Mining Gold In The Cloud: How Telzio Scaled To 100,000 Users With Peter Schroeder

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Your First Thousand Client | Peter Schroeder | Telzio

 

In the tech startup world, we are of the belief that one needs to go out and raise millions of dollars in order to run a tech company. This episode’s guest managed to build his company and scale to a hundred thousand users without any funding. Mitch Russo interviews Peter Schroeder, the CEO and Founder of Telzio, a seamless cloud phone system solution for all sized businesses. In this conversation, Peter shares the amazing story behind Telzio’s growth and how he was mining gold in the cloud. The key? Just make a good product. Peter talks about what Telzio offers to businesses, providing a much-needed solution to connect them no matter where they are in the world. From advice on growing and scaling a company to the game-changing impact of ChatGPT, Peter and Mitch cover an array of topics that you won’t want to miss. Tune in!

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Mining Gold In The Cloud: How Telzio Scaled To 100,000 Users With Peter Schroeder

My guest was born and raised in Denmark, where he started and ran Scandinavia’s largest artist community at the age of fourteen. He was an early starter. In his twenties, he founded a record label and attained over twenty platinum records and 40 gold. He’s just getting started doing 380 gigs a year and got burnt out. That’s what happens to entrepreneurs.

This led him to discover his love of technology. Through that, he ended up creating something that is now over 100,000 subscribers. He built a cloud-based phone system that allows companies to offload all of what I used to have, hundreds of thousands of dollars worth of phone equipment, in a closet that was air-conditioned, and every single day, I had to go out and buy new equipment every time. Now, for a small monthly fee, I could have the equivalent of all that and a lot better. We’re going to read from him directly. Welcome Peter Schroeder to the show.

Thank you so much, Mitch. It’s a pleasure to be here.

Thank you, Peter. Tell me, how did this all get started for you?

How far do you want to go back?

If you like, you could share some of the colors of the early days. The audience would love to hear about that too.

That’s the thing. I feel like everything that I’ve done my whole life is one thing led to the other. Something new fell into my lap, and we’ll do that. I burned out when I was DJing. I was at the top of my career. I spoke to my booking agent back then and said, “I need a little time off. I need to put a pause on the bookings a little bit so I can make some new music, be relevant, get that love of going out and playing gigs back, and take a break.”

While I was doing that, I started coding on another completely unrelated project. It’s like a promotion platform for musicians and DJs. I needed a phone service and a support line where people could call in. I couldn’t find anything out of the box that was easy to use and affordable. I was a broken musician. I started making it myself typically, ADD brain, I was like, “I’ll do that.” While I was doing that, I was completely hooked. This was so much fun. All of a sudden, I’d spend a month building that instead of the other project, and I kept going.

That’s the inspired action that gets a lot of us going when we hit a new project. The difference between all of us and you is that you went past the inspired action because first came the inspired action, but we know what comes next. It’s the hard work. Tell us a little bit about that journey.

Several years have passed since that. I didn’t have any money. I’m going in and saying, “I’m going to build a phone company and compete against AT&T and Verizon.” That sounds like a good idea. Somehow, my wife was convinced to cash her 401(k). We had $16,000, and we got started. It was a lot of grind in the beginning. In the first several years, we couldn’t pay for an employee. We did sales support, marketing, development, and everything ourselves. Eventually, we could have our first employee, a supporter, and sales. It was a long road. We never took funding or anything like that.

You built this company for ten years. You’ve never had any funding.

I never had any funding and never spent a dollar on advertising.

This was all word-of-mouth.

A good SEO and word of mouth.

Let’s go back a little bit. Do you think that would be the case again today? Do you think you could do that now as the world changed?

I have kids now. If I didn’t have kids and if I could spend 48 hours straight at a time coding on something, probably.

Let me ask the question a different way. Do you think now it’s possible still to build a company and grow it even as carefully and slowly as you have and attain the same results? Do you think those opportunities are still available? Do you think it’s become crowded and congested?

