How to Create a Monopoly in an Esoteric Niche: Steelcloud CEO Brian Hajost (Part 5)

Sramana Mitra: What is the total size of the company?

Brian Hajost: We will do $8 million this year and we have 27 people.

Sramana Mitra: Are all of them in the Washington DC area?

Brian Hajost: All of them are in our office in Washington DC. As you mentioned, it is a niche product and it’s hard to understand. I cannot hire anybody on the street that has ever done this, at least this development and support work. We have to train. We get good technical people and we train them. It takes mentoring. Most of that is done face to face. 

Sramana Mitra: I really like niche products, because I think niche products are just like you said. It’s an appetite problem and solution. Niche products are easier to sell by inbound marketing and content marketing. It has a precise sales cycle. This is especially true of niche products facing enterprises that have a compulsion to buy based on compliance requirements. This is a good case study of how to build a lean company. 27 people doing $8 million is a very lean company. We love case studies like this.

Brian Hajost: Some of it requires discipline. We never discounted the product. In discounting, your best customers get the worst price and your worst customers get the best price. By maintaining the price integrity and not having sales at the end of the quarter of the month, you are not training salespeople and not training customers to do bad things.

It’s also to make good business. I have never had a bad debt. I have no customers that have a bad debt. I always tell investors, “We always get paid and we always get paid on time.” That means that you cannot lie during the sales cycle. That means that you cannot agree to things that you cannot do. That means that you need to have discipline throughout the organization. We don’t modify the software for customers. Everyone has the same version. It’s very disciplined. 

Sramana Mitra: Is it a recurring revenue business?

Brian Hajost: Yes, we do annual licensing. If you pay us $100,000 this year and you want to use the system next year, you have to pay another $100,000. 

Sramana Mitra: Great. I see what you are doing and I really like what you are doing. I love this kind of niche case study. Is there anything else that I should have asked you that I didn’t?

Brian Hajost: There are a couple of things when you say teaching. The one you pointed out is the concept of blue water marketing vs red water marketing. Don’t go after huge markets that you can never monopolize. Go after markets where no one is at. The other concept that I have is called 90-90-90. It goes across how to develop, deliver, and support customers. It’s about picking your market. Address the requirements of 90% of the market you pick if you have a niche market, with 90% of the features that 90% need. Then you will probably save 90% of your development dollars. Keep things simple and have the discipline to not develop around the fringes, which is what caused fragility in software. 

Sramana Mitra: Yes, gratuitous customizations and nonsense like that. 

Brian Hajost: Yes, with all of that stuff, discipline is the issue. The other thing is hyperactive honesty, being honest to customers, and displaying honesty with your employees. They will know that you are honest when you tell them to do something, give them a review, or you say that you cannot do something. Honesty is extremely important to build teams, especially small teams that depend on each member.

The other one is respect. You cannot have respect for customers if you don’t have respect for each other. In my business, even though we are small, I have employees from every continent other than Australia. I have a whole plethora of religions. They all work together because we don’t allow bad behavior and we treat each person with respect. That is another important point in building teams.

It’s like what I tell my staff, “It’s not that I don’t like discrimination. It offends me in every way. You need to know that from the leader on down. Discrimination is offensive to me and I never want to see it.”

Sramana Mitra: Great. Thank you for your time.

This segment is part 5 in the series : How to Create a Monopoly in an Esoteric Niche: Steelcloud CEO Brian Hajost
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