Sunday, September 23, 2012

Telarus Turns 10 Years Old - A Look Back

According to the United State Small Business Administration, only 34% of all small businesses make it 10 years or more.  I'm sure this statistic didn't factor in the number of new businesses going in to telecom in 2002, exactly when every one else was running from it in the depth of the dot-com crash.  So just looking at the numbers you can understand why all of us here at Telarus, Inc. feel such a sense of accomplishment as Telarus turns 10 years old in 2012.

When Adam Edwards and I started this company, we really didn't do it with the intention of changing the way people do business, sell telecom, research pricing, or market for new recruits.  We were just two young men looking to be in business for ourselves.  Both of us had worked for the 'big firm'.  Both of us had worked for the 'upstart high-tech company'.  Now, we just wanted to live life on our own terms; but how to do it?

Diamond Bar, CA, 1986 - This is me
launching off of the large  jump in the
Patrick/Adam bike track!

Telecom is one of those few amazing industries that, in theory, is a residual-based opportunity.  Each month your customers pay their Internet and voice bill, 15-20% of that bill comes back to you, the salesperson.  Amass enough of these customers and you have a cash machine. 

Ever since Adam moved in next door in 1986 we wanted to start a business together.  Our first business was a dirt bike track that we constructed in my back yard (before it was landscaped).  It had a selection of small, medium, and large jumps, berms, whoop-dee-doos, and more.   It only took a day or two for the track to become a kid magnet.  We let all of the neighborhood kids ride on it for free for a few days before we announced our new rate:  10 cents per lap.

One day a kid knocked on my door and offered my mom a dollar, saying "I just rode 10 laps on Patrick and Adam's bike track.  Can you please give them the dollar?" 

Adam doing some freestyle in 1986.
"Oh you're OK," my mom responded.  "Keep your dollar!"

"No ma'am!" the boy replied.  "Adam and Patrick will beat me up if they find out I rode without paying!"

And so began our career as entrepreneurs.

Fast forward to 2002.  The dot-com bubble/recession was about one year old.  Telecom companies, the hardest hit, were laying off workers as fast as they could without having to turn the lights off.  High-tech companies were drowning in debt that they have acquired to rapidly expand just a year earlier.  Very few carriers had real channel programs; most merely resembled a glorified referral program.  Businesses were getting desperate.

As it turned out, is was perfect timing for us to get in.  In today's day and age, two young guys with hardly any money and a business plan would get laughed out of most carrier programs.  Back then we were actually able to call in a few favors and get contracts we had no business receiving.  It was enough to start up Telarus 1.0:  Patrick generating leads and Adam closing them.

Adam and Patrick in our Senior year
of High School (1990).  Yeah, we were
pretty self-confident! =)
Our first priority was simple math.  I had $30,000 in my savings account, and Adam about the same.  We calculated that with business and personal expenses combined, we could last about 18 months before we'd have to go looking for work without a penny to our names.  I had a habit of referring to our situation in the form of an analogy:  our plane, though in the air, was on the decent and we were frantically trying to pull up on the joystick.  Hopefully we'd start to earn enough money to survive by that magical 18th month, when we'd hit the ground and burn up in flames!

From my experience as an online affiliate for Cognigen Networks, I learned first-hand how to generate leads for residential long distance, dial-up Internet, and international calling cards.  Would that knowledge translate to commercial voice and data leads?  Thankfully, yes.

As the leads from started to trickle in, Adam did his best to call them all quickly, send them pricing proposals, and then follow up.  We soon realized that only having one or two carriers meant that we were undercut on price just about every time by someone else.  We also realized that direct reps and other agents were able to turn around pricing to their prospects faster than us, putting us in an additional hole.

Thankfully we were able to overcome those challenges with Adam's tenacity and salesmanship (he's not too bad for a CPA!)  Soon we had a few dozen clients and a few dozen dollars a month in commissions.  It was a start, but our plane was still headed down and our "burn up" date was quickly approaching.

Adam and I during our freshman year
at BYU (1991).  From the start we always
wanted to be business partners, we
just needed to find something where
we could both apply our talents!

If there is one thing Adam and I are particularly poor at, it's losing.  Making Telarus a successful company in just 18 months wasn't just a career objective, it was something we took very personally - as if Darwin was questioning our manhood.  We worked even harder generating and closing more leads until I got the phone call I'd been waiting for .... "Patrick!" Adam said.  "We did it.  Telarus is going to pay us our first pay check of $3000 each on August 15, 2003, just 15 days before the burn up date!"