It’s always possible. There’s this weird misconception that when you have a startup, especially in tech, you have to go out and raise $200 million from a VC, and you have to burn it all in a year. That’s the only way to run a tech company. That’s the only thing you hear, and that’s also what we thought when we started out.

Your First Thousand Client | Peter Schroeder | Telzio
Telzio: There is this weird misconception that when you have a startup, especially in Tech, you have to go out and raise 200 million dollars from a VC and then you have to burn it all in a year.

 

We tried to raise money, but who’s going to invest in a couple who wasn’t even married at that time and trying to compete against these big giant multinational corporations? There’s no way. We had to go that way, and we believed in the product. The thing is you shouldn’t think about trying to beat those guys. You have to think about making a good product and getting a few customers to pay the bills and grow it. Don’t think about being the best from day one because that’s not going to happen if you don’t have money.

That’s unfortunately true. I like the way you said it. Build something that a few customers will pay for. At that point, once you start with a few and a few more hear about it, did you create incentive programs in the beginning for your customers to tell others about it, or did that come later?

It came early on, but it was never something that we did a lot about. We didn’t try to promote it too much. People kept referring people. They didn’t even want anything for it. They loved the product and they wanted their friends to have it. That came easy. It’s about making a good product, and then that stuff comes.

Let’s talk a little bit about the product and the way it works because it’s interesting how the world has changed. I mentioned briefly, and you and I haven’t spoken about this, but I built a software company many years ago called Timeslips Corporation. I grew it out of my garage like the way you did it. I sold the company after I hit about 250,000 customers. I sold it to Sage UK.

One of the things that I thought was interesting about the way we operated was that we had 100 employees and a room filled with equipment. Every eighteen months, the rep from our local phone vendor would come by and say, “You hit the max on this equipment. You need to upgrade to all new equipment.” The first group of equipment was $25,000. By the time we sold the company, we had spent almost $2500,000 on the equipment in the room, let alone the people to run it, the real estate, and everything else. Tell me a little bit about what software does to replace that.

What we do is 100% cloud. You go in and you sign up on our website. It’s a self-service platform. We do have a team that can help, but most people tend to figure it out because it’s easy. We do it completely software-based. What you’re talking about is what telecom looked like before VoIP was everywhere. What has happened over the past several years is everything has become VoIP. Even between the carriers, there’s no hardware or any hard lines anymore. Even if you have a landline phone in your house, it’s until it reaches the next box out on the street, and it’s VoIP from there. It’s all on the internet. Even on the public internet, it’s not even closed anymore.

The thing is the internet has gotten fast and optimized. There’s no need for any of those things anymore. We can make phone calls around the globe with a round-trip latency of less than 100 milliseconds, which means that you can’t even hear that delay that you used to hear when you talk to someone from a different country. Even if they’re on the other side of the globe, you can’t hear it. Those things have to have changed. The interesting thing about that is that it was the alt change. I feel like when things went from analog to VoIP, that was a big shift, but what’s happening now is way bigger. The whole industry is about to change. I don’t think we’re going to see much phone service for many years anymore.

The whole industry is about to change. We're not going to see much phone service for many years anymore. Click To Tweet

The last mile, which runs from the central office in a sense, back to the hub. The real question here is once that last mile is replaced, or in this case, in the United States anyway, it doesn’t even make a difference. It’s all the web anyway. Let’s talk a little bit about how a small business can utilize a system like this. We all have cell phones. We have free services everywhere. Many people who operate from home can use the web on their own without needing to sign up for anything. What are the advantages of using a Telzio-based system over what is normally considered standard stuff?

As a business, you want certain features that you don’t have on a standard business stuff. You want to transfer calls between your employees and your conference calls. You want every employee to have their own extension. You want them to have their own voicemails and texting. You want to be able to receive texts on your main business number and have them routed to whoever is most efficient in answering whatever question it is.

