When the stereotypical entrepreneur is a 20-something with a sales or marketing background shooting for the moon, Neil Berman stands apart. He had a career in accounting before founding Delivra, an email marketing service provider that’s a “unicorn” in its own way.
The company itself is a rarity in the software world: it’s profitable. I spoke with the CEO about the advantages his accounting background gave him and what’s in store for Delivra.
Watch the full interview with Neil Berman here:
Dot-com Boom Beginnings
The year was 1999. Adoption of the Internet was rising rapidly, and Berman wanted in on “what I felt was a really big thing.” A former employer had once told him that if he could find a business that met three criteria – faster, better, and cheaper – he should go for it. Berman’s wife was working for the postal service at that time, and when he compared email communication to regular mail, Berman felt it met all three: “I stuck my stake in the ground and went from there.”
Until then, Berman was an accountant: “I still belong to the Indiana CPA Society.” Working on the public side of accounting, he gained an inner look at many companies and what made them successful… or not. When starting his own company, Berman just didn’t buy into the classic entrepreneurial model of raising money, growing as fast as possible, and selling out. Between his conservative mindset and desire for independence, he opted to not seek investors and instead grew organically, initially starting Delivra out of his own home.
“I’ve seen entrepreneurs with great ideas, but the faster they grow, the more money they lose. Then their business collapses, and they don’t really understand why.”
-Neil Berman, Founder and CEO of Delivra
To this day, the company is opening a new regional office every three months without having to raise money or get a bank loan. When mentoring others about entrepreneurial finances, Berman said, “I find that either their eyes glaze over or they’re afraid to ask questions because they don’t want to appear stupid.” He emphasized that it’s vital to understand your business’s key performance indicators, especially what you have to do to break even. “If you’re in school today, take some of those accounting classes that you hate,” he advised wryly. “I didn’t like them either, but it’ll be useful information someday.”
On Walking Away…
Like fellow CEOs Steve Jobs and Howard Schultz, Berman left his own company and returned, but for a very different reason. Six years ago, Berman’s wife became ill and passed away very suddenly. Devastated, he hired a team of five to run the company’s functional departments in his stead and traveled the world: “I didn’t know if Delivra was going to be my future. I had to get grounded again.”
…And Coming Back.
Two years ago, Berman did return: “Coming back home to email software felt comfortable for me. I loved the software business and wanted to take it to the next level.” However, while the company was still profitable, competition had considerably heated up during his absence, and sales had flattened: “What we were doing previously had stopped working.” Berman jumped back into the saddle and set about determining Delivra’s future.
On Consultants and Dirty Laundry.
Since he knew the business, the market, and the competition, Berman had a vision for Delivra’s path forward but hired consultants to help him make a more informed decision. After “doing what consultants do” – surveying and interviewing customers, staff, and people both inside and outside of the industry – they presented a recommendation that aligned with Berman’s hunch but was better defined and more actionable. When working with consultants, Berman stressed transparency: “You need to be communicative about everything. Air the dirty laundry.”
“The Magic Differentiator.”
Today’s email marketing industry is competitive, but Delivra is investing a lot of money in product development to offer clients a robust marketing solution. But perhaps its biggest differentiator is its focus on building relationships with clients via its expanding network of regional offices and offering them product enablement help up front: “We find that to be a magic differentiator. Although it costs more, we’re going to close more sales, and that’s how we’re going to grow the business.”
A Crash Course on Email Deliverability.
Delivra takes pride in helping its customers’ emails reach inboxes the right way: “Today, delivering email with the blizzard of spam that’s out there is challenging. It’s part science and it’s part art.” Watch Berman’s crash course on email deliverability and list hygiene →
How do you try to apply a financial mindset to your entrepreneurial venture? Comment below!
See Delivra for Yourself on May 14th!
