Niche Expertise Drives Incredible Growth

By Matt Pillar, Business Solutions Magazine

This ISV is reaping the rewards of a focus on the beauty salon niche.

GuestVision Technology Solutions

2011 revenue growth rate
50%
2012 projected revenue growth rate
120%
Phone Number
(800) 967-0249
Employees
50
Website
www.guestvision.net
Verticals
barber shops, beauty schools, retail beauty supplies, salons
Vendors
Dell, Merchant Warehouse, Sage
Distributor
BlueStar


Integrity In Credit Card Processing?

Ted Therriault, president of GuestVision, believes integrity is an all-or-nothing proposition. But, taking the high road can be a pretty tough proposition in the payment processing world. Some 54% of Therriault’s business is from sources of recurring revenue, the two primary of those being maintenance services and card processing.

“In 10 years, we’ve gone through the process of evaluating how to attack credit card processing four times,” says Therriault. “We needed more than a product that worked well. We sought a partner that would deliver 100% integrity, a virtue that’s very much compromised in the credit card processing space.”

GuestVision seems to have found an appropriate partner in MerchantWarehouse, a credit, debit, and gift card processing provider whose services it has been reselling for the past five years. The company says more than 95% of all clients referred to MerchantWarehouse (GuestVision sells it up front, then passes the client on to the payment processing provider) save a significant amount over what they were paying with a previous provider. Therriault also says the marketing, tradeshow, and large-client sales support that GuestVision receives from MerchantWarehouse are value-adds that set the payment processor apart.

www.merchantwarehouse.com


Payment Security Spells Niche Opportunity

When the PCI DSS (Payment Card Industry Data Security Standard) drumbeat started up a few years back, thousands of retail salons found themselves in need of solutions that would meet certification requirements. Fortunately for the many of those thousands who source software and payment processing solutions from GuestVision, the company placed a stake in the ground early as the first payment application in the U.S. beauty market to become PA (payment application) DSS-certified.

“Initially, we developed and certified a PA-DSS solution because it was a requirement and the right thing to do,” says Ted Therriault, president of GuestVision. “Our first PCI DSS audit validated that there was no alternative. We had to get better at payment security. We had to document why it worked the way it did every step of the way.” While GuestVision ultimately added a profitable and necessary item to its line card with payment security, Therriault says the value extends far beyond that of the sale. “Obtaining and supporting PA-DSS compliance also contributed to our intrinsic belief that we were doing things right,” he says.

Therriault says there are pros and cons to developing secure payment applications in-house. “We created all the advantages of a self-made system — we knew how to easily adapt and manage our site-to-gateway integration with First Data — but homemade solutions that are monitored by a regulatory body create a higher degree of liability, as well,” he cautions.

Despite the risk and complexity, Therriault says any requirement that presents a chance to sell that aforementioned complementary expertise is a great opportunity for VARs. “Especially today, as mobile payment applications and devices change the game yet again, retailers are looking for assurance from their technology partners,” he says. “Encryption technologies, like MerchantWare from Merchant Warehouse, have given us the last-mile certainty that even a USB keylogger would not compromise our security.”

While your company slogged through slow growth last year, GuestVision was gobbling up a market on its way to growing by 50%. This year, while you’re enjoying a few more wins, GuestVision has charted a course that will take it well past the 100% year-overyear growth point. This is a story about the principled and strategic decisions GuestVision president Ted Therriault made in a successful attempt to create a compelling solution in the industry he serves.

Agility Enables The Markets To Align

When Therriault founded his company in 2001, he leveraged three market dynamics that shaped the industry at the time. SQL databases that could once only run on servers could now run successfully on desktop PCs, high-speed Internet was becoming available to even the smallest businesses, and flexible, data-driven programming tools — once available to only the largest enterprises — were finally available to small companies. Therriault envisioned these dynamics collectively contributing to a software package that would give a chain of small retail locations the ability to run as one — with a common, self-consolidating data model among all sites.

Not long after the company was founded, on a “chance” meeting with a fellow businessman from one of the nine chambers of commerce he belonged to, Therriault’s vision began coming to fruition. This fellow was an entrepreneur who owned a chain of furniture stores and a large Fantastic Sam’s franchise. He’d found a perfectly acceptable software package to manage furniture sales and inventory, but he lamented to Therriault that the software packages he’d tried in the salon business had caused him unending grief.

Therriault reasoned that there were plenty of parallels between the needs of a salon chain and the centralized transactional management system DB Builder had created to manage bankruptcies. He further reasoned that selling technology to salons was a brilliant way to transition from software programmer to software company owner. He vowed to help his new acquaintance and almost instantly had a charter client — a 1,300-location Fantastic Sam’s franchise.

Therein lies rule number one in Therriault’s playbook. There is, in fact, nothing “chance” about meeting a life-changing first customer if you’ve invested a lot of time and energy into networking yourself, your business, your applications, and your ideas. Especially if your business is new, you may have yet to meet the perfect market for the products you sell. And, you may never meet that market without an open mind and a lot of exposure.