At the same time, you also want your main number to have a phone menu like, “Thank you for calling. Press one for this. Press two for that.” If you’re a larger business and you have support or a sales department that needs to take a lot of calls, you want to put calls in the queue until someone is available. You want to make it so that instead of putting people in a queue, you want them to get directly to who they spoke to last time they called. They don’t have to re-explain everything over and over. Features like that are things you don’t have on a regular cell phone plan.

What we’ve done is create a mobile app that you put on your cell phone because your employees don’t want to have two cell phones with them. That’s the thing we did in the early 2000s, but that’s annoying. What we do is we have an app that you put on your cell phone. Whenever you get a business call, it comes in on your personal cell, and you’ll see that it’s a business call. If you want to make a call from your business number, you can open our app and type in the number from there. It’s the same thing with texting. Your employers can use their own cell phones and take their business calls with them no matter where they are in the world.

One of the things that became valuable to me was later when I built a company with Tony Robbins and Chet Holmes. We built Business Breakthroughs International. My audience probably remembers this story. I’ve told it a few times. We grew that company to almost $30 million in revenue. We had several hundred people distributed around the world. If it wasn’t for a service like yours, we could have never done that.

This is one of the things that you could do with Telzio, and I’ve used the system. I could speak with it from experience. I used it a few years ago. It’s better now. You can, with a visual map, build routing guides and diagrams as to how you want a call to be handled when it comes in. The nice thing about this is if you’re spending money to generate leads from the phone, which I highly recommend because it’s worked well for me, you can see a dashboard of what’s going on with those calls almost instantly.

The other thing is if you’re trying to track your ad spend and you set everything up properly, you have multiple 800 numbers indicating which source each of these ads is running, and you can even have multiple ads running from the same source by time slice, and Telzio will help you separate all those out. This is not a product advertisement of Telzio, but since I’ve used it and am familiar with these backend systems, I thought I’d share a little bit more about this with our audience.

As a reminder, we are speaking to the amazing Peter Schroeder. He’s the CEO of Telzio. He founded this company ten years ago, and we’re listening to his story. You can go to YourFirstThousandClients.com and look for Peter Schroeder’s show page. Peter, you learned a lot growing a company to the scale that it is now. We have a lot of people reading who are in various stages of their entrepreneurial journey. Let’s start with a little bit of the basics here. If somebody is under six figures and wants to scale the company and grow the company, give us some advice. Where would we start? How would that work?

If I were to give myself some advice ten years ago, it would be to get a founding partner who is a salesperson. That’s the main thing I regret not doing and not focusing on. I am happy that we focused for at least the first five years on building the products, nailing them, and making sure that they’re solid. We could have grown a lot faster if we had someone on our team who was sales-minded. I’m not a sales guy. I understand business, but I’m not interested in sales. That’s not my happy place. Get someone who is an absolute badass at selling. Get that person on your team from the beginning. That’s the main thing I would’ve done differently.

Get a founding partner who is a salesperson. Click To Tweet

Did you start with that person? Are you speaking from, “I wish I could have done that?”

I wish I could have done that. We didn’t get even a single salesperson until 3 to 4 years in.

Let’s go back a step because there are going to be some people here who are tuning in to this and say, “That’s what I’m going to do. I’m going to go out and hire a salesperson.” The one thing that I would advise people to do is maybe perfect the sales process yourself first before you bring on a salesperson so you can teach them how to do what you want them to do. When we were building our company for quite a while, I did all the selling myself because I felt like I was the best at it.

You are always going to be the best salesperson. No one can sell your products better than the founder. That’s a fact. You can’t do that yourself forever. That is why I’m saying, “Have a co-founder who’s a salesperson.” I could take the time and teach everyone. That’s also what I have done. This is my happy place. I would rather spend that time coding and building the product. I had to learn a lot about sales. I’ve learned a lot over the years. I can pitch the product. I can tell you everything great about it, but that’s not all there is to close a deal. I feel like that’s important. We could have at least shaved 4 to 5 years off to get to where we are now if we had done that.

