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Graham McCarthy, CTO, left and Brennan McEachran, CEO, right speak during a meeting
Case Studies
Posted: June 25, 2012
by Ryan Starr

Toronto’s Hitsend could revolutionize social media with Soapbox, but development is a challenge

VITAL STATS
Contact:
hitsend.ca | 1 855 HIT SEND | info@hitsend.ca
Type of Company:
Software development
Mission Statement:
Number of Employees:
8
History:

It seems everyone wants what HitSend is selling.

Chapters Indigo, Vitaminwater Canada and The Walrus magazine are all using the company’s software. But with so much work and a small team of only four developers, the Toronto-based tech startup has had to turn away new business.

The company’s flagship product is SoapBox, community crowdsourcing software that helps companies gather ideas, then prioritize and act on them. The program is simple, elegant and effective, and it’s become so popular so quickly that the team can’t always code fast enough to keep up.

“We have an amazing sales team,” says Brennan McEachran, who founded HitSend in 2009 while studying commerce at Ryerson University. “But the development team was sweating a bit trying to keep up, so we told (the salespeople) to take a little break.”

The sales staff get paid when this happens, but they don’t bring in new business. That’s a serious problem for any company, and a potentially deadly one for young businesses looking to grow.

“It’s not an ideal situation,” says Krista Jones, a practice lead with MaRS’ information technologies, communications and entertainment practice. “No startup should ever back off on sales. You need to start to manage your sales expectations on when you can deliver, as opposed to stopping the sales from coming in.”

HitSend’s developers are an industrious and nimble lot. But the work they do—coding, customizing software for clients, constantly updating the product for ever-changing sites like Facebook—is complex and takes time. This makes it tough for the company to balance priorities. It also means scalability is a big issue.

“You want to make the product the best for customers,” McEachran says. “At the same time, you have longer-term goals that you want to work towards. Sometimes it’s tough focus on both the short and long-term.”

In an ideal situation, McEachran says, HitSend would like to have two additional developers on staff. But great help is hard to find—it’s tough to compete with giants like RIM, Facebook and Google, not to mention the dozens of smaller software and gaming companies springing up in Canada—and the big venture capital dollars available in the U.S. simply aren’t present further north.

Challenges aside, HitSend has a valuable product in SoapBox, which provides corporate clients with their own feedback and engagement portal. Users submit ideas, which are organized, filtered and discussed by the community. The posts are voted up and down, with the best ones compiled and sent off to company decision-makers. And the technology is made even more valuable by its ability to provide companies with a detailed analysis of their user base.

What does this mean exactly? Say a Toronto company wants to promote a new product by generating interest within its online community. SoapBox provides the company with a special graph that highlights their most influential users, giving demographic, location and contact information for each person. The company can use this data to target influential customers and their networks, increasing the precision and effectiveness of marketing campaigns by growing word of mouth organically.

But HitSend’s clients can be a demanding bunch, most of them wanting Soapbox to provide something unique for their community. That means a lot of additional coding and testing—more work for an already maxed-out squad of developers. What’s more, in the cutthroat world of tech startups, every idea needs to be protected, meaning HitSend is constantly engaged in dialogue with lawyers and even more development work to prevent codes from being copied.

It all takes time, a luxury few young companies have.

“The challenge,” says McEchran, “is getting the product out the door on deadline.”

HitSend appears to be at a crossroads, Jones says.  The company can choose to focus fully on customization work and get paid appropriately for the added effort—or they could provide a more robust product with no customization, but at a lower price.

“They need to make sure they’re solving enough of a problem for the (client) that they can charge the prices that a repeat customization business requires,” says Jones, “because it’s a high cost of doing business.”

As it stands, that high cost, in both time and money, is slowing potential growth.

“We’ve said no to customers on certain features,” says Warren Tanner, HitSend’s chief marketing officer, adding that they’ve had to completely turn down two potential customers.

