This Solo Founder Built A $10M ARR Tool For Software Teams
Company name: Inflectra Corporation
Revenue: 833K/ Month
Hello! Who are you and what business did you start?
Hello, my name is Adam Sandman, and I’m the Founder and CEO of Inflectra Corporation – a tech company based in the Washington, DC area. Our flagship product is SpiraPlan and our companion testing automation tool – Rapise. Our mission is to bring harmony to customers’ software development and testing process, and our products help customers design, develop, test and release their most mission-critical applications. Today, Inflectra is doing about $10MM in ARR and we hope to continue growing at between 30-40% YoY.
One of the most rewarding things about our business is that we see our customers every day; they are everywhere! As our business focuses on medium-large companies (which is unusual, I know!) in industries such as food, transportation, logistics, banking, insurance, defense, and life sciences, we see them in everyday life. When visiting the doctors, I will see the name of our clients; when traveling, the plane I am flying in, the fuel we are using, the airport I am landing at, and so much more. Inflectra’s customers are the critical infrastructure that keeps the entire world running, and we make the software platform – SpiraPlan that helps them deliver. That is very cool.
What’s your backstory and how did you come up with the idea?
As I’m sure is true for many people who start businesses, the seeds are unconsciously sown at an early age. Growing up in South Wales, most people in high school wanted to go to university and join a profession (doctor, lawyer, civil servant, etc.). However, from an early age, I was always fascinated by computers and technology as well as loving business (this was the 1980s and Margaret Thatcher’s Conservative party had just launched the largest deregulation and privatization effort in the country’s history). When I was ten years old, I started writing computer software on 8-bit computers, both computer games, and rudimentary application software. I would try selling them to friends in school with mixed success. After high school, I went to university to study Physics since I had always liked science and assumed my career lay there.
At university, I quickly realized that I was not excited about working in a laboratory or teaching and that a career in Physics wasn’t what I had expected. However, in one of those random ways that life throws you opportunities, I met an entrepreneur after watching a Goethe play in Oxford, and he explained that he’d faced the same dilemma. Over Haagen-Dazs ice cream, he suggested a career in IT consulting since I liked computers and business. So, in 1998 I emigrated to the United States to work for the Internet consulting company Sapient in Boston, MA. After eight years working for Sapient in their Boston, Los Angeles, and Washington, DC offices, I decided that I’d had enough time in consulting (I had a young family) and quit my job to be a stay-at-home parent (my wife had a secure job with the US. Government) and launch my new business “on the side.”
The idea for the business came from my time at Sapient, where we had started using a new piece of software for managing our project’s requirements, test cases, defects, and project plans. It was a great tool that was light years ahead of anything else in the industry at the time, but it was too expensive for most teams to use. In addition, it was geared toward waterfall software projects, and the Agile manifesto had just come out and was changing how software was designed, developed, and tested. In short, a ripe opportunity for new, modern agile requirements, tests, and project management systems. When my friend and colleague, Nathan, and I were in the middle of complaining about how we would love to use a product like this for our other projects late one night over drinks, I blithely said to him, “I could code something just as good myself in the evening in six months.” His reply (the challenge that started me on the path to founding Inflectra) “Well go on then bud, what are you waiting for?” I listened to his advice, and quit Sapient soon after.
I had always wanted to start a business, and since I was a good programmer, I figured I could code the first version of a product myself and get it to market relatively cheaply. Before deciding on the requirements and test/defect management idea (which ultimately became our SpiraTest product), I had looked at some other product ideas, including a content management system for small businesses (this was before WordPress existed). The reason I decided to build SpiraTest was that there was already an expensive legacy tool on the market, so I wasn’t having to create a whole new product category from scratch. When you start thinking about your new idea for a product, I’d recommend reading a book called “Selling the Wheel,” as it explains the product innovation lifecycle and is a good way for you to understand your position in the market and differentiators.
When you are deciding on your product, you need to figure out upfront if this is a new, disruptive product category, as that will require a lot of investments. Additionally, you will have to undertake significant upfront work to develop thought leadership around the product and convince potential customers that there is a need for this new product. Since I had planned to self-finance / bootstrap the company, I knew that a cheaper, better version of an existing product category was the better option for me. Although this provides less differentiation, it is a significantly less risky endeavor and doesn’t require the same upfront capital. I had a young family, so for the first year, we saved money by pulling my children out of their expensive daycare / after-school care, and my wife had a full-time job with the U.S. Government. We cut our household expenses back to the bare minimum until the business either was cash-flow positive or the initial investment pool was exhausted. Luckily, within a year of launching the product, we had enough customers to at least cover costs. By the 18th month, the business covered a basic salary for one person. The fact that customers were willing to try the product online and pay for the product within the first year validated our confidence in the business proposition.
