How Being Scrappy Made Grasshopper Profitable Within 2 Months – with Siamak Taghaddos

In 2003, Siamak Taghaddos and his friend, David Hauser, launched a voicemail service. Within 2 months, the entrepreneurs were profitable. By the end of their first year, they did $423,504 in sales. By their 3rd year, they did $8.8 million.

How did they do it? And what can you learn from the creative way they built Grasshopper into a profitable business and lifestyle brand? That’s what I invited Siamak to Mixergy to talk about.

About Siamak Taghaddos

Siamak Taghaddos is the CEO and co-founder of Grasshopper. From the company’s About page: “We started out as GotVMail Communications in 2003, after identifying the need for an easy-to-use virtual phone system for entrepreneurs that wouldn’t break the bank. ... As of May 2009, we became Grasshopper. Why the change? Quite simply, the name ‘Grasshopper’ evokes the power to propel forward. And that’s exactly what our service does for entrepreneurs like you: gives you the tools to propel your small business forward.”

A few lessons from this program

They were abitious

I asked Siamak he launched Grasshopper with a plan to be like AT&T. He said, “we weren’t going to be AT&T. We thought of ourselves as ‘We’re better than them, we’re smaller, we’re going to be much more nimble, and we’re going to target entrepreneurs.’ And I think that’s what the big corporations didn’t know how to do, which was find their niche, and then focus just on serving that niche.”

Instead of paying upfront, they got creative

To keep their costs low in the early days, they inspired suppliers to believe in their potential. He’s an excerpt of Siamak telling me about one of his first deals, “It was great. Rather than paying this guy a million dollars up front on day one and then having to break even point some few years later, we said, ‘We’ll pay you as we grow.’ But he saw the vision. He understood where we were going, and so we worked together.”

They focused VERY narrowly

“I think what kind of set us apart is that we were targeting entrepreneurs,” Siamak told me. “A lot of people came up to us and said ‘why don’t you offer VoIP service? Why don’t you sell your service to large companies?’ A million different things. And we said ‘No. Our focus is on entrepreneurs. One to five employee companies. And that’s it.”

They built a brand

Here’s an excerpt of Siamak’s response to my question about what kind of brand he envisioned. “Of course it was aspirational, the whole thing was aspirational. ... And if you create an aspirational service, people will come to you.” He went on to explain that he specifically looked for customers who saw themselves as “entrepreneurs” and not “small business owners,” because the entrepreneurs were trying to grow their companies and he wanted his service to grow with them.

They charged their customers

I asked Siamak why Grasshopper didn’t offer its service for free, the way other web sites do. Here’s an excerpt from his response. “It still costs us money to run the service. So if you get a phone number and if you make phone calls, we have a cost for that. We have a cost for everything.”

He also said that charging makes his service MORE appealing to entrepreneurs. “I think it’s a different kind of person, it’s a different kind of market that signs up for free service than for a paying service. I, myself would not sign up for a service that is free to help my company grow, because I’m not sure who the company behind it is, I’m not sure if they’re a very smart company by giving their service away for free. So what we did is offer a 30 day money back guarantee. You take the risk with us, you sign up, and if you don’t like it, cancel. We’ll give you all your money back. I think that’s what was different with us. We had that no-risk sign-up.”

They spotted simple opportunities that others missed

I asked Siamak how Grasshopper made a deal with FedEx to get access to FedEx’s customers. I wasn’t sure how a young company would even find the right person at FedEx. His response was so simple that I can’t even find a quote that does it justice. Basically, they Googled “FedEx small business partners” and saw that the company had an office whose job was to help companies like Grasshopper partner with FedEx.

Sometimes they just “winged it”

Here’s an excerpt of Siamak talking bout how Grasshopper came up with its pricing. “We used the price that we wanted to pay, that we would have paid as entrepreneurs. And then we saw what happened.

“I think when we first started off it was more a la carte pricing. ‘Sign up, add this feature, add that feature. Pay this for this feature and that feature.’ And then as we started getting customers and listening to them and speaking to them. We saw that entrepreneurs just want to get something that works and not have to worry about ups and downs and a la carte pricing and everything.

“So we said, ‘You know what? Let’s just go and have all the features included for a base fee.’”