Your First Thousand Client | Peter Schroeder | Telzio
Telzio: You are always going to be the best salesperson. No one can sell your products better than the founder.

 

Let’s say, at this point, you get the salesperson. Talk a little bit about communication. How do you communicate with your initial prospects? A lot of times, particularly introverts who start companies, feel like, “I don’t want to bother them. They’re fine.” Give us some input about what you think in terms of communication with existing clients and prospects.

I’m exactly that person you described right there. That’s why I’m not a good salesperson. I would say for us, the way we did it in the beginning, we took calls when people called, and that’s a big failure. I wouldn’t say do that. We haven’t spent advertising money. We are lucky that we have a good product. People come to us and they want to tell everyone else about it. The product sells itself once you sign up for a trial.

We have 70% conversion once we get people to sign up for a trial, which is wild in our industry. Normally, that should be 5% to 10%. That’s what saved us because if we didn’t have a product that was fun to play with instantly when you signed up and got you hooked in because of the call flow you were talking about earlier that’s fun to play around with. That is what saved us on that count because if we didn’t have that, we would have to call everyone and be aggressive like our competitors are. They call every half hour to their leads until they sign a five-year contract. We didn’t even ask for contracts. We started doing that because people asked us for it.

For us, it’s almost the opposite way because I would say what we have started doing over the past few years is building out our sales team. Most of that is in the Philippines. We have amazing people out there. They speak perfect English, with no accent or anything like that. They work their butts off. They’re good people out there. We have a huge team out there, and we even started getting our supporters out there.

It’s great advice to have people go and do that, particularly if you have the resources to build a sales team in a foreign country. At first, it’s hard to manage. You had some help. I assume you have a competent sales leader in your company who sets this all up and does the training or brings in people to do that. It’s a big deal. What you’re describing is the hard part. Was there ever a time when, while you were scaling the company, you were either running out of money or hit a point where you started to wonder or worry whether you’d be able to get past that point?

Yes and no. We have always been running out of money because we’ve always reinvested everything. We’ve been conservative at the same time. We have always made sure that we have enough money in our bank account to pay for the next couple of months’ payroll and keep the lights on. Lucky for us, we have a business. It’s a recurring subscription-based business. We would have to lose all our customers from one day to the other for it to fail.

We try not to put all our eggs in one basket by having one large customer. That’s an important thing. Don’t bet on one customer because if you lose that one customer, you’ll have to let half of your staff go. We specifically avoided that. There’s no customer that is over 1% of our revenue. That’s a round rule for us. It’s important that we don’t do that.

Don't bet on one customer because if you lose that one customer, you'll have to let half of your staff go. Click To Tweet

It’s about trying to get those salespeople. We have a good sales leader. Try and find that one person who is that good sales leader, and who believes as much in this product as you and can. Go out and find those and build that team, and have the experience of building that team. We were lucky enough to get a person from our biggest competitor to come over to us. She started building out. She’s in the Philippines, and she started building out our team out there. She started poaching her old colleagues. We got employees who were trained in selling to our target audience and trained in the industry. All we had to do was beat out the way that they’re taught to talk to their customers, which we do differently than our competitors.

There is some training involved, which is natural. Those are the things you have to do. What about the support side of that? You have to build a support organization. Are they also in the Philippines? Do you do that in the United States?

We got our first two supporters out in the Philippines. The rest is in the United States. We used to have everyone in our headquarters office. After COVID, we scaled down. We are only three and a half at our headquarters. Everyone else is completely scattered all over the world. That goes for supporters and engineers.

You do run an almost completely virtual company. It is important to note because it doesn’t require a lot of people on site. You also use your own software, which is great because it makes it easy for you to see how it works. When we started the show, I talked about ClientFolio, which is my coaching platform. The reason I built it is because, like you, I needed it from my own coaching business. I needed a software platform that would help me manage what I do, and nothing out there worked for me. I had to come up with something that did. If you use it every day, you get to see the flaws, what’s missing, and what’s needed. That’s a big advantage as well.