It’s pretty awesome to see what Delivra has built in Indianapolis, Indiana. We use Delivra at Verge and I’m blown away by the people at this company. Come meet them for yourself at Delivra’s open house on May 14th. Hope to see you there! Click here to RSVP →
Matt: You’re going to love this. Neil Berman is the founder of Delivra, which is an email marketing company that started in 1999. They’ve raised no money, they’re making millions of dollars, check out this interview, let me know what you think.
Neil, you have built a profitable business here with Delivra, which in the software world is rare. I wanted to get a little bit of background on why you decided to grow a software business in 1999, before anyone else was doing email marketing. You kind of saw into the future. First of all, why did you choose email as the place to start your software business?
Neil: Well, I was looking to get into the dot-com boom. I wanted to participate in what I felt was a really big thing. Big like television, big like automobiles, and prior to that big like telegraphs. I felt the Internet was a big thing. It was exciting, I wanted to get involved. In my mind, it wasn’t software at the time. It’s “how can I get involved here” and build some kind of – I call it infrastructure – a play that had some staying power and wouldn’t be a fad. Email, the communication piece, is what I came up with.
Matt: Yeah, you picked right!
Neil: And you know a little bit of luck, a little bit of timing, and a little bit of smarts.
Matt: You actually had criteria that you used to pick email, right?
Neil: I did, yeah. So a former employer once told me if I could find a business idea that met these three criteria that I should go for it. And, the three criteria that he gave me were faster, better, cheaper. So, when I looked at email, and coincidentally my wife worked at the post office, and I think that’s where my inspiration came from. I compared email to postal, and it’s certainly cheaper, faster, and better in that it’s more convenient. You don’t need a postage reply card anymore. A lot of people don’t even know what I’m talking about, if you’re under 30 years old! So I said hey, it meets the criteria; it seems to me that over time, this is kind of visionary that the postal budgets would move to email. I stuck my stake in the ground and went from there.
Matt: Before that you were actually working as an accountant is that correct?
Neil: I was, so I’ve got my CPA certificate. I’m currently retired which means I don’t have to go to school every year to keep it active, but I still belong to the Indiana CPA society. Plan B just in case!
Matt: It seems like you hear about a lot of entrepreneurs that start in the sales and marketing side of things, especially in sales and marketing of sales companies. I feel like that gives you an extra edge, or at least a different lens through which to look at you business.
Neil: So as an accountant I worked on both the public and private side of things. So on the public side I saw a lot of companies, what made them successful and what made them less than successful. I also understood how money flowed through a business. So, when I approached starting a software company I was a little bit prejudiced based on my history. I didn’t buy in to the risky, in my mind, approach where you raise money and you grow as fast as you can and then you sell out. Because if you look at that approach, which the way more entrepreneurs start, there’s many more failures than successes. If I’m 25 years old, I can take a chance, shoot for the moon, and if it blows up and I’m still under 30 then I could try again. I was a generation older so I had to take a more conservative approach. In other words, this is my last stand and I’m going to make it work no matter what. I’m going to never bet the farm. Lastly, I’m independent, and to me raising money meant I was going to have another boss or a board of directors, at least to report to, and I kind of just want to do my own thing.
Matt: You want to do your own business your own way.
Neil: Yes, and do it my way. Succeed or fail it will be on my shoulders.
Matt: You’re now doing $4 or $5 million dollars a year on track to hit a goal a couple years from now doing 20 million, right?
Neil: The goal is 15, but that’s only the next goal. The way we’re going to do that is we’re putting a lot of money into product development, and we’re opening regional offices. Put feet on the street in markets to participate locally at the rate of one office every three months, basically forever. We’re going to attempt to do things differently. Selling online today, a lot of competition, fewer people actually have sales people out there building relationships and can call someone at their place of business. We find that is a magic differentiator. Although it costs more, we’re going to close more sales, and that’s going to help grow our business.
Matt: You guys are building that off a foundation that you built over a decade ago in terms of how you run this business on a cash basis. Why is it important for entrepreneurs to do that?