“That’s a tough thing for anybody to do,” says Jones. “That I admire. It means they’re starting to believe in where they’re going and what they’re trying to build upon.”

Even with the overwhelming workload, McEachran still has his eyes on the big picture, and wants to expand SoapBox beyond the corporate world.

The next target is schools. Administrators could use SoapBox as a means of generating ideas to improve the educational experience, or to receive feedback from students and parents on new proposals. HitSend is also looking at moving SoapBox into the political sphere, where it could serve as a tool for garnering feedback from constituents.

In the end, Tanner trusts that the strength of the HitSend team, and the quality of the product they’re offering, will ultimately lead to success, regardless of a difficult journey.

“Soapbox is going to shake things up and change the way decisions are made,” he says. “The bottom line is, we really believe in what we’re doing.”

EXPERT VIEWS

As Interviewed by:

The tech world is moving so fast that some companies must grow quickly or risk losing their place in the market. So it seems HitSend has a real need for investment to take advantage of growth opportunities. I think they’ll want to look for an angel investor—if they feel they’ll have better luck in the U.S., they shouldn’t limit themselves to sourcing equity in Canada. Good ideas will attract capital. Looking south might seem daunting, but the company is already a step ahead, as they’re working out of a university incubator. This should give them access to a network of resources which can potentially be leveraged to put them in front of the right types of investors, with the right type of information to share. And, since the company already has customers who are proving the software's value, they shouldn't need to discount their services to grow sales. Their pricing strategies could include a higher advance rate for customized work and another for ‘out of the box’ solutions, because ensuring a positive cash flow is critical to sustain growth.

by Mike Feaver

Every business wants to be in a situation like HitSend, but they need to grow, and they need capital. So they must spend efficiently, especially when it comes to technology like internet and mobile phones. I assume they’re very mobile, but their fixed costs are probably high as well. If they talk to a small business specialist at their carrier, and there are better plans available, they could save some serious money on operational costs. Another challenge is finding the right people. The talent is migrating south to the U.S., but today’s technology means this isn’t necessarily a problem. Remote access, and collaboration software like Microsoft Office 365 or Google Docs, can help HitSend go beyond Toronto and expand their potential pool of candidates nationally or even internationally. Finally, their customers demand customization, but this is expensive and time consuming. Maybe they should split the business into two segments, one that charges for customization, and one that provides out-of-the-box solutions for a lower price. That way customers get what they want, and the company is paid for extra work when it’s needed.

by Tisha Rattos

The question is, how do you build a scalable business model? Talent is a key part of this, it's a scarce resource in Canada, and your ability to execute strategy is only going to be as good as the people you have. If they're going to build a strong talent pool, they'll need a positive company culture. They can use collaboration technology—things like Jabber, WebEx and TelePresence—to support that culture by allowing employees to engage their work, on their own terms, through an office and workspace that moves with them. Plus, they can use these systems to extend the candidate pool globally, and let potential employees experience the company culture to remotely see what makes HitSend an attractive business. The other challenge is dealing with customer demands. It sounds like HitSend is focusing on development at the expense of revenues. Customization requires change, which requires an investment of time and resources. These are always finite, so they should focus on selling what they have today—balanced with customization and development—in order to avoid biting off more than they can chew.

by Mark Collins
Showing  3 comments
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  • Dilip July 6, 2012 at 4:08 pm

    There are several options here, it all depends on how the current owners want to proceed and what they are comfortable with…..The key is that they must move quickly .to maintain their edge….and capitalise on the market…..

  • Fulbert July 6, 2012 at 6:27 pm

    I agree with Mike Feaver recommending that HitSend should leverage its position as working out of a university incubator, not only as an access point for potential investors, but also to deal with the human resources part of their dilemma. There are lots of talented students in Canada’s universities and colleges who can benefit from a co-op placement or even an opportunity to earn some dough while gaining work experience at the same time. And if these students are nurtured the right way–with incentives, work-life flexibility, etc.–they automatically become future employees.