First, creating a SaaS platform requires exhaustive focus on the customer. Too many times, I think companies are inwardly focused. It’s imperative that you hire people that have the ability to look ahead. The SaaS space allows for rapid change, and you need help looking around the corners.
As part of our series, “5 Things You Need to Know to Create a Successful SaaS or Software Business,” I had the pleasure of interviewing Ray Parsons.
As President and CEO and a member of its Board of Directors, Ray Parsons is responsible for the overall success of Transcepta, the leading provider of intelligent e-procurement and accounts payable (AP) automation solutions. He has led technology organizations for over 20 years, including successfully building and selling a software company (Unisolve) to Microsoft. After selling Unisolve in 2001, Ray became the General Manager for Microsoft’s worldwide supply chain management initiative. Ray also served as the General Manager for the Microsoft Business Network, a research effort targeted at identifying ways that companies could simplify their electronic document exchange.
Thank you so much for joining us! Our readers would love to get to know you a bit better. Can you tell us about your backstory and how you got started?
I started as a software developer out of school. I had the good fortune to go to work for a well-run, regional ERP software development shop where I learned a lot of practical experiences about how businesses work. Eventually, I worked myself into a position where I was offered a chance to buy a portion of the company, which was called Unisolve. I borrowed everything I could borrow and made the purchase. Over time, I bought a bit more of the company. After 20 years of hard effort, we were thrilled when Microsoft acquired our company.
I worked for Microsoft for a couple of years after the acquisition. It’s a wonderful company, but small business was in my blood. Eventually, I left Microsoft and did some consulting until a friend approached me with the idea that became Transcepta.
What was the “aha” moment that led you to think of the idea for your current company? Can you share that story with us?
After Unisolve’s successful acquisition, I was doing general business consultation and board work. Another member of a business roundtable group approached me with the idea for what was to become Transcepta. He had a neat solution to eliminate a lot of the fragility in business-to-business document exchange. We wrote a business plan for it and tested it against the angel investment community. The response was very positive, so we founded Transcepta.
Can you tell us a story about the hard times that you faced when you first started your journey? Did you ever consider giving up? Where did you get the drive to continue even though things were so hard?
As is always the case, it took longer than we thought. We managed to get the technology smoothed out and developed a market message that was starting to resonate with our prospects. Unfortunately, our timing was terrible. We were just getting everything figured out when the Great Recession hit in 2008 and companies just stopped purchasing technology. We never really considered quitting because we knew we had an idea that would improve the world. Instead, we raised a debt round and tightened our belt. All the founders went off salary for a year, and I made several bridge loans to the company to keep it going.
How are things going today? How did your grit and resilience lead to your eventual success?
The hard times forced us to become leaner and more efficient. When you’ve stared into the abyss of failure, it tends to stick with you, so we spend extra time ensuring that our business decisions are well-founded. We’re not afraid of risk, but we want the possibility of a reasonable return for those risks we take. I wouldn’t willingly live through those hard times again, but I’m glad that we did it.
One real benefit is that by reducing our expense profile and taking on short-term debt, we were able to make it through the cash crunch without diluting our ownership.
Can you share a story about the funniest mistake you made when you were first starting? Can you tell us what lessons or takeaways you learned from that?
When we started, our theory was that the right approach to the market was from the accounts receivable side. Not wanting to leave things to chance, we retained a market research firm to conduct focus groups to validate our approach. Everything seemed teed up to blast off. We invested significantly in advance of the market rollout, including hiring a number of fulfillment staff to handle the anticipated demand. After pushing really hard for six months, we only had a handful of companies enrolled to use our solution. That really caused a period of reflection within Transcepta.
We started talking deeply with the prospects that were saying “no.” They all told us variations of the same thing: “We actually believe that your solution works and would save us money, but we don’t think that our customers will go for it and we can’t afford to take the risk.” One of our founders suggested that we had the theory of the market backwards and we should pivot to selling to the accounts payable and procurement sides of the house. It turns out he was right, and we’ve been doing that ever since.
What do you think makes your company stand out? Can you share a story?
The procure-to-pay space is a competitive market with many solutions, and most providers deliver a similar message to the market. A significant challenge is to cut through the noise and demonstrate to customers how you’re better. While Transcepta delivers a world-class solution, it is the customer experience that we provide that makes us really stand out. It starts in the sales process where we are extremely open about what we do well and where we’re still climbing. When we get to implementation we are laser-focused on delivering on time with great quality. Finally, we pride ourselves on exceptional ongoing customer support. We have a 99 percent customer retention rate, and that is reflective of the end-to-end experience we work hard to optimize.