What other words of wisdom might you have for someone who hits a point? The name of the show is Your First Thousand Clients, and there’s a lot of experience that we get when we start to accomplish that goal of getting 1,000 people to either be clients or subscribers. What does someone need to know that allows them to get there that isn’t obvious to the beginning entrepreneur?

We did a couple of things. In the beginning, we were focused on startups. That was our target customer. The main reason for that was we built the product from the ground up. We had few features in the beginning. It was a small product. That was great for startups. Our pricing model was $1 a month, and you paid as you go.

As we grew and added more businesses, we realized this was not going to work forever because we had a lot that spent $10 a year. They take up the same amount of support and onboarding sales efforts that a customer of 5,000 employees takes because they would have support or an IT person to figure it out. We had to figure out how we could move from that target audience.

As we built more features on the product, we also started getting more larger customers. All of a sudden, Facebook and Airbnb signed up. From one day to another, they signed on. That showed us that the product is ready to not have a $ 1-a-month plan anymore. We moved it to a minimum of $50, and we kept the same billing model where it’s pay-as-you-go. We don’t do contracts. You don’t do this pay-per-user unlimited usage because that’s a scam. It’s a good way to make a lot of money. I’ll give them that, but it goes against my beliefs in all kinds of ways.

We kept that model. Because we put this $50 a month as a minimum usage or spent, that allowed us to weed out the small ones that are not serious customers that are never going to contribute any revenue to us, and be at a pricing point where we could get the ones that are small, starting up, can afford, and have a real business, and focus our support on that.

The thing is we have few employees. We try not to have a lot of staff on purpose. I don’t like managing people. I try to find some talented ones and pay them a lot of money so that they don’t leave once we’ve trained them and they know the product. They know everything about what’s going on. We can do efficient support fast. That’s the key for me personally. That’s how I can stay happy.

That’s the goal. You’re the founder. It’s important to stay happy and motivated. You said something important that I didn’t want to gloss over. You said you find great people and you pay them a lot of money. For entrepreneurs, it’s a bit counterintuitive because what they want to do is find people and hire them at the lowest possible price they can.

I made that mistake in my twenties when I started Timeslips Corporation, and I made it. It was an honest mistake. We didn’t have any money. We couldn’t pay people a lot of money. After a few years, the competitor came along and started snatching our people out of tech support after they had been fully trained. We realized we needed to revamp how things were done.

It’s an important tip that you shared with us. Let’s go a little bit deeper on that. When you bring somebody on board, do you have automated training systems in place to get them up to speed, or do you feel as if it’s best to have them work with other people, shadow them, and learn that way? What is your preference?

We have a small team. We have some training manuals, some high-level guidance, and things that we need to be trained on. It is another team member that trains them and goes over. We don’t have anything automated besides our cybersecurity awareness things and those high-level ones that everyone has to go through. The actual training on the product, whether that be for sales or support, was done by another team member.

I have a poster hanging right here that says, “You don’t need a 100-person company to develop that idea.” It’s a quote by Larry Page from Google. I have it there because I want to remind myself that it’s expensive to hire cheap people. I’ve made the same mistake. There’s a quote that says, “If you think it’s expensive to hire a pro, wait until you hire an amateur.”

It's really really expensive to hire cheap people. Click To Tweet

For example, for software developers, if you hire $120,000 a year, which could maybe be what you could afford, that was what we could afford in the beginning. You get one that is worth $120,000. That per person is not going to stay on for a long time because it’s not going to live up to your standards and what you want. Instead of doing that, wait another half year until you can afford that $200,000 person and get that one in because that’s going to propel your company forward so much faster. You’re going to have someone who’s going to stay on and make sure to pay them above average so they stay on, as you mentioned. It’s incredibly important.

These are the wisdom nuggets that come from having built, scaled, and run large organizations. I appreciate you sharing them. We’re going to transition at this point to the next part of the interview. What we like to do with this show is ask the same two questions of all our guests. The answers are never the same, which is what I love most about it. I’m going to ask you this next question, and this is a question that tells us maybe a little bit more about you. Here’s the question. Who in all of space and time would you like to have one hour to enjoy a walk in the park, a quick lunch, or an intense conversation with?

