How I Started A $9M/Year Company Outsourcing Support For Startups

Cody McLain

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Published: February 4th, 2020

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Cody McLain

Founder, SupportNinja

$1.4M

revenue/mo

Founders

1021

Employees

SupportNinja

supportninja.com

from Austin, Texas, USA

started April 2015

$1,399,996

revenue/mo

Founders

1021

Employees

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From Foster Care to Millionaire: A Young Entrepreneur's S... Cody McLain

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Hello! Who are you and what business did you start?

How many times have you failed and got back up? My life has been nothing but failures, hurdles, and obstacles, and I continued to get back up. I started my first business when I was just 14, had to borrow my mom’s credit card to pay for a reseller account at hostgator.com. The plan was to get rich selling web hosting! I didn’t get rich, per se, but after losing both my parents before the age of 18, it was the only thing I had left that gave me purpose.

Today, I’m the founder of SupportNinja and author of the book, From Foster Care to Millionaire. My current company is SupportNinja, which recently ranked #86 on the 2019 Inc. 5,000 list. We handle back-office support and outsourcing for some of the biggest names in Silicon Valley. We can’t disclose all of our clients but they include HotelTonight, Checkr, RVShare and a few others that you have probably heard of. We have over 500 people in our Philippines office and have around 20 in our Austin, TX HQ.

We primarily do two things, front-end customer support for tech-companies and back-office support for apps, platforms and the like. The customer support is for every channel, social, chat, email, phone, and the back-office is often us servicing their platform inside their platform. For example, we handle a lot of content that is reported by users of social media platforms and apps. The company gives us their guidelines and we set up the necessary amount of staff to process the volume of requests.

The business presently generates over $9M ARR with around 103 clients. Our growth rate in the past 3-years was 3,684%.

how-i-started-a-9m-year-company-outsourcing-support-for-startups

What's your backstory and how did you come up with the idea?

I’ve been an entrepreneur since I was 14. I was kind of forced into it as both my parents died when I was young. I started my first business because my friend wanted to get an Xbox but his parents grounded him so we worked together to get the money. Our first business was a web hosting company, but our partnership split up after only a week. For the first time, I found a passion, an interest, a calling. What I discovered through that process is the creativity involved in building a business appealed to me. Since I lived difficult life, it was something I naturally fell into. I created several more businesses over the years. In one of them, I was screwed over by a business partner. All of this is mentioned in my book From Foster care to Millionaire.

What led me to start SN was my feeling of imposter syndrome and in confidence. In the last hosting company I had (sold for just south of a million) I realized I had to put in the support hours and deal with the customers’ gripes for many years. This is a skill I did not initially see within myself. I always wanted to work for startups but didn’t necessarily want to be one, so I found a niche within an existing proven market in the industry which ended up being outsourcing.

A lot of startups need outsourcing but most of the outsourcing companies that exist today weren’t necessarily founded for startups. I saw that I could appeal to startups and I had a natural interest in technology and using all the latest and greatest apps and seeing this inherent divergence of my interest within the tech community and the interest in building several businesses online, even including the company I built in India for the agents who were initially providing support for my customers.

I found at least one company that was doing business with big-name clients and that validated the idea of going into the outsourcing industry for me. They happened to be in the Philippines and I discovered that the Philippines is a really great place to outsource because there are many shared values. Furthermore, the labor cost is pretty low and the only challenge was figuring out how to go to the Philippines and register an international business and deal with all the issues associated with learning the laws, and manage the business from the US. What I didn’t realize along the way is I would find the right people who sit in the right seats on the bus as Jim Rohn would say. I didn’t need to know every aspect of the business in order to get it started. Now I have a CEO who does a wonderful job managing the business. We have grown to be #86 on Inc 5000 for 2019 and we have seen tremendous growth. We have over 100 clients and over 500 agents and we are on track to grow another few thousand percents for 2020.

Take us through the process of designing, prototyping, and manufacturing your first product.

We currently provide 7 services. What we are trying to accomplish is what startups need to scale. When we first started we wanted to do everything. We even took miscellaneous requests like when a company was looking for one person to be their accountant and graphic designer, but we couldn't have good standards in place for recruitment and training, so we decided to cut down our focuses for the things we do really well.

We recruit train, monitor and improve the results of people that are working for these startups. The first part of recruitment is asking the right questions. That’s followed by training. We have a prebuilt course to provide training materials and it’s very easy to add on to. Quality Assurance means benchmarks and good milestones as to what we need to hold people accountable to.