Providing this extra level of customer service has been particularly important throughout the pandemic. We’ve received countless messages from customers thanking us for our extra effort through this time of change and uncertainty. To illustrate this, here’s a quote from one of our customers, Charlotte Arnold, VP Operational Accounting for The TJX Companies (parent company of T.J. Maxx, Marshalls, HomeGoods, etc.): “Without Transcepta, our supplier invoices would be arriving at an empty office. The pandemic has highlighted the acute need for automation, and we’re so thankful that we invested early. We’re saving so much time and keeping our suppliers happy in the process. It’s a win-win.”
Which tips would you recommend to colleagues in your industry to help them to thrive and not burn out?
It’s cliche, but I find that maintaining a good work-life balance is key. There are always opportunities to work hard, but they don’t always have to be taken. In the early years, I worked plenty of 100-plus hour weeks. Now, I try to be more judicious with my time investment.
Secondly, I think that burnout can be a sign that you haven’t built your team to the right level. If every decision ends up on your desk, that’s a great indicator that you either don’t have the right team or your team doesn’t feel empowered. Both are issues that you’ll need to address or you’ll end up hating what you’re doing.
None of us are able to achieve success without some help along the way. Is there a particular person who you are grateful toward who helped get you to where you are? Can you share a story?
The gentleman who hired me in my first real job was a stern, but fair taskmaster. He always took the time to explain to me why I needed to do something. That really helped to give me a broader perspective.
There’s one real story that I can recall. I was working with my boss on developing a new accounting system. He left for a couple of weeks of vacation, leaving me with a stack of programs to work on. When he returned, I proudly displayed my work product. He looked at it and quickly told me, “You misspelled ‘accounts receivable’ throughout the system.” After that, he left me to contemplate my failure for a couple of days. I learned that the little things matter as much as the big ones, especially the highly visible ones.
It must have worked out, because I ultimately became partners with that gentleman and we enjoyed a successful exit together.
OK, thank you for all that. Now let’s shift to the main focus of this interview. Approximately how many users or subscribers does your app or software currently have? Can you share with our readers three of the main steps you’ve taken to build such a large community?
Our solution is a platform that enables customers to automate their accounts payable and procurement processes. Customers connect, transact, and collaborate with their suppliers on the platform, enabling efficiency and better decision-making for both parties. Currently, we have hundreds of thousands of companies leveraging our platform.
Building our community required:
- Providing real value to both customers and suppliers
- Delivering innovative software
- Viewing customer service as a differentiator
What is your monetization model? How do you monetize your community of users? Have you considered other monetization options? Why did you not use those?
We tried a number of approaches over the years. Many of our competitors tried to monetize both sides of each transaction. We tried that at first, but we saw how that placed an unnecessary impediment to adoption of the solution. After some analysis, we decided that we were efficient enough that we could make the solution free for suppliers to use. That both lowered a barrier to adoption and better aligned the cost to the primary economic beneficiary: the accounts payable/procurement departments at large customers.
Based on your experience and success, what are the five most important things one should know in order to create a very successful app or a SaaS? Please share a story or an example for each.
I’ll give you three because these are the learnings that really stand out to me:
- First, creating a SaaS platform requires exhaustive focus on the customer. Too many times, I think companies are inwardly focused. It’s imperative that you hire people that have the ability to look ahead. The SaaS space allows for rapid change, and you need help looking around the corners.
- Next, take a long-haul view. SaaS companies typically don’t have big upfront fees the way legacy, on-premises solutions do. Therefore, you need to optimize for long-term customer relationships. Build a solution that is sticky and results in high retention rates.
- Finally, long-term, sustainable profitability is possible, but it likely won’t happen overnight. Be patient and do what is right for the customer and success will follow.
You are a person of great influence. If you could start a movement that would bring the most amount of good to the most amount of people, what would that be? You never know what your idea can trigger.
I’m passionate about the quality of education that we’re providing to our youth. Both of my parents were elementary school educators. We need to get political ideologies out of the classroom and focus on what’s best for the students. There are wonderful, market-based solutions that appear to be doing terrific things for the youth they serve. Everything needs to prioritize the successful learning of our next generation.
How can our readers follow you on social media?
This was very inspiring. Thank you so much for joining us!