Child Entrepreneur Kevin Sproles: CEO Of Volusion (Part 5)

SM: How is your pricing model set up?

KS: It has changed over the years. My most inexpensive option was $100 a month and up. We had plans at $200 and $300 a month. I also sold the source code for a couple thousand dollars. Today, we have a plan at $25 a month. We can offer that now because of all the efficiencies we have in the business. I did not have repeatable processes in the beginning. Even though clicks were cheaper in the beginning, hosting costs were more. Now clicks are expensive; hosting is different. Most people’s infrastructure was prone to problems, whereas today it is more mature. We have an enterprise infrastructure with enterprise-grade security. That cost is probably the same.

SM: Clicks today are a lot more expensive. How does that impact you?

KS: It is good timing for us that I was able to start the business when I did. For someone to come in and compete with us, they have to pay very expensive clicks and learn on a larger budget. We have built our business model around the increasing price of ads.

SM: You have created entry barriers for competitors, which is great. How did your revenue evolve from 2005 to 2010?

KS: In 2005 we did $1.6 million, in 2006 we did $4.8 million, and in 2007 it was $8.6 million. We pretty much doubled during most years. Only last year did we not double our preceding year. That is why we have been winning so many awards. In 2009, we won a bunch of awards as well, many of them for being the fastest-growing company in the San Fernando Valley.

SM: What was your revenue last year?

KS: We did $22.4 million in 2009.

SM: Your business is still very similar to where you started. You have streamlined things and fine-tuned your processes.

KS: In terms of what we offer and what our vision is, that is correct. We have products which are more mature and involved. From a business scaling perspective, we have figured out how to grow fast, and I think that is what is challenging for most businesses. We used to be able to get feedback from customers because I was doing sales and software development. Communication between customers and our internal employees was real-time and agile. We can implement a change overnight. The bigger we get, the more of a challenge it is to make that happen. Getting feedback from 18,000 customers is much more difficult. Last year we hired somebody to do that. We needed a specialist because that is one of our critical business elements. We are successful because we ask our customers what they need.

I was reading the 1M/1M on your blog. I noticed in there that you have to ask customers before you build the product. We take that approach which we think all businesses should do. Companies should continue to ask customers what they need all the time. That is how you know how to continue building the next versions.

SM: I also think it is key that you did the service work early on. That allowed you to get to know your customers’ needs. I talk about that a lot in 1M/1M. If you have the opportunity to do service projects in the domain where you want to work, it is important to take advantage of those.

KS: Exactly. That is really interesting because both Clay and I were intimately involved. He was running a business and processing orders for about a year. He understood it from the client side very well. While I did not do the retail business, I work with the retail business owners. We hired a chief customer officer in 2008 whose specialty is customer experience. He was doing that work with Rackspace before. It was a great investment, and he now runs all of support plus all analytics around customer feedback.

This segment is part 5 in the series : Child Entrepreneur Kevin Sproles: CEO Of Volusion
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