What started as an internal tool to monitor the prices of Misha’s e-commerce then turned into a $155,000/month business that has been operating since 2011, has 650 clients and employs 104 FTEs. A bootstrapping story full of downs and highs...
Hi Misha! What's your background, and what are you currently working on?
Hey, I’m Misha! I’m 48 and I’m living in Belgrade, Serbia, where I’m married with 2 kids.
23 years ago, I started my first website. 15 years ago, I founded WEBCentric, as a roof company for many of the projects I was involved in. 9 years ago, I founded Price2Spy, an online price monitoring service (SaaS), that’s currently employing 104 FTEs.
In essence, I’m the company’s CEO, but I often also act as a product owner, business analyst (all due to my technical background) and coordinator of our major sales efforts.
Price2Spy is currently serving over 650 clients who use it either to monitor their competitor prices (retail) or their retailers’ prices (manufacturers).
I will try to explain how I got to the idea of such a tool / service, from a very unlikely sequence of events, starting back in 1997 with football fansite.
What's your backstory and how did you come up with the idea?
In 1996, as a young Software Engineering graduate, I got my first job in Serbia’s first ISP (Internet Service Provider). At a time, Serbia was recuperating from bloody war in Balkans (1991/1995), so the economy and the IT infrastructure were really poor.
As a young engineer I was tasked with building some of the first websites in Serbia. I liked it so much that I started creating websites in my own time - first for my hometown (Bijeljina in Bosnia), then for my favorite bands (Oasis, etc) and finally my favorite football club - FC Red Star Belgrade.
People in our part of the world are passionate about football, so when first FC Red Star’s website went online - it attracted huge number of visitors (at that time - ‘huge’ in Serbia meant a couple of 000s visitors per day) - mostly Serbs living abroad, nostalgic about their favorite football club. I was acting as both webmaster and content (forum) moderator.
Soon enough, I started receiving emails like ‘where can I buy Red Star jersey?’. I started replying like ‘Sorry, no official merchandise is available yet’, but after 5 or so such emails, I figured out that there was an opportunity. So, I built my first online store, arranged the way to receive payments from abroad (which was a nightmare at a time in Serbia).
Few months later, Serbia (actually, at that time it was still called Yugoslavia) qualified for the World Cup Football (France 1998) so I saw an opportunity to sell national football gear. However, there was a political problem - Red Star supporters were hard-core Serbian nationalists, and they would not tolerate Yugoslav football jersey in their fan store. So I had to build my 2nd store (YU Sport Shop).
When the time came to open the 3rd such store, I realized I needed a generic software that could run N stores in parallel. Like many other young Serbs, I had left my country (I lived in Holland for 6 years), but I hadn’t shut down the business. I had found partners who would take care of orders and the merchandise itself, while I was still busy with online part of the work.
By 2005, when I moved back to Serbia (which is not so common, very few Serbs that go abroad actually do go back), we were running 5 stores, all of them targeting Serbis living abroad.
Another thing that really helped was the fact that I started getting outsourced web development projects for Dutch, German and US clients. I hired one developer (who is now Price2Spy’s CTO), then a 2nd one, etc - I remember that somewhere in 2008 I wrote my last piece of code, as I figured out I couldn’t keep running the business and doing the actual coding.
In 2008, an idea was born: to build a general-purpose online store for Serbian market, selling consumer electronics, sports equipment, fashion, etc, and that idea became takolako.com - one of the first Serbian Allround eCommerce stores.
As TakoLako was growing (in 2010 we already had 10 FTEs), we become aware of the competition undercutting our prices. My first reaction was: “Ok, lets monitor competitor prices, so we can make our own pricing decisions.” The way we started doing it was that each category manager would open an Excel file of his/her own, and on each Monday he/she would check prices of most important products on competitor stores.
After only 3 weeks, all category managers wanted to speak to me - they considered the task of competitor price checking utterly dull, and taking so much time. They asked me whether they really had to keep doing it. And that’s when the bell rang - this is something that should be automated. After all, we considered ourselves a software company - we had to be able to do better than this!
We started working on a simple tool that would monitor competitor prices for us, and generate alerts when someone dropped their prices below ours. It worked like a charm. Our prices were more competitive, my product managers had more time for creative tasks, and things got so much better. In only 6 months since we started using the tool, we had a 32% increase in sales.