Freddie Mercury. I would like to meet him. I’m sad that I never got to even see him perform.

Tell me why. Why would you choose him out of everybody in the universe?

I feel I relate to him. He had the same upbringing. He came from a regular family but had to fight for what he wanted to get to where he was. He had some talent, but he still had a lot to fight for. I relate to him. He is the best songwriter there ever was.

I love the movie about his life. That was wonderful. If you had this moment with him, would you ask him a question?

I couldn’t even say anything. I will be starstruck. I would ask him questions. I would want to know what he goes through when he writes songs. I’ve been a songwriter. I still make a little bit once in a while. That creative process is different from person to person. I would like to know what went through his brain, how he did it, and where he got inspiration because he’s made many good ones, and those are hard to come by.

Here’s the grand finale. This is the change the world question. Are you ready?

Yes.

What is it that you are doing or would like to do that truly has the potential to change the world?

We’ve been building AI stuff for a long time. As we started building our AI product in 2017, we registered AIAttendant.com back then. We’ve been waiting for the technology to be ready, and it is now. We have some fun stuff coming. Not only AI, but there are other things right now that are happening that are completely going to change the whole communications industry, and that’s fun. I’m excited to be part of that and get to play around with these things.

We rarely cover AI on the show. Since you brought it up, I’m going to ask you, how did you start working with AI before there were things like ChatGPT available? What resources were you using?

AI is not a new thing. It’s been around for a long. We have the same things that ChatGPT is built upon. We have been messing around with it. It’s machine learning and these things that are built into your freaking fridge. It’s everywhere. It’s that ChatGPT has a better way of solving certain things and has built a product around it that consumers can use for something productive. That’s the main thing that has changed over the past year. Besides that, for someone who is in the industry and software development, it’s not a big surprise that it came around like this.

No, it’s not a surprise because we had Watson from IBM twenty years ago. That was more potent AI back then than anything ever came close to it. It’s funny because IBM led AI, and yet no one ever associates IBM with AI anymore. Everyone associates Google with AI and quantum computing. Most people don’t realize that IBM has been building quantum computers for a long time before Google.

If you think about it, ChatGPT came around this time a year ago, and not long after came Google’s Bard and a couple of others. It only took Google a month to build what ChatGPT has built for the past twenty years. OpenAI is not a new company, and they’ve been doing this for a while. It’s not that Google remakes it in a month. Google has been on this for a while. They were forced to release a product that they didn’t even feel was ready yet at that point, which wasn’t because it was horrible. They were forced to release that because OpenAI was out there with theirs. They couldn’t sit on it any longer. It’s not that this is new. It got a lot of attention because now there was a consumer product that people could use for something.

It has changed the work environment for everybody. Peter, you promised something special for my audience. Tell me a little bit about it. What is it and how do you get it?

I would like to give everyone a free month of service, besides the trial, but three months once you sign up with us for our service. That will allow you to try it out for your business if you like it, and I’m sure you will. As I said, we have good conversion rates.

The average person and the solopreneur might find it valuable, but if you’re a little bit bigger than that or, you have several employees, particularly if you have a distributed workforce, this is a cool product. This is worth checking out. I would suggest you take Peter up on his offer. It’s fun to play with too. That’s another good thing about it. Even as a study of great products on the web, take a look, login, play around with it, and see how it’s architected because it’s well done.

The way to get to that link for your free login is to go to Telz.io/Mitch. The other way to get it easily is to go to YourFirstThousandClients.com and go to Peter’s show page. Peter, it was a pleasure chatting with you. Thanks so much for your time and for sharing everything you have. You have such incredible luck going forward. I hope to tell you it goes to a million subscribers sometime soon.

Thank you so much for having me. This was a lot of fun.

Thank you.

 

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