Growth of a Software Development Company

Our CEO and co-founder of KindGeek, Anton Skrypnyk, and his father, Oleksiy Skrypnyk, who is also an entrepreneur and co-founder of the Eleks software development company, participated in GrowthFactory QnA webinar, “Growth of a Company and CEO Development”. On this webinar, they shared their experiences and insights regarding entrepreneurship, business, and outsourcing of software development. This article is a translation and a summary of the webinar and its key points. 

What is More Important to a Software Development Company: Strategy or Sales? 

Oleksiy: 

This question is similar to the one children ask, “Who is better mother or father?” The answer is both are equally important. Strategy and sales are intrinsically connected. Strategy answers the question, “What is that special we have that sets us apart from our competition?” Business is a multifaceted endeavor. There should be harmony between all aspects of business if you want your software development company to function properly. Without a good strategy, it is borderline impossible to keep sales up. 

Anton: 

A strategy is a focus. Sales are an instrument. Without a doubt, the balance between the elements is necessary. However, strategy should be primary. Sales should not define the way of a company but rather be an addition that complements a strategy. A strategy is an understanding of what do you want from your company, your employees, yourself, and your life in the future. Such an understanding is essential to any entrepreneur. 

Oleksiy: 

It is also worth mentioning that sales should not be neglected. I’ve spent a lot of time observing businesses from a distance and witnessed some companies that tried to operate without developed sales or marketing infrastructures. In reality, such an approach works for several years. It helps to save some money by not hiring salespeople and/or marketing professionals. But then, the catastrophe happens. The company’s growth stagnates significantly, and the organization falls behind the competition.

Businesses should constantly develop. Or otherwise, they will die. I have such an example of a Lviv company that was a well-functioning business with 200 employees for quite a while. It had great revenue but as the time passed by and the employees grew as professionals, they started leaving the company for better career opportunities, and the company began to collapse because it had not the infrastructure to support its market position.

Proper Sales Strategies When Starting a Software Development Company

Oleksiy: 

Anton, how you managed to transform your company, KindGeek, into a well-functioning business with minimal investments and despite the dense competition in the software development industry? What sales channels do you consider to be the most important?

Anton:

So, in the beginning, when you have basically nothing in terms of business capacity, you should understand your HR and Recruitment well in order to create a sales channel that would help you smoothly lead your future clients from the start of your partnership to the delivery stage. There is actually a gap between what you aim to deliver and what you can deliver at the moment because of the lack of employees. 

When KindGeek had basically nothing except “of three computers and two chairs,” we had to be agile in our approach.  We were aiming to engage clients who required design and business analysis services. And while we were analysing clients’ requirements and conducting some work-breakdown procedures, our recruiters were actively searching for people who would perform the actual task while we had 1-2 gap weeks. It was one of the approaches that we implemented. 

The second approach was also based on our limitations, which were the absence of investments, the lack of employees, and cases we could demonstrate. The approach was based on “quick leads,” the leads that need something ASAP.  We were able to generate those leads via LinkedIn. As far as we weren’t able to compete with big Lviv companies in terms of salaries, we decided to choose less popular technology stacks. Therefore, we were selling PHP and Product Management services. 

Oleksiy:

Considering that I am a mentor of ten or so small companies, I want to mention that it is very important to have a clear focus to understand what you can deliver. In the beginning, Anton’s company had another important focus - startups, and they really doubled down on this focus, which allowed them to achieve better expertise in the sphere than their competitors did. 

Anton:

Yes. We were focused on clients’ success and on the delivery of exceptional client experience during the engagement process. We not only told clients what they should do but what they should not do because we had our own experience with startups and knew where the main issues laid. 

For example, we had a client with a limited budget who already had an MVP that KindGeek developed. We should have started working on a new feature, but we declined the work because we knew that the client had a limited budget, and the development of the new feature would harm the product’s marketing. 

He asked why we would not work on the feature for which we would get paid. We answered that it would be much better for him to invest his money into the promotion of the working product, and only after the new round of investments would over, we would continue working on the project. Otherwise, the risks of the project to collapse would be too high. We wanted the project to succeed and understood that it would be better to promote the MVP first and proceed with the software development second. 

As a result of such an approach, even the clients that did not start working with us due to different reasons such as better timezone, recommended us to other people because they did not expect such great work ethics on a pre-sale stage. 

Oleksiy: 

This example demonstrates that a partnership can provide you with a reliable sales channel. The second important sales channel is a good marketing, which includes well-designed website, good content, references, articles. These two channels are not expensive but work well. 