Neil: I talked to a fellow yesterday. He created a social app, he works as a IT manager at a local company, and it’s really a cool app. He’s put a lot in to it, he put it online, but he’s not selling it, and he only works there part time. The reason I tell you this story is, he came in to see me because he had heard that I built a business without raising money, and he said, “This is my 401(k) plan, this little app, and I just want to do it myself. It’s not looking so good, what would you recommend?” So, I recommended to him that in addition to the technology, that he embed some services, basically account management and support. Charge more, and look for people who wants some help. His light went on and he goes, “I never thought about that.” But in addition to that you’re going to have to quit your job and go out and make some sales calls, go to the chamber meetings, go network with some people. Either you’re selling or your raising money, but it’s not going to happen by itself.
Matt: Do you think it’s important to quit your job in order to make the entrepreneurial venture work?
Matt: When is the right time to do that?
Neil: Well, to make it work it’s a 24/7 job. I worked 7 days a week for 5 years. And for the first few years, didn’t make any money, couldn’t take any out. So before you make the commitment I would suggest that you get all your bills paid, and your wife or significant other is making a living that does not require you to chip in. So, you’re going to be working for free, sweat equity for a long time, because you’re not raising money, and you have to to have something to live on. If you have a big dream and you’ve got a big mortgage on the house and you’re paying car payments on two cars and you’ve got four kids living paycheck to paycheck because wow, that’s a lot of overhead, you’re probably not eligible to start a business. You’ve already taken that path in the other direction. In that case I would suggest you just work hard a build your career working for somebody else. But, there’s nothing wrong with that. I did it for 30 years.
Matt: So, your personal balance sheet really needs to be balanced before you go and start something.
Neil: Yeah, pay the bills off. Or your wife or your family or someone is making those payments because you aren’t going to be contributing for a while. And every money you make you will have to put back into the business to grow it. I started out working for myself in my house. You can do that for quite a while, but eventually you need an office, and that’s not too expensive, and you need a website. But when you start hiring people, that’s a new day. They expect to get paid every Friday no matter what, so you’ve got to keep the momentum going there. Therefore, you’ve got to keep the expenses down and the revenue up.
Matt: Are there any specific metrics that you check on a regular basis? Or even a frequency in terms of what you look for in KPIs or key performance indicators on the accounting side?
Neil: We have KPIs with regard to activities for each of the functional areas of the business, and then those flow done into a financial statement. I would suggest if you’re in school today, thinking about this, take some of those accounting classes that you hate. Nobody likes it. I didn’t like it in school either. But I took them figuring, “this is going to useful information someday.” And it absolutely was. You just got to understand what it costs to write an order, a customer acquisition cost, what does it cost to service that client? What is the overhead that’s fixed that you can’t change? If you’re going to add 10% more business, how much extra will that cost? Fortunately in the software business not much. You have a high fixed cost and a low variable cost. For example, in the email business it costs virtually zero to send one more email, so us and all of our competitors are looking to add clients because the margins are high. So you need to understand those kinds of metrics before you get into business. Because I’ve seen entrepreneurs with great ideas, but the faster they grow the more money they lose, and then their business collapses. And they don’t really understand why that happened. We talked about opening these regional offices – before we did that, I hired consultants to do market analysis. I didn’t know which markets to go into and we had some criteria around that, and then I had them create pro formas to determine how long is going to take to be profitable? What is the average sale? How many clients do we have to sign up? And then if we can make the office profitable, how fast can we can we open offices without going into debt? We balance that all ahead of time, so we have criteria to open offices, we know we can open 4 a year, one every three months, organically, which means with internally generated cash flow. If we want to get greedier than that we got to go the bank or we got to go to investors. But I knew that before I jumped. Hire someone that can do pro formas, if you can’t do them yourself, because that will make you an honest man or woman.
