A $14M Bootstrapped Family Business in Eugene, Oregon: Palo Alto Software Founder Tim Berry and CEO Sabrina Parsons (Part 2)

Sramana: When did you actually start making a real business out of the software?

Tim Berry: This really is one of those “darkest moments before dawn” stories. By 1994 the template business had failed in retail. We had a $250,000 liability for returns. We had boxes and boxes of software coming back to us, and at the same time I had three kids in private school. Everything was very much integrated into my family finances. Things looked very bad.

I did two things right. First, I found programmers who took my templates and helped me create apps out of them. The great thing was that these programmers did it for a percentage of revenue. I did not have the capital to pay for it otherwise, and we were really not investible any other way. These people were available for a percentage of revenue plus a small fixed cost.

The other thing that was critical back in 1994 was packaging. The Internet was there, but it was not a viable channel yet for software. We depended on the precursors of Best Buy, Staples, CompUSA and folks like that are where we sold. The ability to sell software was based entirely by what was on the box. We repackaged the software and we created a stand-alone application instead of templates. It was impossible to sell templates because people did not understand them. That product was Business Plan Pro, which was successful very quickly after it was launched.

Sramana: Did you launch Business Plan Pro through the retail channel?

Tim Berry: That was the primary channel. In 1998 we offered our first web downloadable product. At that point we were 91% retail sales.

Sramana: How did you get into the retail channels?

Tim Berry: It was about knowing what I did not know. I made contacts with sales reps who knew the retail channel and were willing to work for a variable cost after the fact percent of sales. That was vital because we were broke at the time. We did not have the capital to just hire somebody. I found a sales rep firm who believed in the product, market and viability. They took us on for a contract where they got 6% of sales after we got paid. That was vital for us to get into retail.

Sramana: What kind of revenues did the retail channel bring at that point in 1998?

Tim Berry: The first year we offered Business Plan Pro retail was in 1995. We got close to $2 million of revenue that first year. By the time we got into downloadable sales in 1998, we were doing $4.5 million a year of revenue through retail.

Sramana: Retail really worked as a channel for you.

Tim Berry: It was the only channel that was viable in the mid-1990s. It is funny how quickly that changed. The push toward downloadable came very fast. We had our first application available for download in the fall of 1998. The back-end of checking the credit card and authorizing the sale was a major change for us. We implemented that October 5, 1998.

Sramana: How much revenue were you able to do from October 5 of that year until the end of the year?

Tim Berry: It was so exciting, those were good times. We had been selling as little as $5,000 a month direct. By February of the following year we were crossing $100,000 a month from direct sales. The vast majority of those direct sales were downloads. That was a huge shift in our business.

This segment is part 2 in the series : A $14M Bootstrapped Family Business in Eugene, Oregon: Palo Alto Software Founder Tim Berry and CEO Sabrina Parsons
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