Sramana: That is a very good revenue stream for your first year. Great work! By the end of the first year, all three of you had quit your full-time jobs to work on the startup. What happened the second year?
Rod Brown: We just continued to grow. I think 95% of our clients deal with the Federal Government. They deal primarily with Medicaid. That exposes us to risks with the federal budget. Medicaid is a federal program that is managed by the states. The legislator of each state has the ability to direct those funds. The risk to us is that our customers funding can be affected overnight.
We were at the right place in the right time in 2006. There was a legislative change that changed how mental health services were delivered in North Carolina. Because of that, people had to have increased accountability in record keeping. They also had to hire more staff. That meant they needed more licenses for us.
Sramana: What impact did that have on your revenue ramp?
Rod Brown: I don’t know the exact number, but I would say that we doubled our revenue in two and a half years. The other factor that contributed to our revenue increase was our expansion into other states. We grew some because of word-of-mouth recommendations from our clients as well as our own efforts to attend trade shows in other states.
When we went to the trade shows, we started to meet other interested parties. That led us to start marketing in Georgia because of a relationship that we established at a tradeshow. We have been the leading provider in Georgia because of that.
We did not do a whole lot of marketing in those first few years. We did not spend a dime on advertising because our market was so unique. We would just go to trade shows and attend very focused events.
Sramana: What did the revenue ramp look like over the next few years and what were the strategic decisions that led to that revenue increase?
Rod Brown: The decision to go to other states was key. The other key was adding staff and relinquishing responsibility. I was the sales and marketing guy. For the first three years, I was involved in every single deal. I could not do that forever. We made a great decision to hire some sales people as independent contractors. They could market our software, which was great for me because it freed me up to be a thinker in the business instead of just a doer.
Sramana: How did you recruit those sales reps?
Rod Brown: We had a commission-only sales model. We started with our friends who needed a job. Our sales director today is a great friend of ours who was in a car accident. He had been working for UPS and was no longer able to do that job, so he came to work for us. He was a natural and is our sales director today.
Other people came to us from the industry. There is a huge learning curve in the mental health industry. There are a lot of consultants in this business so we did agreements with people who were already prospecting to our potential clients. We basically just added another arrow to their quiver.