Blog | July 25, 2012

Where Are They Now? Paladin Data Corp (Oct. 2009)

By The Business Solutions Network

If you were reading Business Solutions back in 2009, today's Where Are They Now featured VAR should stand out in your memory. Never before -- and probably never again -- will a VAR and his airplane grace the cover of the magazine.

Dan Nesmith, president and owner of Paladin Data Corp, spoke in the article about how he sells his POS software solutions on a national scale, without a reseller channel, by using his own fleet of aircraft. His seven employees all have pilot's licenses, allowing them to buzz about the U.S. from customer to customer. Certainly a unique story. One I was eager to have updated by Nesmith...

How has your business fared since we last spoke with you?
Nesmith: Our gross revenues increase 17% to 23% per year. Every year. Since our business model is based on a recurring revenue model (our service and products are only available by subscription), every year we receive the revenue from the prior year plus revenue from the new clients that have joined our family.

What has contributed most to your success since we last spoke?
Nesmith: Customer Service, Customer Service, and Customer Service is the key to our success. We provide the coolest solutions our markets have ever seen, but in spite of the millions of dollars invested in creating our product, clients join our family because we offer the best customer service they have ever experienced.

Are there any new technologies/solutions you're offering which are impacting your business?
Nesmith: Without climbing too far up my soapbox… I’ll say that new regulations on business are out of control. Everything from health care mandates (we’re strong in pharmacy), privacy rules, and defense of your business against zealous state sales tax agencies, to managing newly restricted products (that the markets still expect to buy), and the list goes on and on.

Paladin Data Corp is a solutions company. We succeed in our markets because of our ability to rapidly craft and deploy solutions before retailers are harmed by enforcement actions. AND at the same time we provide retailers solutions that improve their customers’ shopping experience.

Speak to any failings you've experienced since we last spoke.
Nesmith: Our market is dominated by honest, decent, hard working business owners, but we found a significant exception to this rule. We have always supplied equipment and a variety of peripherals to new customers. We’ve always allowed customers to pay for these by credit card. We discovered rather bluntly the effects of credit card charge backs to business. The equipment was gone, and the purchase funds were gone. We eventually won the chargeback challenge but lost when the decision was appealed to VISA. Since credit cards are “consumer credit devices” and we were a business, we were not allowed to submit data or even testify on our behalf. We lost all the equipment and the purchase price.

Our solution to this problem was to no longer accept credit cards as payment for new systems. These are business-to-business transactions and we can no longer accept “consumer credit devices” for payment. We worried if this decision would impact new sales and if the risk of charge backs was less than loss of new clients. After two years of not accepting credit cards for new system purchases, I can tell you that it made ABSOLUTELY no difference in our sales process or closure rate. “Simply fax a copy of the check you wish used for this purchase along with your contract and we’ll get started on your project”. Customers have NO issue with this.[pullquote]Yes, we gave away most of the upfront licensing revenue, but every customer gained has added to our recurring revenue base."[/pullquote]

Are there any other tips/tactics that you think are worth mentioning that are contributing to your success?
Nesmith: Our markets have a couple of big players in them, and everyone is competing for the same business. We’ve always been a better price point (and in our opinion offer a vastly superior product) and this spring we found that other companies were reducing their upfront prices to “match” ours. Having achieved our goals of building a new technology product, funding a colossal shift in business to a recurring revenue model, launching the new product and gaining a noteworthy market share, we decided to offer our product and services to our markets at a significant discount.

Anyone could now install one of the Paladin POS solutions in their business for $999.00. Prices have historically been $8,000 to $35,000 to achieve this. If you are opening an additional store location, you may have the entire Paladin POS suite of features and services for $1.00. Needless to say the response has been huge. Yes, we gave away most of the upfront licensing revenue, but every customer gained has added to our recurring revenue base. And once a business moves to us, they are generally with us for life. Our subscription cancelation rate is less than 3% a year.

How has payment processing contributed to your company's bottom line?
Nesmith: Payment processing continues to be a moving target for most retail markets. Everyone that thought PA-DSS goals were achieved within the last two years now realized that new technology and new equipment will be required to meet the end-to-end encryption standards coming on line. As soon as that is fully deployed everyone will need to adopt EMV standards. The fun never stops.