When SupportNinja was first starting, Cody did a lot of research because he had no idea what he was doing. The biggest thing was getting the client services agreement because this is not something you can just find online.

Another startup lesson learned is to not be afraid to reach out to your competitors. Cody actually reached out to a competitor when SupportNinja was first starting, and the competitor helped us because since they were so much larger and didn’t handle small clients they didn’t view us as a direct threat.

We built a system to develop our new hires because our business is based around the service of helping people build remote teams from scratch. There are a lot of challenges and different needs with startups and people and we are matching them up and making sure they are all aligned.

Describe the process of launching the business.

I created the website using a Themeforest template. I had no idea what I was doing. I called competitors pretending to be a client to find out what their offers and sales practices were.

I financed the business with the money I made from my last company.

It was probably a few months after starting before we started to see a lot of customers. We had one call with a small company. They were comparing us to a competitor, and they knew we were just getting started. They decided to take a risk because they knew we would treat them better than the other option because they are a small team and we're looking for three or fewer agents. They would just be another number to the other companies but they knew we would treat them better and we did.

Since launch, what has worked to attract and retain customers?

First, a core marketing channel is needed to give a positive return on investment, and then we had to figure out how to maximize that. We allocated that money to testing new channels because at some point you will reach a saturation point and need to know where to go next.

Connor was hyper-focused on the areas he saw that needed the most help like building out Google Adwords. Then when we hired the first salesperson, Connor worked closely with them. Connor guided them because that’s an important thing every founder has to be able to do. Connor mapped out the initial department and initial workflow (even if he wasn’t super comfortable in that area). A mistake people make could be to hire someone based on that person already knowing what to do.

Hire carefully. Make sure you have a system.

Because we understand what the sales process looks like and what those main selling points were, we could look to hire those people that would be a good fit. Hiring two account executives (Brandon and Ray) at the same time, we know we have product-market fit, a sales process that works, etc. If one fails, then we have a recruiting problem. I need to hire to the profile of the person working. If both failed, then we need to check the product-market fit because everything isn't working. We had a massive boost in profit and revenue with hiring both, as they could play off each other and compete and we got a structure in place that could work.

With all of our marketing efforts, the most effective is paid media. The second most effective is sales enablement. If we have someone that checks off all our boxes and is a qualified customer, more likely than not they will go with us. Making sure we were set up to work that way and present ourselves in that way was a big deal. We understand our differentiating factors so that if we explain them in a way that makes sense, people won't go with other companies because they are not us. This is a true success indicator of a business.

Helpful habits or skills that a founder needs to have. Prioritization is the biggest thing for me. At the beginning of my week, I prioritize my week.

Sales enablement is making sure you know what your unique value propositions are and putting in front of a customer. Also, sales operations are making sure the sales funnel works. For example, when a client comes to us, the way we handle them as they come in, how we figure out what they are looking for (market qualified lead) is essential. What are the emails that are being sent out, what is the message, the script, collateral, etc? We need to make sure we are handling their objections and concerns and making sure you are aligning their business interest and they know that.

We found success with having a designated head of strategic partnerships going to conferences on our behalf and finding new customers and points of referral. In any industry or vertical, there are going to be other industries that could likely sell your services as an add on or benefit to their customers because what you sell doesn’t compete with them. It’s a value-added service.

SEO is finding all the long-tail keywords and creating good blog content and landing pages specific to niches within the market.

What's interesting about our business model is that it comes down to people. If we find them the right people and those people do good work and stay with the company then we are a sticky service. We are at risk if we don't understand client needs or break down or hire the wrong people. What makes us unique is our customers stay with us for a long time. Our agents stay on the account for a long time. The attrition rate 28 percent, ours is 3.4%. Our agents stay with us for a long time and the clients love that they get to know the agents and feels like an extension of their team. Customers love that because they can't imagine going anywhere else.

Spike was after hiring 2 salespeople

How are you doing today and what does the future look like?

SupportNinja is profitable which was one of our first ambitions. We are a bootstrapped company so we pump that profit back into the business. We set up to build our first custom (X), IT build-out, we are investing 3.5 million into this operational capacity. We were able to finance half with our profit and the other half through our line of credit.

Next year we are going into the year of technology, so we are thinking about how we can make our processes more effective, how to get more QA data from agents and present to customers, how to get more data from all departments and see how we can make it more efficient with technology.