What a massive, huge relief - I knew it was just the salary of a brand new elementary school teacher, but it was $3000 from my OWN little company!  The best $3000 I ever made in my entire life, still to this very day.

Once we knew we wouldn't be spending obscene amounts of time on looking for work, we had an executive meeting in Adam's Huntington Beach apartment where we mapped out a plan to expand Telarus.  Some of our ideas included: 
  • Recruit and train agents to sell
  • Automate / speed up pricing research
  • Expand SEO capabilities and reach
  • Create an affiliate program for webmasters who know how to create high-traffic web sites but aren't interested in closing the sale
  • Hire and train channel managers to assist the agents with pricing, and anything else they stood in need of
Sweet - a plan.  Now, where to start?  and how to pay for it all?

Our agent program started of very small:  Jason Oliver, a friend of Adam's who lived in Huntington Beach, and Bob Shupe, a friend of mine I met at a Cognigen meeting I conducted a few years back.  We started to send our own leads to these two agents who did their best to close them.  We didn't have any online portal, real-time pricing, ... nothing.  Adam worked as the Channel Manager and did everything he could to get quotes back to them quickly.  We learned early on that the flow of information from carrier to their indirect channel was like molasses in January.  Something had to be done or we'd be making $3000/month for the rest of our lives.

One fall day in 2002 I mentioned to Adam during a lull in the surf, "why don't we build an automated, online, real-time quote engine to speed things up?" 

"Oh, I don't know," Adam replied.  "All of the carriers do their best to conceal their pricing and keep it out of the hands of even their own agents for fear that the competition will get a hold of it."

"Well we can't keep doing what we're doing now," I responded.  "This industry is ridiculous!  In today's day and age of the Internet, real-time information is going to happen sooner or later.  Why don't WE be the ones to do it!?"

Crazy idea, right?  Why would any of these multi-billion dollar companies want to play ball with two nobodies whose combined revenue wasn't even to the size of one direct sales rep?

The longer I thought about it, the more the seed of desire grew inside me.  Soon it was all I could think about.  "Adam?" I pronounced.  "We're going to do it, or we're doing to die trying."

Adam was still skeptical, even though he liked the idea.  He didn't think the carriers would give us what we needed to perform the calculations, and he would be right.

Soon after the decision had been made to more forward with GeoQuote - the name I attached to our future quoting software - I called my good friend Aaron Lieberman, free-lance programmer extraordinaire.  I let him know that I had a big and important project for him, but that I didn't have any money to pay him; he'd have to agree to stock in Telarus as payment.

Through some miracle he agreed to help me out with the project and I got on a plane to Boca Raton, Florida and I set up shop in his home office, sleeping on a futon for two weeks.  Each day we worked on GeoQuote and came up against things we were ill-prepared to deal with. 

"Aaron, do you know what V and H coordinates are?  Carrier Central Offices are all mapped out in V and H coordinates, NOT GPS!"

"Aaron, any idea what a Central Office is?"

"Aaron, any idea how to determine which carrier owns a Central Office?"

"Aaron, how do we know which Central Office is serving a particular phone number?"

"Aaron, how do we know if a phone number is a mobile number, a CLEC number, a ported number, or a regular LEC phone number?"

"Aaron, did you know carriers charge different rates for inbound calls than they do for outbound calls?"

"Aaron, did you know that carriers associate different commissions with the different voice rate and Internet port plans?"

"Aaron, any idea how to convert a V and H coordinate into a mile?"

Day by day, the questions just kept coming.  The deeper we dug, the more intellectual dirt fell on us.

"This is AWESOME!" I told Aaron one night at a modest Italian restaurant in Boca Raton. 

"I don't understand," said Aaron.  "We're totally hosed!"

"No we're not," I replied.  "The harder this is for us, the harder it will be for our competitors who try to copy what we do later.  Not only will there be a huge intellectual barrier to entry, but we'll file for a patent on this stuff to set the bar even higher!"

Our big break came on night 6 of our power programming session.  I was looking in Google for more information about V and H coordinates and on page 21 of the Google results I found an obscure email send from one Bell Labs employee to another that actually had, in algebraic form, listed out the Donald Elliptic Projection for AT&T V and H coordinates in 1957!!! 

