Sramana Mitra: You must have had a lot of relationships in that business since you were coming into this business trying to do something better than what you’ve done before. Did many of those relationships convert into paying customers?
Carl Ryden: Yes. We call them switchers. We get someone to switch from something they had before. It was good, but also not good. It was good, because you get money in the door and you get reference-able clients. It was also bad in that you never had to learn how to sell to new clients. It built in some bad habits. Eventually, we weaned ourselves off of switchers. I was somewhat against going after the switchers.
Sramana Mitra: Why?
Carl Ryden: Because we needed to learn our own stuff. We need to learn to sell to new clients ultimately.
Sramana Mitra: Yes, but it’s easier to sell anything if you have reference customers. The best way to get reference customers are people whom you have relationships with.
Carl Ryden: Yes. That was the practical argument that won the day. Ultimately though, what happened was we got really good at winning switchers, and then you run out of switchers.
Sramana Mitra: That’s natural. By then, you had a lot of reference customers and the product was robust.
Carl Ryden: Yes. It was necessary. You have to be prepared when the easy sugar rush comes off. You have to find some protein. You have to learn to sell the stuff to somebody who wasn’t a switcher.
Sramana Mitra: Revenue-wise, how far did you get with the switchers?
Carl Ryden: It wasn’t all switchers. We had newbies too, but the switchers were dominating. We probably got to a million dollars of recurring revenue.
Sramana Mitra: What time-frame is that? When did you hit a million dollars in recurring revenue?
Carl Ryden: Within a year, I think.
Sramana Mitra: That’s fantastic. Then what? What happens next? When the switchers ran out, what customer acquisition strategy did you settle into?
Carl Ryden: Let me back up. When we were in that first meeting, I forced it a little bit. Patrick is a wonderful guy. He worked very hard and made a lot of progress, but he wasn’t the right guy to do sales for us. But we’re owners first, then employees second.
He’s still an investor and he comes to the Christmas parties. It was a very painful discussion. It took us a lot longer to get to that point than it should have. We’re chugging along. We were doing around $2 million. We started hearing from people that with a company of that size, we need to hire a sales force. We actually went out and hired a transactional sales force. These were folks who had experience selling to banks.
Sramana Mitra: Was this direct selling? It’s a small price point to do direct selling.
Carl Ryden: By the time we were $2 million, we’re selling at $90,000. We charge based on the asset size of the bank. We hired a direct sales force and a commission-based sales team. It was a bit of a disaster. Fast forward a couple of years, none of them are left. We rebuilt the whole sales team again, this time, around the right way to do it. There’s this joke. Once we got rid of our transactional sales force, our sales actually doubled.