businesses – people were paid via direct deposit and the largest organizations were giving them electronic access to their pay history. We needed to rethink and switched our vision to building a cloud-based service that really democratized access to high-end payroll tools. By engineering the service from the ground up to live in the cloud, we could ensure that everything was paperless. Employees would be given full electronic access to their complete pay history. Data would always be secure and backed up. Most importantly, we didn’t have to worry about dreaded software patches – updating tax tables or changes to tax legislation. We could do that once in the cloud and ensure that all small businesses would have access to the latest tools. We launched our cloud service in April 2010 and I remember that day well. We were really excited – we had flipped the so-called switch and made the service live. We issued a press release …. Yup, an old school press release … And we waited. And Waited. Our web traffic that day was a stunning 50 hits. Nobody signed up and I later found out that most of our traffic that day came from family who were curious about what we were up to. We believed that if we built it, people would come. But they didn’t – we failed to tell people the right way. We didn’t create any buzz and we didn’t clearly articulate why they needed cloud payroll. We fixed that, focused on telling business owners the advantages of cloud payroll and within a year we crossed 1000 businesses on the platform. 
Growth, however is hard. You’ll run into many problems. Finding the right people to help run your company is tough. Figuring out how to delegate and find more efficient ways to do the day to day tasks will keep you awake at night. For us, we wanted small business owners to love us. We wanted them to love payroll. Which, in retrospect seems kind of silly – like really, who loves payroll? In essence we wanted to create fans who would refer us to others and spread the word about how easy it was to pay their staff. It’s an effective method – create a fan and have them extol the virtues of your service. In doing so, however, we inadvertently created a fanatic. One of our earliest launch partners was a mid-sized accounting firm in Toronto. They helped us scope the original cloud-based service and were our first private label client. We created for them a fully hosted payroll service that they resold to their accounting clients. They loved the service and were vocal about how it helped grow their business, attract new clients and retain the existing ones. Over time, however, this accounting firm viewed us as their outsourced IT support team. And, because they were our first large scale client, we did everything they asked. Tweak the system here, add a feature there – and soon our systematic process of saying yes to all their requests was taking us away from our core business of helping small businesses pay their staff. We were spending way too much time servicing them. Invoicing, which normally should be a very fast process for larger clients, took 2 or 3 days for this one client. It wasn’t sustainable. We started enforcing our pricing policies more – no more free outsourced IT consulting. Feature requests from this firm were being put in our regular queue and for things we didn’t feel could benefit our larger audience, we said “no”. For me personally, this was very tough. Saying “no” to one of your major revenue drivers seems counter intuitive. But we had to. We could not sustain the level of service we were providing and certainly not at the price point we were charging. Inevitably, the client left us. On the day they called to say they were leaving, we brought the team together. I was livid – I wanted to know how we could let this client go. Obviously, we couldn’t afford to keep them but I was hoping we could find a better way to keep them and the revenue stream. We pointed fingers, we cursed and we blamed ourselves. In the end, we realized that this client who turned from fan to fanatic was bad for our business. In so doing, we learned how to better balance client service with great software. Today, we get notes from clients every week who love the service and how its made paying their staff so easy. I’ve even had clients send us gifts – TimCards to keep our developers well caffeinated. It’s unbelievable but its these fans that motivate us to continue building great software. Looking back, there are few things that I’ve learned in getting us to this point.
- We dared to build something in a market that was imploding. We dared to go against the norms of desktop software and we dared to shake up an industry stuck in the doldrums. If you’re daring to stretch the boundaries, and stay focused, you’ll see success.
- We built something on our own. There’s merit in seeking outside capital and I wish success to those who do it. However, building this service without outside capital helped us really focus on getting a viable and self-sustaining product to market faster than if we had a cushy runway of VC money. Contrary to what people may have you believe, bootstrapping isn’t sexy. It’s tiring, its stressful but there’s nothing better for getting your team laser focused on building a real business.
- We grew something by taking our clients and turning them into fans. I wish there were a simple formula for this, but getting the basics right will help you get there. Deliver a great product, provide excellent support and wow them with value. Your fans will follow.
Now, it’s your turn – we’d love to hear your story. Use the comments below and we’ll give you a free payroll account to help pay your staff.
Sam Vassa is CEO of PaymentEvolution