It is always an attractive idea to find money to hire a good salesperson who will earn you more money in the future so you can hire an even better salesperson. Rinse, repeat. However, we do forget one simple fact that the most efficient salesperson of a company is its CEO. And despite the size of a company, its CEO still should be its best salesperson.

Anton:

I think that the CEO has three main functions: sales, HR, and corporate culture. And if CEO succeeds with the latter two, each employee can become a sales person.  

Also, you should not be afraid to ask your clients whom you helped to create a quality product to help you find new clients. It is completely normal practice for both a small company and for a big company. 

Finally, content marketing is very important because it helps you find new clients. 

Oleksiy:

I agree. The process of sales should be intelligent, meaning that you should be able to interest your possible clients with your experience or immediate value that content marketing provides. 

 

Anton: 

I also want to provide an action plan. If you are a CEO at a software development company, ask each and every one of your clients why they have chosen your company to work with and attentively write their answers down. It will help understand you and your clients what your company is best at and market your company more efficiently.  

Oleksiy: 

Yes it is true. Such things work. In fact, you never know for sure what will work for you. Therefore, you should not be afraid to act “strangely or unconventionally.” Also, don’t be afraid to be “naked and vulnerable,” most people value sincerity and straightforwardness.  

As for the answers you will receive from your clients, they may be very interesting and original. For example, one of our first clients from New York’s Stock Exchange informed our company that we simply tired them with our determination. We were the only company that managed to send them 18 letters a day, while the rest was writing one letter a month. So the client thought that if we needed the work so much, there was a reason to give this job to us. So, you never know.

General advice on different stages of a company’s development. 

Oleksiy:

Depending on the size of a software development company, there are different approaches to finances, management, structure, etc. For instance, when a company is small, the finance system should be very simple - the heap of money you earn should be bigger than a heap of money you spend. 

It is easy to measure the maturity of a company’s finance by asking a simple question, “Have you ever taken company’s money for your personal needs?” If the answer is yes then your company basically do not have reliable financial system. Also, if your company has too much of the uninvolved money, it means that the company does not develop fast enough. 

The same is with the management and structure. How to know whether you require more advanced management system or not? You will realize it when the time comes.  

Roughly, when there are less than 50 employees at a company, the CEO should be a Jack of all trades. CEO should hire and fire people, participate in project management processes and sales. If a company starts scaling, you will notice the necessity to advance a company’s structure, implement new processes, and hire new people to lift some of the weight off your shoulders. 

Anton: 

I agree. However, at KindGeek we noticed that it is better to implement new processes slightly before they are required. I’m not talking about the final version but rather about drafts of these processes, so in the future, it will be easier to transition to the new stage of the company’s existence.

Oleksiy: 

When a company has 400-600 employees, it is a stage of development that requires strong management system and structure. And when a company has more than 1500 employees it is time to divide the company into smaller parts - business units each of which functions as a separate company. Otherwise, such a monster is almost impossible to manage as a whole. 

The growth of a company is a consequence of your growth as a leader and a businessman. Sometimes, may happen that a CEO of a company is the primary hindrance on the path of its growth. In this case, a CEO should step aside and allow the company to grow. Finally, regardless of the situation, you should strive to hire people who are better than you and provide them with an environment where they can grow and help others grow as well.  

Metrics of a Software Development Company’s Success that CEO Should Control? 

Oleksiy: 

It depends on the company and its size. For instance, at ELEKS we always monitor our revenue, EBITDA, and clients’ satisfaction in order to know whether a company functions well. In addition, once a year we conduct an extremely thorough survey regarding employees’ satisfaction rates and scrupulously analyze it. It is essential to ensure whether your employees like their workplace.  

Anton:

Yeah, At KindGeek, we do basically the same but at a lesser scale. We also control a project’s profit margin of every project and employee retention. In addition, I always do my best to communicate with each client at least once a month to receive direct feedback. 

How do you think what is the future of the small outsourcing companies in Ukraine? Will they be able to compete with bigger software development companies? 

Anton: 

I think it is a matter of choice. If you feel comfortable working with a small company, if your company has a strong focus, and expertise and you are able to make maximum out of it, then you will be able to successfully exist. You can still make your “Lamborghinis” and “Ferraris” in small quantities and be happy about it.  

Oleksiy: 

I want to draw an analogy between the Ukrainian outsourcing market and marine life. There is a lot of different fish in the ocean. There are plenty of sharks, whales, and smaller fish. And even though there is always a certain risk to be devoured by bigger fish, I think that in Ukraine there is a balance in the world of software outsourcing, where companies of different sizes coexist in a certain harmony. For instance, in 1998, there were 20 IT companies in Ukraine, now there are more than 300 in Lviv only. The development of the IT sector in Ukraine is staggering, and the perspectives are promising for companies of any size.