Once You’re In, Go All In

There was nothing lucky about Therriault’s discovery of the salon market’s grave need for good business software and services. His solid product and networking savvy created an opportunity, and once he pursued it, there was no looking back. GuestVision was born and would grow quickly, fueled by a focused dedication to a market — an industry, in fact — that continues to open doors for the company today.

Of course, even though it had a marquee client, quick and profitable growth in the salon space wasn’t guaranteed. That is, until Therriault and the rest of his company set about becoming experts at building software that runs several hundred to several thousand salons. Notice they’re experts at building the software, not running salons. “We don’t share common expertise with our customers, we share complementary expertise,” says Therriault. “We understand the nuances of the walk-in business that serves 300 clients in a day, or one that sells more shampoo than cuts, or a regional chain that manages nine or ten thousand SKUs even though they might sell just one of a single SKU all year, or a franchise that must manage
identical offerings across hundreds or thousands of locations,” he continues. “But they’re the merchandisers, they’re the marketers and the business people. We are the providers of a complementary solution that analyzes, models, and helps them see things and learn things about their business that they didn’t know, things that will make them better. This is where many VARs get it wrong. If you’re going to sell a value-add, it’s got to be something valuable — it’s got to give them something they didn’t have before.”

This is intelligence speaking, not braggadocio. In fact, Therriault is the first to admit that what GuestVision has built has been so refined, any attempt to apply it in a nonbeauty market or even a mom-and-pop salon would fail. “What we’ve done is build a solution so unique and specific, it’s useless to any other
market. But it makes us the top dog in ours,” he says.

Therein lies rule number two. To win in a market, it might be necessary to sharpen your expertise to a point that’s so well honed, you become a hero who dominates one niche market and a relative unknown to everyone else.

Business Model Mantra: Build One, Sell Thousands

Central to its achievements at replicating success in the salon business is an unwavering commitment to pursuing customers that, like their first, have many locations, widespread influence, or both. Customization is far more efficient in a build one, sell thousands model than in a model that requires a thousand modified one-off implementations.

While GuestVision’s roots are planted firmly in software development, it has found that serving franchises well means operating like a franchise yourself — in other words, creating a recipe and replicating it in high volume. That’s why, despite the tens of thousands of mom-and-pop and small regional salon and barber chains across North America, GuestVision focuses exclusively on high-volume franchises. This way, the overhead associated with brand-specific customization — which is necessary and expected at this level of business — is typically limited to the initial engagement.

That’s rule number three. Hammer out a model that works and then replicate it without exception. The consistency will make the product easier to maintain, easier to train and upgrade, and in the long run, much more profitable.

New Market, Same Industry: Continuous Evolution

Not despite, but because of the slow economy, the segment of the beauty industry served by GuestVision is at its strongest in a decade. “The market for $125 hair cuts fell off a cliff in
2008, driving growth for our clients, who typically sell cuts for $10 to $30,” says Therriault. It’s a comparable service for a much lower price, so even as the economy crawls back, the franchise salons are keeping a lot of that business.

This growth in the franchise salon business has spurred a new business opportunity for GuestVision in a closely related market. Cosmetology schools are enjoying record high enrollment as salons clamor to hire. It just so happens that cosmetology schools operate much like salons themselves, and many of them are franchise operations, with up to 500 students per school. They require software to run their POS, front end time and attendance management, dispensary management to handle far more beauty product than any normal salon, inventory, financial records, and so on. Thus, GuestVision Cosmetology School Software was born. What looked like a lateral move that required little modification in fact took GuestVision one step further toward salon market domination. In fact, much of the tremendous growth anticipated by GuestVision this year is coming from cosmetology school sales. And that brings us to Therriault’s rule number four. Stay focused, but recognize a complementary opportunity when you see it.

With complementary opportunities in mind, Therriault’s mind began to wander a bit one day in 2011. “We supply a full suite of software that helps salon and cosmetology school franchises run their businesses and manage their inventory,” he thought. “What if we sold them that inventory, too, from salon fixtures to equipment to hair care products?” The idea was that as a school opened new locations or modified existing ones, GuestVision would act as the veritable sole supplier of tech, fixtures, and product — it would supply the “school in a box” — then act as a distributor of everything in the four walls of the school on an ongoing basis.

Therriault took his first step into this concept by joining forces with Teresa Lewis, who had built a successful school product distribution enterprise for OPI nail products. Indeed, nail products are the first that YourNewSchool, the newly formed union of GuestVision and OPI, is helping its customers manage. “The nail segment of beauty, with its manicures and pedicures, is the fastest growing in the industry. This growth in a down economy is driven by relatively low cost, ease of trial, built-in repeat service, and the unique fact that it’s the only beauty service that a woman can actually see throughout her day,” says Therriault.

Now if this story were about any other VAR/developer/integrator, we might stop short of even telling this part of the story. We don’t typically advise VARs with expertise in the pizzeria business, for example, to begin selling pepperoni and cheese because they’re complementary products. But, this pursuit of new opportunity follows Therriault’s final rule. More important than following the rules is recognizing when it’s appropriate to ignore them.

 

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