This is when I said to myself: “we need to offer this to the world”. It was spring of 2011 - and Price2Spy was born.
How did you build Price2Spy?
As every other software project, we started by analyzing what did our potential customers need. In our case, that was easy because we were building Price2Spy according to the needs of Takolako.
The process did not take too long (around 3 months) as we were already very experienced building web apps in Java for our outsourcing clients. Apart from myself, acting as PM / business owner, the project was carried out by 4 engineers, none of them working full time on the project.
At this point, I came with different thoughts about Price2Spy that would later define the different paths I took:
- “I’m building a tool for online retailers. Online retailers are very busy people, they will appreciate if a tool can help them save some time. However, they are very careful with their expenditures, so my pricing shouldn’t go too high”
- “The fact that we’re based in Serbia doesn’t help at all. Serbia (at that time) is more known for troubles, than for quality software engineering.”
- “As I don’t have a big marketing budget, I have to build a strong website with a lot of content in order to win organic visits.”
- “I don’t have to rush, as I have other projects running, which are profitable enough.”
- “Things don’t need to be all about happy faces like ‘use our tool and all your problems will be gone’. My clients are experienced online retailers who know that there are no simple solutions to important problems.”
However, no matter how clear it seems I had all things, there were 2 issues which gave me a great deal of trouble in the early days of the project:
1) How should I name the tool?
Thanks to our online stores, I already had quite some experience with SEO so I knew that the name should be self-explanatory. Therefore, it should definitely contain the word ‘price’ as it was all about pricing.
However, as you may guess, all good and simple names were already taken. In our internal conversations, we kept saying that this tool was good because it would help retailers spy on competitors. Hence the name Price2Spy, which I find pretty strong. However, the word ‘spy’ is rather controversial, and has many negative connotations, that you’re simply unaware of if you’re not a native English speaker.
Put it together, I think the name has helped us win the market in a very quick way, but harmed our efforts to win top enterprise clients
2) How should I price our services?
How do you price a tool which helps others price their products?
In the very early days we came up with a very easy way to capture prices from many different websites, so I decided not to limit the number of competitor websites but just focus on the number of products to be monitored.
Since we had an eCommerce business of our own, we could measure the impact of using such a tool. The conclusion was that the pricing should start rather low ($19.95 USD per month, for up to 100 URLs to be monitored) since we wanted our clients to have a cheap entry-level fee, which could be upgraded once they felt the benefits of the service were great. Nowadays, (after 9 years in business) we believe we should have started with higher prices.
On the side, it was clear that we had to stimulate our clients to grow, so the more URLs they monitored, the lower the ‘price per URL’ was.
Did I enjoy the process?
Very much, but to be honest, I think I was not aware I was enjoying it. I love creating new things and solving problems no one has properly solved before. On the other hand, Price2Spy was a baby project, among several other projects I was running on a daily basis, all of which required quite some attention.
Nowadays, looking back, I see that I was very lucky to possess a number of skills that were needed to make it a success. Among these were that:
- We were already very experienced in software development.
- We knew we didn’t have to spend much money/effort upfront. Instead, we had to launch something simple and if it worked, it would start bringing profits which would justify investing more time and money into development.
- We were aware of the importance of SEO.
- We were under no financial pressure, meaning that we weren’t looking for instant success.
- We were building a tool for eCommerce professionals and I consider myself to be one that kind.
Price2Spy was launched in April 2011. We got our first trial clients in May and the first payment (which made me so happy) on Aug-13 2011.
Which were your marketing strategies to grow your business?
Due to my eCommerce background, I knew that online marketing was essential to the project’s success. My strategy went into 3 directions:
- Adwords: We started with a moderate budget and kept a close eye on the ads’ performance. Pretty soon I discovered we were having a huge number of clicks from countries which we didn’t mean to target and where we had a low conversion (India, Indonesia, Malaysia), so we decided to split our campaigns into 2: West (high budget) vs East (low budget).
- Strong content: I was blogging about lessons learned from experiences of my clients, such as “Is it worth offering ‘free shipping’ deals” which brought many online retailers founders into knowing the tool.