Within an hour we wrote a ColdFusion version of that mathematical equation and, viola!  We were converting GPS (Latitude and Longitude) coordinates into V and H!!  Now we could figure out, very accurately, the mileage between the CO that was serving the customer and the CO where the carrier's network ended.

Soon we had the platform for GeoQuote built and I was on a plane home to California with the software in a disk in my briefcase.  I must have had a smile on my face the entire 5 hour flight home.

I drove to Adam's beach apartment the next day to give him the good news and to show him our software.  "That's fantastic!" Adam said. "Now, where do we get the actual data to put in there?"

"Well, from the carriers, of course," I sarcastically replied.  "With a functional piece of software in our hand, maybe they'll be more inclined to hand it over!" I rationalized.

Well, long story short, Adam was right.  Carrier after carrier did all but call security to escort us away.  We were, after all, boarding on the heretical to even suggest that a T1 and PRI was a commodity and that they should help us build the world's first "online shopping engine" that would do nothing but push prices down and competition up.  Not a single carrier would give us anything.

"So, are we done wasting our time yet?" Adam asked.

"No way," I said.  "If they won't give us the data, I make the data up myself!"

Since we'd been in business for over a year, we had a decent stack of quotes for locations spread across the entire country.  With this data, I thought, I'd write a statistical analysis tool to "guestimate" the price based upon past price quotes, and hope we were close.  Then, I'd package it all up into a public-facing website called "", drive traffic to it, and see what happens.

In March 2003 we launched and invested every last dollar we had into Google pay-per-clicks.  We started off with just a few leads per day, then a few dozen, then a few hundred.  With the influx of leads came a dramatic rise in manual quote requests we were sending our carriers.  They complained that "you're overloading us with quotes" and that "the quotes you're showing on your site are all wrong!"

"Well," I said, "there is something you can give me that will 1) take away the quote burden on you and 2) help me display accurate pricing!"

Still, most didn't bite on my open invitation to engage with Telarus and share quoting information with us.  But, in May 2003, we got the big break we'd been waiting for.  One of our carriers, ACC Business, gave us a list of all of AT&T's Central Offices, along with a simple matrix that said "0 to 10 miles - $300 loop, 10 to 25 miles - $450 loop, and 25+ - $500 + $10/mile".  THAT was all we needed.  The next day we were quoting ACC Business, a division of AT&T, with 99% accuracy, in real-time.

With ACC Business on board, I went to Netifice, another one of our carriers and played the "ACC Business is in, are you going to get in too or get left out in the cold" card.  Eric Sandoval, our channel manager at the time, didn't want to tell us "no". 

"Listen guys," Eric stated, "I like you a lot.  You're full of passion and drive. But I don't have that information.  I use this system called Lattice that lets me key in a phone number and it shoots me back a price.  That's all I've got."

"Well Eric," I said, "why don't you hire someone to write a script that starts at 000-000-0000 and goes all the way up to 999-999-9999 and just mine all of the pricing for all of the phone numbers in the United States?"

"Patrick!" Eric replied, "That is a feakin' great idea.  Let me work on that!"

15 days later we have the massive spreadsheet of mined data from Eric, and Netifice was now quoting.

One by one I went to each carrier, letting them know they were all the only carrier not to quote in real-time in the GeoQuote system.  The fear of being left behind was far greater than the desire for increased sales.  We used that fear to perfection and soon we not only had each carrier quoting in the system, we had actual XML API's that would communicate the new pricing directly into our system without the need for manual updates.

This, I would say, was our first major accomplishment as a company.  Over the years we'd have many more, but I don't think any will match GeoQuote in terms of supplier push back and our will to overcome.

After that, our story is pretty well known.

So, here we are in 2012 with 32 employees, over $1M in commission revenue each month, $5.5M in monthly customer billing, and over 1000 producing agent partners and 41 suppliers.  Just 10 years is all it took for a great group of people to help transform our early mini-victories into an industry powerhouse. 

A special thanks goes out to all who have helped Telarus become the master agent it is today, especially the employees, agent partners, and suppliers who worked with us in our early days.  Adam and I always talked about Telarus like you see it today, but back then it took a tremendous amount of faith to work with a company so small when so many large competitors were surrounding us at every turn, waiting to take our people and our ideas. 

Happy tenth birthday friends and associates of Telarus!  May our twentieth find our company and relationships stronger, our revenue orders of magnitude greater, and our friendships deeper than ever before!

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