Cracking the Very Small Business Market: PayCycle CEO Jim Heeger (Part 2)

SM: A key issue with small business facing products is how do you reach your customers, give that it is such a fragmented market. What did Intuit do?

JH: It was a direct marketing play. Historically, as computers came down from the enterprise level (the IBMs of the world), they went to the mini computer level. There were a lot of channels which were used to sell accounting applications and manufacturing applications during the enterprise days. For us, to reach the really small business market, it had to be, rather than a sales play, a marketing play.

Most of the SaaS models in the enterprise today are still sales models. We, at PayCycle, are a SaaS, but also a pure marketing play, and it is the only way you are going to reach the very small business market.

In the payroll space in particular, we are competing against service bureaus such as ADP and Paychex which are historically sales based organizations.

SM: You do not do any sales, not even TeleSales? You are relying fully on Direct Marketing?

JH: Correct. We don’t have an outbound TeleSales effort.

SM: Was that true at Intuit as well?

JH: For the most part. Later on, with some add-on products, the annual support models in particular, there were some TeleSales. However, TeleSales was never a major driver. The major difference is that Intuit had a retail channel. By the time I got there, 7 or 8 years into the game, they had figured out how to drive their upgrade traffic into the retail channel. A lot of people were trying to figure out how to sell their upgrades direct to improve the margins. Intuit did just the opposite which was to drive the traffic into the stores because it was good for the stores, and it created a great retail presence which they still leverage today.

SM: What was Wall Street’s view of Intuit as a business at the time? It was a different model, which they were not used to at the time.

JH: I did a rotation as CFO at Intuit, although I was not really a finance guy, so I am not sure how I got that job. I would not get that job today! You could not take a risk on a person who did not have a finance background and have him be a CFO of a NASDAQ 100 company, but in those days I was able to pull it off. Intuit was sort of a darling of Wall Street in those days because the idea of recurring revenue streams in their business model was really attractive.

SM: What was recurring? You were not selling subscriptions were you?

JH: It was revolving around the upgrades; there was definitely a strong upgrade cycle. There was the original printed check business which ran for a couple of years. With the TurboTax merger in 1993, that was definitely an annuity business. There were many such recurring streams.

SM: TurboTax of course had to update the tax forms in the software every year.

JH: Exactly, and it still does it that way today.

This segment is part 2 in the series : Cracking the Very Small Business Market: PayCycle CEO Jim Heeger
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