Matt: Building the pro forma with over a decade of financial data and understanding how your business works is one thing, but what about an entrepreneur who is just starting out or is in the first several months of their venture? How much time should that entrepreneur spend on a pro forma? Did you create a pro forma right off the bat?
Neil: No, but I knew if I could keep expenses down close to zero, and if I could just sell X dollars, so in my head I kind of knew what to do. It was small enough that I didn’t need to get too complicated. So, when I’m talking about pro formas before you get into business, the ones that I don’t agree with, and I saw one recently from a startup that had no sales, and the pro forma was pages long, and it projected an income in year five of $32 million dollars. To me, that’s just, well very aggressive to say the least. I’d rather see a pro forma that’s not a hockey stick, that’s growing gradually, and tells me here’s what we have to do to break even. And if we do better we’ll make more money, but you really can’t predict at the start what that looks like. So I just like to know is what you have to do to stay in business, and to me, that would be the important information for someone looking to start a business to understand and understand in detail. When I talk to people about finances, I find either their eyes glaze over, or they’re afraid to ask questions because they don’t want to appear stupid. But this is the time to figure out what that means. If you don’t have a partner, have a financial person that you can check in with at least every 90 days for what I call a gut check keep you on track. I’m a big proponent to having advisors, whether they’re formally on an advisory team or they’re colleagues, but lone rangers are usually alone when it comes to being successful.
Matt: Entrepreneurship is a lonely job.
Neil: It is.
Matt: If you don’t have a team around you.
Matt: Well it’s been really interesting learning about the Delivra story, especially now that you’re back in this big growth mode and you guys are expanding. One of the things that growing a cash-based software business afforded you the opportunity to do was step away from the business for a little while.
Neil: I did.
Matt: which you personally chose to do. Could you talk a little bit about that experience and what kind of perspective it gave you on your business?
Neil: Ok, thank you for asking. Six years ago my wife got sick and passed fairly quickly, and I was not expecting it, so it was a big blow, and I had literally my head in a wastebasket. I had this very successful business which I didn’t feel like running at the time but felt I had the responsibility to make sure it continued. So I hired a management team.
Matt: How big was the team at that time?
Neil: There was no team. There was me, and I was running things myself. Now, I had functional department heads, since I’m not coder and I don’t know anything about IT, so I had people doing that. But I ran the sales team, which was also the client services team. So, I hired five guys in different areas, one in sales, one in client services, IT, software development, and another one to run the numbers. I just basically walked away. I started travelling. I came into the office, let them make all of the decisions, and that went on for a number of years until the smoke cleared. It was about two years ago, and I came back and looked around and said, “What’s going to happen next?” Competition was heating up. Our high end clients were leaving, our low end clients were leaving, sales had flattened out, and what we were doing previously had stopped working. I did a strategic plan with a consulting firm in town, and they told me what the next 10 years needed to look like, and during that project I realized I needed to make some changes at the top.
Matt: You had made some serious changes and a big decision by stepping away from the business, and it sounds like the right decision based on where the company is now. What pulled you to go travel after you lost the person that inspired you to start Delivra? What pulled you abroad?
Neil: Well, you have to find yourself and your life again. I was really back in my 20s emotionally going, “What am I going to do with my life?” My life’s partner was gone, and I didn’t know if Delivra and software was going to be my future. I had to get grounded again. Fortunately I came back and decided I loved the software business and wanted to take it to the next level.
Matt: What was it about the business that brought you back to it?
Neil: Well, two things. One, technology is always changing. Probably too fast for all of us! Exponentially, as a matter of fact. I like the challenge of keeping up with new technology. And I also liked the software business in that you’re delivering a service and product online and you don’t have to deliver that physically, which is very appealing to me. Those were the two reasons coming back home to email software felt comfortable for me.
Matt: You mentioned that you came back to the business that was in a very different state than you left it in. What was that feeling like?