When you launch a new product or business, set a fixed budget and timeline for how long you will continue to sink money and time into it.
Take us through the process of designing, prototyping, and manufacturing your first product.
The very first product we launched was SpiraTest – an integrated requirements management, test management, and defect tracking system. Since I had left Sapient and was essentially a stay-at-home dad that could code, I focused on developing the product first since that didn’t cost anything. In addition, I could work on building the first version part-time when not watching my children, without needing to pay for developers, designers, or any other resources. I chose development tools that I was familiar with at Sapient (Visual Studio, .NET, SQL Server Express) and built a rudimentary version in Web 1.0 technologies (pre-Ajax) that could be downloaded and installed on a local laptop (for trials) and a server (for production). To avoid the expensive and time-consuming hosting needs (at the time pre-AWS), the first version was only available as an on-premise product that you hosted on your own web server. Now that we had a product that worked (even if the UI was a bit clunky), we needed a way to market and distribute it.
A screenshot from the first version of SpiraTest v1.0 in 2006
So again, based on the fact that we had not raised any money and, therefore, money was more precious than time, I also created a basic website that would let you log in, sign up for a trial, make a purchase using PayPal and get a license key that would unlock the product after the initial 30 days.
A screenshot from the original Inflectra website in 2007
At this point, we had a product, a basic website that let you see the product’s features, and the ability to sign up for a trial and make a purchase… so we were all done, right?! Well, no…we had actually to launch the business itself.
Describe the process of launching the business.
Once we had the prototype, first product, and website ready, the next step was to spend some money and actually launch the company legally and practically. I used LegalZoom to incorporate Inflectra in Delaware and then spent a surprisingly long time on bureaucracy: getting a Federal Tax ID, registering the company in my home state (Maryland), and setting up Bank Accounts.
A couple of tips: when you first sign up for a Federal Tax ID, don’t say, that you have any employees. Until you actually pay yourself a salary, you don’t need to worry about payroll taxes or unemployment insurance. However, I didn’t realize this and by letting them know I would have employees right from day one, I had to fill out a lot more paperwork for the IRS and the State of Maryland that I could have avoided. You may also need to register for Sales Tax depending on what type of product you are selling and where you will be selling it.
For the bank accounts, I wanted a large bank that could handle international payments, so I chose HSBC which at the time had some very good small business bank accounts with no fees for wire transfers. Unfortunately, they exited the US retail market in 2021, so we had a massive effort to switch over to Bank of America, so a warning, make sure you choose a bank that will have longevity, as it is a pain to change over! To accept credit cards, we started out using PayPal, but when customers had problems with declined cards, it was too difficult to work out, so we switched to a real merchant service provider (GlobalPayments Inc. using Authorize.Net as the payment gateway). Nowadays there are more online options (Stripe, etc.) that were not around in 2006.
With the legal and financial stuff out of the way (I also hired an attorney to read all the language and legal notices on our website and an account to file our corporation taxes and other monthly filings) it was time to launch the website on our production domain. With that done, there was exactly zero traffic to our website. So, I purchased a couple of books on search advertising, including the excellent, “Ultimate Guide to Google AdWords: How to Access 100 million People in 10 Minutes” by Perry Marshall. Armed with that knowledge, I set up some simple ad campaigns on Google AdWords, Yahoo!, and Microsoft Bing (it was called Live Search in those days!). With that now in place, I waited patiently for the first trial sign-up for SpiraTest. Luckily, that came in a few days together with some sales and support emails that we eagerly answered. However, now that we were spending money each month on advertising, we were anxiously waiting for our first sale, which would take quite a bit longer.
A screenshot from the current version of SpiraPlan v7.0 in 2022
It took about nine months from the time we launched the first version of SpiraTest to the time we had our first sale. It was a small sale (about $300) and we needed to add several features to the product (based on feedback from early prospects) to get that sale, most notably support for reporting and custom fields. A good lesson learned was that an MVP (minimum viable product) for the launch was not necessarily a sufficient MVP for a paying customer! After that point, sales started coming in monthly. So, in retrospect, the product needed sufficient feature support to be viable. However, the typical sales deal took about 60-90 days to close, so potentially some of the later features may have been unnecessary.