We are focusing on the year of tech because we want to reduce the amount of time and money that goes to miscellaneous expenses and put that money to the agents and clients.

A big problem, in the beginning, is the client would sign a contract with us and we had to front the initial costs of a computer, desk, setup, recruiting, training these people over the course of a month and that was substantial. We changed our deposit to a startup fee so we could recognize the revenue sooner, and changed it from 1 month to 2 months to cover the initial startup cost. We did have some kickback in sales but it has not had much of an impact. Kickback is a normal part of sales. We put together a negotiation framework for salespeople which helped profitability.

We are a team of 444 agents and 67 admin staff in the Philippines and around 20 team members in the US. One of the coolest parts of SN is we were able to scale from a 26 person company to a 530 person company and do that with our values in check. Although there have been bumps in the road, everything is relatively smooth and scaling well. We have a framework. We recommend all entrepreneurs read EOS. Also, we recommend working with mentors, learning from managers that you hire, and figuring out from the books that make sense for your company.

We spent last year putting together a training course for managers and we are hoping to see more results as the year goes on.

We have 9 managing principles that all managers have to abide by. We have educational courses in learning management systems for all levels with Lessonly. Employee development and personal growth have been a big focus for us. We partnered with lesson.ly to develop training and management courses to further the self-development and skill training for all of our employees. A big part of it is alignment, you want everyone to run off the same playbook but give them the flexibility to add their own personality. Functioning as part of the same team but operating as a manager.

Through starting the business, have you learned anything particularly helpful or advantageous?

Losing your biggest client is always something business owners consider but like to believe to be an unlikely occurrence. What happens when your biggest client does walk? For SupportNinja that happened in April 2018. We had a larger client that experienced explosive growth. They made up a quarter of our revenue and were our prize account. When their scale reached a certain point, they went to a competitor the offered more redundancy.

Figure out the scope of the problem. Pull the financial reports and figure out how it impacts your cash flow. Reduce spend on projects and cut back on your investment. Project net income for the next few months:

Increase revenue through the door by offering a discount to all prospects in your pipe.
See if any of your existing clients are willing to jump in and take some of the weight.
Place a hold on all additional hires, focus on protecting the ones you have.
Go in person to thank them for their business, get feedback, and make a retention effort.

What you can do beforehand:

Conduct regular post-mortems on accounts. What could go wrong? How can we head it off?
Open a line of credit to give yourselves flexibility when losing accounts.
Do not rely to heavily on deposits that are not recognized in the books.

A really good decision Connor made was how company values took off. They put together a list of values on a piece of paper and they basically have not changed. Everyone knows them, people make decisions off of them, and we are hiring off them. Values are undervalued. It's one thing to have values and it’s another to embody them.

Improve every day and be humble, just like the company has a vision statement and three-year plan, everything we apply for the company should be applied to your personal life.

Helpful habits or skills that a founder needs to have. Prioritization is the biggest thing for me. The pain points are very transparent and they bother me. At the beginning of my week, I prioritize my week.

I use a variant of the Eisenhower matrix and look at impact vs effort. I list everything on my mind. For me personally and the company. What can I do? Some things I can't do and some I can. Give it a score 1-10 as far as what's the impact and how long it will take, multiply and prioritize.

What platform/tools do you use for your business?

We use Hubspot because what it can do is perfect for a small sales team. Salesforce is better for bigger teams.

Our whole team has Slack and live and die by it. Everyone likes it. We try to utilize Slack in a unique way by having a good news channel which helps with employee morale and motivation.

HeyTaco! which is a tool that allows employees to award employees with other virtual tacos.

dubb for video communication for sales so our sales guys can send out personalized video messages to leads, (we also use it internally in the newsletter or throughout the week),

Droplr for sending out quick screencasts so we don't need to arrange meetings to go over software.

JazzHR is very comprehensive and manages the process and interview process.

What have been the most influential books, podcasts, or other resources?

The most influential books and podcasts for our team have been MindHack, Armchair Expert, How I Built This, Planet Money, Freakonomics Radio, Startup Therapy, Startup Podcast by Gimlet, and Tradetalks.

Advice for other entrepreneurs who want to get started or are just starting out?

Hire carefully. Make sure you have a system.

Are you looking to hire for certain positions right now?

Looking for an account executive. Looking for a marketing/content person in Q1.

Where can we go to learn more?

If you have any questions or comments, drop a comment below!