Neil: It was not a company in trouble. They were still debt free and making money and paying the bills. But it didn’t look like we had a future without making some significant changes – in personnel, in product, and how we went to market. If you’re going to make a lot of changes in a business – and people don’t really like change – I had to jump in and take over running the daily operations, which I hadn’t done in years. So, it took a few months to get comfortable back in the saddle, but now that I’m doing it I’m having a wonderful time.
Matt: Were there any things that you did that helped you get back into that rhythm, and kind of get back to that flow state of peak entrepreneurship?
Neil: I needed to have a vision of the future, and that’s what I didn’t have when I was gone. So I came back and had to visualize where the company was going to go and then create a plan to do that. So, fortunately, I knew the business, knew the market, knew where the competitors aligned, and was able to focus on an area where I felt that they were ignoring.
Matt: You mentioned you brought on some consulting help. Did you set the vision and then bring on the consulting to help you figure out how to execute that, or did you bring people from outside the business in to kind of help you find out what that vision is and then go about setting a plan?
Neil: So I had a feel for what that might be, but I wanted to have an informed decision. So the consultants came in and did what consultants do – they did surveys, they talked to people inside and outside the business, talked to customers, non-consultants, staff. And they came back with a recommendation that aligned with what I felt it should be, but they defined it much better. The definition was very important for us. Even the terminology of how we describe that vision, which I wouldn’t have been able to do with the quality and the clarity that the consultants provided.
Matt: Anything that you discovered as you were working with these consultants that you think you might pass on to entrepreneurs that are thinking about bringing in consultants? What helped you be most effective with those outside teams?
Neil: You need to be transparent and communicative about everything. You have to air the dirty laundry, good news and bad news. Let them digest it and then regurgitate it back to you in a way that reorganizes data and information so that it becomes actionable. So I would just say, open up and spill the beans!
Matt: One of the things that I’ve noticed just in the vibe of the office here and talking to members of your team is that it is a very communicative office environment, and probably one of the benefits that you provide your clients as well. But when you think about the team that you’ve built here, what have you done culture-wise that has enabled some of that communication?
Neil: What I find is important in servicing our clients is we need to be collaborative. The software business is complicated. It’s different than manufacturing and selling a cardboard box. So we need people with specialized information and experience. Delivering mail into the inbox is important. We have a team that knows how to do that. Rendering your HTML email template on a phone, on a tablet and on a laptop requires some knowledge, and we have a team in charge of that. Being able to explain to a prospect why our services match theirs better than two or three other competitors. There are people who are good at that. So we have to collaborate together during the stages of the sales process and the stages of maintaining and servicing clients. So therefore, we have fostered a culture where there is little or no back-biting. Where we encourage the different functional areas to talk to each other. We cater in lunch every Friday for example so people who don’t have a reason necessarily to communicate during the week can talk about what they’re going to do on the weekend and become friends. It’s really just practical business process that if we get everyone working together – like a football team – we’re going to win more games. That’s my job, frankly, is to put a team on the field to win the games.
Matt: You’ve talked a little bit about the playbook for the next couple of years in terms of building your regional teams and actually having feet on the street to talk about your software and talk about the businesses of your potential clients. What are some of the other things we can expect to see from Delivra as you guys continue to expand and grow your client base?
Neil: We’re going to stay focused on email marketing as a core, as a hub around other digital marketing tactics, and we’re going to hook into those to create a more robust solution for our clients. For example, the next integration we plan on doing is with a software called Eventbrite. Many of our clients do events, so it’d be nice when people sign up for those events if they automatically synced into Delivra, and you could send them a drip campaign after the event, for example. We’ve got a number of other integrations with other key vendors which we think will help our clients be more successful in their digital marketing efforts coming up here in the future.
Matt: How do you guys try to differentiate yourselves from other competitors? I know other email players in the space have integrations too, and when you’re competing on a feature basis, everyone eventually has the same features. So what is it that you’ve build differently with Delivra?