The initial funding was from personal savings until the flow of sales was sufficient to offset our expenses. We kept expenses very low (both business and personal) for the first year and I took no salary. Luckily, we had my wife’s full-time job to support the family, and the initial $20,000 set aside in initial capital lasted the first year until sales flow was established. At this point, I was still the only employee and the only expenses were web hosting and AdWords ($500/month in spend). We didn’t resort to credit card debt and crowdfunding sources weren’t really a thing yet. The positive side is that the company had no debt and we did not have to dilute our equity to raise money. We continue on this path even today!
Since launch, what has worked to attract and retain customers?
When we first launched Inflectra and our Spira products, social media was in its infancy, so we focused first on paid search channels (AdWords, Bing, etc.) and B2B industry listings that were appropriate to our product category. Initially, we were listed on Business.com and Capterra. Subsequently, we dropped Business.com and added more modern platforms such as G2, TrustRadius, PeerSpot, Gartner Peer Insights, and GetApp. These channels all had the advantage of being cost-controlled and delivering relatively immediate traffic. To build a more durable business and deal with savvy customers that have learned to avoid sponsored search links, we subsequently invested in a formal Search Engine Optimization (SEO) program where our partner, Effective Spend, manages both our paid search and SEO. They use the keywords that rank well for paid search and help us create compelling organic content that targets those keywords. They also reach out to websites and owners of “listicle” pages (articles that feature the Top 20 Best Tools for XYZ) to get our products and articles listed with organic “do follow” backlinks that improve our Google Domain Authority (DA) and Page Authority (PA). These are metrics that determine how high your pages will display on Google organic search for specific keywords. My advice to founders is to first focus on channels that deliver immediate traffic on day one and then look for longer-term programs like SEO.
A screenshot from our internal marketing dashboard, showing the conversions YoY by channel8
One major mistake I made early on was trying and doing too much myself. I ended up with a bunch of services and vendors (paid search, SEO, marketing, etc.) that I didn’t have time to manage, and we didn’t have a holistic message or vision. A mentor recommended that we scale back this spend and hire a full-time Chief Marketing Officer (CMO), and only when you had that person in place and ready to manage everything, invest in those channels. So, my advice here is to get a full-time marketing manager on your team and make sure your core marketing messages are solid before you invest too much in different channels and platforms.
Our website as it is today in 2022
Once we had the core digital channels in place, we looked at increasing our brand recognition as we were tired of prospects saying, “this is such a great product, how come I’ve never heard of it.” Particularly when selling to mid-large B2B customers, being a relative unknown can be a huge disadvantage. CIOs tend to want to purchase from vendors they’ve heard of and which they know will be around for the long haul.
Separately, we decided to build out a partner channel as well to increase the number of sales we could do without having to expand our direct sales team. Since a lot of our customers look to purchase services associated with our product (test consultancy, agile transformation coaching, software development), having partners that could recommend/sell Spira, along with their own consulting services made a lot of sense. To achieve both of these goals, we started attending and sponsoring trade shows and conferences. Before 2020, we attended about 10-12 trade shows a year. During 2020, we tried sponsoring/attending virtual events, but honestly, they delivered little value for us. They are great for speakers and attendees who want to hear the content, but they don’t replicate the networking and partnership development that goes on at an in-person event. My advice here is either sponsor/attend an in-person event or don’t bother at all.
One further refinement, we’ve been piloting is to also build a targeting sales strategy around each event, inviting prospects and potential partners as part of the overall event game plan.
Our booth at the Agile+DevOps conference in Las Vegas, NV in 2022
In terms of social media marketing, we hold webinars and post links to them and other pieces of content (blogs, whitepapers) on various channels such as LinkedIn, Twitter, and Facebook. As a B2B software company, the usefulness of both Twitter and Facebook has declined steadily, with Twitter becoming divisive and political and Facebook becoming a network to share family photos and personal stories. Conversely, since the pandemic, we have found engagement on LinkedIn to have increased and that has become our “go-to” social network apart from YouTube, where all of our videos live.
The last aspect worth mentioning is the sales process itself. When we first started, users basically trialed the software on their own with minimal assistance or handholding. That worked for small customers looking to use our relatively simple SpiraTest product. However, as we added more sophisticated products (SpiraTeam, SpiraPlan and Rapise) and our customers expected more handholding and expertise in doing a proof of concept (POC) with our products, we had to change our approach. After experimenting with traditional sales resources, we found that the best approach was to have technical pre-sales account managers assigned to a prospect based on country and industry. That way they could assist with a discovery call to understand their needs, provide 1-2 demos of their more important use-cases and then work to help them close the deal. The added benefit is that we could keep this structure and have the same account manager help with renewals and account expansion. My advice is don’t wait too long to deal with expansion and retention. Once you have your first customers, you are one year away from losing them. It is much more efficient to spend money to keep and grow a customer than find a new logo. In addition, we added a new role of customer success manager to augment our existing support team. This person acts as a dedicated relationship manager to our largest VIP customers to ensure they are getting the help they need.