- Going public with the list of websites monitored: I know that this sounds controversial, but my logic was ‘If we can monitor thousands of websites, why not say it out loud, with concrete names listed?’. Further, the fact that we monitor that particular website didn’t mean that we were disclosing on whose behalf we were monitoring it. And finally, publicly announcing that we could monitor a particular website also meant that we felt confident that this website would be able to block our traffic.
All of the above strategies were purely online and were quite a success. However, I noticed that while very good in attracting small and medium businesses, these strategies did not do well with enterprise-level clients.
This is why in 2015 we started attending trade shows and professional conferences, in some cases as sponsors, in some cases just a s regular attendees.
The result was mixed; if we attended a trade show industry where we were particularly strong, the success was great. However, in the case of industries that we were trying to get a foothold into, the results were very poor.
Put it together, the results were inconclusive so we decided to invest more into what was already performing well (online marketing) while keeping conferences, but selecting them really carefully.
Speaking of revenue, I remember the first time I seriously analyzed Price2Spy revenue was in 2013. Until then, Price2Spy was a side income and whatever it brought in was considered a success. The development resources it required were already there (most of the time working on other projects, for our outsourcing clients) so we were practically working on Price2Spy in spare time.
In 2013 I hired the first account manager to handle support questions and that was a clear sign that Price2Spy was becoming a viable source of income.
However, 2015 was the turning point, as 2 important things happened
- Out of the blue, we got an offer to sell Takolako. By that time, I was seeing that our eCommerce business was stagnating and taking too many resources from a much more profitable project (Price2Spy). On the other hand, the fact that we had a very diverse and profitable business meant that we were able to negotiate a fairly good price. After a couple of months, Takolako had a new owner and we had offloaded other eCommerce stores into a new legal entity with me as a majority owner and with an experienced and loyal colleague acting as a CEO.
- Our largest client for outsourced web development got into some financial troubles so he cut our contract. While it was a significant financial blow it also meant that our 6 most experienced developers could now spend their full time on Price2Spy. And fortunately enough, Price2Spy was at that stage earning enough to keep paying them.
From that moment on, Price2Spy got our absolute focus. We still do some development gigs (as we have some very loyal clients from our early days), but put it all together financially speaking, Price2Spy means now 93% of our income.
What are your goals for the future?
To put it simply, my goal is sustainable growth. For the last 3 years, we’ve been growing 25-30% year on year. I would like to grow at a somewhat faster pace, but I would not like that to happen at the expense of my personal life, and I believe most of the people I have in key positions feel the same. In other words, the goal isn’t to grow fast but to grow for a very long period of time.
As for profitability, we’ve been profitable since day 1. However, I must say that during the last few years, I have noticed that profitability has been going down (due to increased costs of labor in Serbia). That’s something I have to tackle in the coming months.
Speaking of client structure, I would like to gain more enterprise-level clients, simply because such clients are easier for making long-term plans.
Hiring more FTEs is an essential part of that plan. I’m very proud of the fact that we have developed a very strong team in the rural part of Serbia, which is economically in very poor conditions. Once in a while, I visit our office there (the only IT office in 30 Km radius) and that fills me with great pride.
I’m also thinking of international expansion. One day I hope to have a sales presence in the US and Western Europe, maybe even far East.
Last but not the least, we try to stay innovative. In 2018 we launched JustLikeAPI, a startup service for capturing data from various social networks. Unlike Price2Spy, which is focused on product price, JLA focuses on reviews/comments. It is fighting for development resources with Price2Spy all the time but I find this good for both projects.
As for personal goals, I try to find more time for my wife and 2 teen daughters (the elder one recently said: “my father acts as CEO of this family, and as a father to the company which he founded”). I also try to combine business with pleasure, for example, a trip to a football game combined with a visit to a nearby client.
In essence, the plan is to stay around for as long as possible. And in order to do that, I know I need to have good and loyal associates, which can take some pressure off my shoulders. That’s why I have recently started a profit-sharing schema which involves some of the key people in the company.
What were the biggest challenges you faced and the obstacles you overcame?