Neil: I had a conversation today with a local organization in the healthcare industry. They’re using a competitor, and they were willing to talk to us on the phone. Through the conversation they admitted that they were using about 20% of the features that were available and paying a lot of money for that. So I said, “Why don’t you use more?” Their answer was, “We really don’t have the capabilities in house to implement all those, and we’re not getting the help we need. Or, if we ask for help, we can’t afford it.” And that’s the opportunity for Delivra, to offer the help up front and ongoing to take advantage of the toolset that we offer, and align the tactics with the business and marketing goals of our clients. This is not rocket science. This is just being able to enable clients to draw value out of the platform at a reasonable price. Doing that is the trick. We have a lot of internal control systems and activity reporting to make certain we can deliver services and still make the payroll on Friday.
Matt: It is really cool as a recent Delivra customer and someone that has experienced the service side of things, it’s very refreshing, especially someone that uses a lot of different software tools, to see your care and attention. You guys take things like list hygiene and deliverability very seriously. Can you talk to me a little bit about the importance of those things and maybe even what those things mean for someone who doesn’t spend a lot of time in email
Neil: So list hygiene has nothing to do with soap and water, or brushing your teeth. Today, delivering email with the blizzard of spam that’s out there is challenging. It’s part science and it’s part art. One of the ways to ensure that people are seeing your email in the inbox is what we call list hygiene. What that means is that you need to continue to engage recipients on a regular basis, and if you’re not, we suggest you stop sending email to them. By engagement I mean they’re opening your emails at least, they’re hopefully clicking through with a call to action to your landing page or website. If they haven’t done that at all in six months, stop sending. Because the public ESPs – the Gmails and Yahoos of the world – will keep track of what’s being opened and what’s being read or not. And they want their clients to only see email that’s relevant to them, and if yours isn’t, you will be relegated to the spam folder, or worse, they won’t even deliver it at all, even if there are no complaints. So this list hygiene thing has become just critical with regard to the success for your email campaigns and getting in front of people on a continuing basis.
Matt: I imagine you see tons of tons of email come through here with all the clients that you have and the emails servers that you have sending out messages all over the world. If someone is an entrepreneur and they’re still managing their email, or the lone email marketer at a startup is watching this, what are the one or two things that people do that inhibit that open or that action once they open the email?
Neil: Over half the email today is being read on a mobile device. If it’s email to consumers, 80% are read on a mobile device. So the first mistake I see people making is that their from address is not recognizable. Before I open an email I have to recognize who sent that to me, and if I don’t, I delete it. Number two, I look at subject lines, and on a phone you have 30 characters. Beyond that, your subject line will be truncated, meaning it’s going to be cut off. I see a lot of email where there’s a subject line and I don’t know what’s in there because they didn’t actually get to the subject of the subject until afterwards. And then third, there’s a couple lines below that called the preheader which people are ignoring today. You can extend that call to open my email in the preheader. So that’s where you start. You got to get people engaged. At least in my inbox, when we’re through with this interview, there are going to be 40 new emails, and I’m just going to scroll through those and delete 30 to 35 of them. You don’t want to be in my delete list, so what are you going to say in your subject line, in your preheader, in your from line that is going to encourage me to engage with you?
Matt: So with the from line, building trust over time so they know when they receive email from your name, or your brand’s name.
Matt: The subject line that actually gets to the point of the value, or the intrigue point, in the 30 characters that are viewable on mobile.
Neil: With you.
Matt: And then the preheader as you put it that you can actually edit in most email softwares that is a preview of what’s in there.
Neil: That’s what you need to do today. Get started!
Matt: Well Neil, thank you so much for taking the time. There was a lot we didn’t get to cover on the Verge stage when we talked a couple weeks ago, so I’m really glad that we could talk about this, and I really appreciate you sharing your experience both in business and life. So I’ll let you get back to your inbox and those 40 new emails!