How are you doing today and what does the future look like?
We have been profitable since our inception and typically we have an 80% gross profit margin and a 10% net profit margin (reinvesting the rest back into the company). Our biggest costs are labor (developers and business development mainly), hosting costs (AWS), and advertising/marketing, with Google AdWords, SEO, and conferences being the largest categories.
The InflectraCon 2023 Conference Website
We also host our own live conference – InflectraCon every year, which is a large revenue and cost center of its own.
My advice is don’t wait too long to deal with expansion and retention.
Inflectra has grown in the past 2-3 years by approximately 40% year over year. Ninety percent of that revenue has come from deals that we sold directly and we are looking to get additional revenue lift from our revamped partner program that we relaunched in 2021. Approximately 60% of our annual revenue comes from renewals of existing customers and 40% is from new sales and expansion sales. That book of recurring revenue has helped us make investment decisions knowing that we have the recurring income to base our projections on.
As a company, about 50% of Inflectra’s business is in North America, with Europe and then Australia/New Zealand being the next biggest geographies. We recently expanded our business development team to include account managers in Latin America (LATAM) and Asia-Pacific to increase our business in those two geographies. In addition, we’ve created better mechanisms for tracking the inbound deals, leads, and sales from partners so that we can better allocate our time and energy to the most productive partners.
On the product side, we launched the Enterprise SpiraPlan edition of our core Spira product in 2020 to capitalize on the move in the industry to Scaled Agile methods such as SAFe. This has allowed us to bid on larger deals and also displace some legacy incumbents from Fortune 500 companies. We continue to invest in R&D on all our products and luckily our core value of, “Build for our Users and Not for Wall $treet” helps us avoid the pitfalls of chasing the latest fad. For example, we have developed our products so that they can support both cloud / SaaS deployment and on-premise without extra development effort. This lets us target customers in key industries (defense, finance, etc.) that are not able or willing to move to the cloud. Currently, about 38% of our revenue comes from on-premise customers and 62% from our cloud customers. We switched all products (cloud and on-premise) to annual, subscription pricing in 2020, which has helped us better manage revenue forecasts and also reduced customer churn.
The breakdown of sales/revenue for 2022 YTD for our different deployment options
Our goals going forward are to continue to grow by at least 40% year over year (ideally more than that if we can fully leverage our channel partners) and increase our brand awareness through a targeted PR campaign so that we are the first choice for customers in our product segment.
Through starting the business, have you learned anything particularly helpful or advantageous?
One of the best decisions I have made is to make sure we don’t outsource our key company functions. It’s easy to outsource everything: product development, sales, marketing, and customer support to third parties, but in the long run, you will need to keep your key people and key ideas in-house. If you intend to grow your products and build a long-term sustainable business, make sure you know which company functions are a differentiator (for us: product development, customer support, and pre-sales account management) and which functions are a commodity (payroll, SEO, managing paid search) that you can find a quality platform or company to manage for you.
One of the biggest missed opportunities for us was that we did not fully capitalize on opportunities in the market when we were a smaller company. When we first launched the company, there were several legacy players that dominated the industry. Due to some missteps on their part, they opened up the market to new entrants such as ourselves. We had a first mover advantage in that we were one of the first companies to offer a similar product at an affordable price with easy options to try and purchase online. However, because we were a small, bootstrapped business, I was too conservative in those early years, and we allowed other similar competitors to enter the market. Had we spent more on sales and marketing in that critical 6–12-month period, I think we’d have avoided needing to compete with them. So, a lesson would be, once you have a product-market-fit, double down on your sales and marketing as much as you can because that window is time limited. A similar window has opened up again recently because of some missteps by our competitors and this time around we’re not making that same mistake.
The other big issue we have faced is pricing. When you first start a business, you just want people to buy the product, so you tend to undervalue your work and therefore underprice it. In the beginning, the price was one of our major differentiators, but over time as we improved the usability and added compelling, unique features, price became an attribute of the product (fair and affordable pricing/licensing) but not the primary differentiator or unique selling proposition (USP). However, once we had set the prices for the early customers, it has been a lot of work to manage their expectations during renewals. It turns out, that it is easy to raise the prices for new customers, but hard for existing ones. They tend to think in terms of an x% increase from what they previously paid, so if the initial price is too low, any change is limited to a percentage of that price. Do a comprehensive review of your competitors and make sure you’re priced appropriately.