The first challenge I experienced was the fact that I simply did not know the enterprise market well enough. Being from Serbia can be a serious handicap. When a potential client approaches you, you simply are not aware of his size, nor the fact that your fees are ridiculously low for him. It took me a while to understand that I needed to offer a variety of services, low-end for small/medium businesses and high-end for enterprise ones.
Next thing: In the early stages of the business I was lucky to hire some talented young guys, for whom Price2Spy was the very first job. The challenge comes 4-5 years down the road, when a young engineer wants to make a move (either because he wants to learn new technologies or to change business focus, or simply leave Serbia). It will be very difficult to keep such a guy, no matter how happy you try to make him.
2015, 2016 and 2017 were tough for me because I lost some very valuable developers this way. I have tried to solve this by hiring seniors, which did not work well so now I’m back to the proven tactics: I keep getting fresh young developers, who (if they stay long enough) will become very productive until the moment when they leave when they will get replaced by the younger ones. An important part of our selection process is a psychological evaluation. This helps us understand which candidates are a good fit for long-term employment.
The 3rd challenge can be described as ‘victims of our own success’. Basically, when starting this business, development resources in Serbia were abundant and thus pretty affordable. As you can imagine, we were not the only that enjoyed such a success. Over time, hundreds of western companies opened their development offices in Serbia, and thousands of small Serbian businesses popped up, offering outsourced software service globally. This resulted in 2 problems:
- A steep rise in development salaries.
- Lare deficit of experienced development resources.
As for personal life, I was lucky enough that my wife was patient enough and full of understanding with myself being constantly connected, no matter if we’re traveling for a skating contest (both of our daughters are in figure skating) or on a long-deserved holiday.
Which are your greatest disadvantages? What were your worst mistakes?
Being from Serbia can be considered both as an advantage (lower project costs) and as a disadvantage (no experience with enterprise clients). I wish I had a business partner from the western world who would be in charge of sales and marketing, while I could run operations and R&D.
Over time we have learned that some of our competitors have solved some problems in a technologically much more advanced way than we did. Each time we identify such a situation, we try to improve our technology stack. This can be cumbersome, as it means even higher development costs. But I consider it important in order not to lose pace on the market.
Lack of ambition (‘moderate ambition’ as I prefer to call it) may be another disadvantage. Very few IT businesses are happy with 25-30% annual growth. On the other hand, I consider it good enough in the long run. There is a Serbian saying that could be translated as: ‘’Those who fly high, will fall down low’.
I pay too much attention to ‘legacy projects’. We have software development clients from 12-13 years ago, which are becoming more of a burden, rather than being profitable. I find it difficult to say goodbye to such clients. I feel that I have to keep my commitment, although they are not my main focus anymore.
Speaking of staff, for quite a long time I was thinking that certain important people couldn’t be replaced. This led to really awkward situations, which were by no means good for the business. And once those people left, I learned that they could, in fact, be replaced and that some replacements worked even better than the one who had left.
On the side, I sometimes take businesses too personally. Winning an important client gets me really high, losing a client can take me really low. I can get really passionate in arguments, as well. I’m far from perfect CEO, but I’m trying to improve, and I’m willing to learn.
If you had the chance to do things differently, what would you do?
Life doesn’t give you any second chances, does it? However, if I did get a 2nd chance, I would:
- Make some decisions more quickly (for example, replacing the ones who are ‘irreplaceable’).
- Take some more risky moves which are simply not like me. I’m not that kind of personality.
- Try a strategic alliance at an early stage with someone more experienced in the sales & marketing side of the business.
- Make a more careful selection of development projects to spend resources on.
- Travel to meet clients at a much earlier stage.
What are some sources for learning you would recommend for entrepreneurs who are just starting?
Unlike many others who read books and websites like Failory (I wish I had discovered it earlier!), I don’t read whatsoever.
However, I did have very precious help in the very beginning. My uncle who could not help with IT technologies but did help in crucial moments with smart pieces of wisdom coming from his rich life and managerial experience, for example. I didn’t speak to him too often, but each time I did, I took something valuable from that conversation.
He died in 2008 and he didn't live long enough to see the company achieve steep growth, but I think he’d be very proud to see what his advice led to.
That’s actually my single piece of advice to young entrepreneurs. Always try to combine your energy, drive, and ambition with the wisdom of some much older whom you can trust.