What platform/tools do you use for your business?
Some of the most important platforms and tools we use for business operations are:
● QuickBooks Online for general ledger and accounting
● Gusto for payroll/HR for our US employees
● Papaya Global an Employer of Record (EOR) platform for our non-US workers
● Amazon Web Services (AWS) for our cloud hosting infrastructure
● Google Workspace for our general productivity
● SpiraPlan our own product for projects, requirements, and quality management
Integrated customer view in our website where we aggregate data from Pipedrive, ActiveCampaign, and KronoDesk
On the sales and marketing side of the house, we use:
● Pipedrive for Customer Relationship Management (CRM)
● ActiveCampaign for marketing automation
● PheedLoop for conference management
● LearnWorlds for our Inflectra Campus online learning platform
● Canva for basic graphical design authoring
● Hootsuite for social media marketing
● KronoDesk, our own help desk platform for customer support
● Adobe Creative Suite for creating our more sophisticated design assets
What have been the most influential books, podcasts, or other resources?
When I first started the company, the book, Losing my Virginity by Sir Richard Branson was the inspiration for leaving my previous job at Sapient and starting out on my own. Startups and insurgent businesses are now common across the world, but in the late 1970s and early 1980s in Great Britain, when Virgin Records and Virgin Atlantic Airways were launched, they were revolutionary. They took on some of the largest and most entrenched companies in the UK (EMI Music and British Airways) and won. It’s a thrilling read and I challenge anyone to read the book and not want to start a company immediately.
Two books that I read at Sapient that were instrumental in building a company with a distinct and enduring culture were, “Built to Last” and “Good to Great” by Jim Collins and Jerry I. Porras. When I first joined Sapient, every new employee was actually given a copy of the book as a joining present. They discuss a lot of great ideas, including building a cult-like culture, the genius of the “and” (avoid false trade-offs), trying a lot of stuff and keeping what works, home-grown management, and having a purpose more than just making money. If you want to build a business vs. make a product, these two books are for you.
“Selling the Wheel” by Jeff Cox is a really important book for anyone who is looking at building a product company. It discusses the different stages of the innovation lifecycle (of a product) and explains the different business models and sales models that you need to have in each phase. It covers the differences between launching a new product in an existing category and having to define and educate the customer on a whole new product segment.
Finally, a great book to read just for the sheer exhilaration and fun of it is, “Hatching Twitter” by Nick Bilton. The book discussed usual startup cliches and tropes – founders falling out, unclear business models, party-like office environments, and toxic bro-tech cultures. For me, it was more a guide on how not to build a company, but it is gloriously entertaining nevertheless.
Advice for other entrepreneurs who want to get started or are just starting out?
The first piece of advice is a bit of a cliché, but I would recommend creating a simple business plan. I used the book, “Business Plans for Dummies,” which was really helpful. I would also read up on basic accounting principles and basic business/contract law. As a small company, you won’t always be able to pay for legal and financial services for every little thing, and having basic business knowledge will be really useful. Think of the famous quote, “there are many good ideas out there, but not that many good businesses.”
Secondly, I would ask friends and family for feedback on your ideas, but also feel free to ignore their feedback. As an entrepreneur, you will get a lot of pushback and criticism from other people along the way, and you cannot get discouraged by naysayers. That being said, when you launch a new product or business, set a fixed budget and timeline for how long you will continue to sink money and time into it. I’ve seen products not have a market fit and still the founders will persist for decades, even though customers don’t see the value.
As an aside, I would be very wary of setting up a business with a life partner or spouse. I know that some couples make it work, but I have always appreciated coming home to someone that is not a work colleague. If your family and work are 100% combined, you will never get a break, and if you end up having a business disagreement, it can affect your personal life dramatically and permanently. I have seen many couples that ran companies together get divorced, unfortunately.
Finally, make sure you have time for fun. Launching and running a business is truly a labor of love, some days you’re on top of the world, and other days you want to run screaming. You never get a real vacation, it’s always on the back of your mind, there’s never enough time or money to get everything you want to be done, and you constantly have to make split-second decisions with only partial information. In that context, when you can have fun for a moment, revel in it. Make sure you and your team have those moments that you can look back on and say, “the journey was worth it.”
Where can we go to learn more?
If you have any questions or comments, drop a comment below!