Most companies—especially large companies with shareholders and major investors—approach everything they do through the lens of traditional capital growth. Every decision boils down to "Will this increase the monetary assets of the organization?" That brass-tacks monetary thinking is so ubiquitous that it seems like the only way to survive in today's economy.
But when business success is only measured by numbers on a spreadsheet, or the price of the stock, employees become assets to be optimized. In this capital-centric approach, everything is reduced to its monetary value, completely invalidating other, larger, longer-term goals in the process.
Embracing a broader understanding of capital
We reject that limited definition of capital and the even more limited business models that it produces. We see capital as the capability of a group or individual to meet their own economic needs. In this light, we've committed to building skills internally, rather than outsourcing core functions.
For example, rather than hosting our apps on the public cloud, we learned how to build and maintain our own data centers. Rather than hiring outside marketing firms to handle our branding and advertising, we do everything in-house. In both of these cases, we've prioritized the building of long-term knowledge capital over short term costs or speed-to-market expediency.
When your notion of capital becomes expansive rather than restrictive, you start to see opportunity everywhere. While roadmaps and milestones help along the way, truly building a successful business is about stretching the limits of your imaginative powers.
We live in the age of metrics and big data, where anything that can be measured and optimized will be. But just because something can be measured doesn't mean it should be. Software can provide innumerable insights into how to improve your operations, but it can't capture everything. You can't put a score on an individual's passion to succeed.
Similarly, the value of a company's culture cannot be quantified. You can look at things like headcount, or revenue, or customer growth to judge the success of company culture, but the intangible will still remain.
Intangible value rather than financial valuation
How can you calculate the worth of a team that's worked together for decades? How can you measure the value of trust between colleagues? How can you quantify loyalty or dedication or commitment to a shared vision? The answer: you can't.
However, these immeasurable elements are just as imperative to our success as any number on a spreadsheet. We're far more interested in building a vibrant, thriving company culture than in calculating market caps and valuations. Not everything can be translated into a number, nor should it be.
We've been bootstrapped and profitable from day one, a result of smart spending, hard work, and a bit of luck. We've had buyout offers, but politely declined. We didn't get into this business in the hopes that we would go public. We build software because it's what we love to do.
The last decade has seen hundreds of new tech companies rise (and fall) on the valuations of venture capitalists. But taking on investors would've meant letting go of the freedom to take big risks. So we've never taken a dime of funding, a distinction that we wear as a badge of honor. We only make money from what our customers pay us, and we wouldn't have it any other way.
By staying private we've also stayed nimble. We're guided by what will best serve our customers, not the stock price. This allows us to make investments in projects that might not pay out until the next quarter or the next year. Some of our best products are the culmination of years of work that wouldn't have been possible with a "growth at all costs" mentality.
We aren't in the business of marketing, we're in the business of developing software. So what does this mean in practice? That we spend twice as much on R&D as we do on sales and marketing. That Zoho runs entirely on Zoho, and that we are our own largest beta testers. This is one of the reasons we can release new products at such a fast clip; when we see the need in our own operations, we create something to meet it.
That commitment is how we've managed to build a suite from the ground up, rather than growing our portfolio through acquisition. Some SaaS providers plug the holes in their offerings by buying stand-alone products and grafting them into their product ecosystem. When we find a gap, we start coding.
R&D isn't always a linear process. Sometimes products have to be completely rethought, or scrapped. Some products take months to build, some years (or decades). But with patience and persistence, we move ahead. And by developing it ourselves, we save money, we grow our employees' skill sets, and we increase the value of the product delivered to the customer. It's a win for everyone.
Our philosophy on customer privacy has never changed: your business is yours, helping you run it better is ours. To that end, we decided we wouldn't do anything with your data we wouldn't want done with our own.
So we have never pushed third-party ads in our products, not even in the free editions. And since we aren't interested in mining your clicks for retargeting purposes, or (worse) selling it to others, we removed all trackers from our websites in 2020.
Leading the industry rather than just following regulations
"Don't be evil" is a good starting point, but "be decent" is even better when it comes to privacy. That's why we extended the protections of GDPR to all of our customers, no matter where they're located; we always aim to give you more rather than less control over your data, its access, and storage.
Valuing customer privacy shouldn't be the result of government legislation; at Zoho, it's been baked in from the beginning.
When you are planning for a long-haul rather than a quick buyout, you don't need predatory business practices—like nickle-and-dime pricing or forced multi-year lock-ins—to prop up flagging revenue reports.
Neither strategy builds good will or trust with customers, and trust and good will are essential to successful long-term business relationships.
Priced for shared growth
Instead, we seek to find the balance point of mutual benefit. We neither want to charge so much that it hurts our users, nor so little that we can't continue to build great products. That spirit of partnership is all the more apparent when you start comparing our prices to the prices of our competitors.
In fact, we have been told—by journalists, analysts, partners and customers—that we could charge a lot more. But just because someone is willing to pay a higher price doesn't mean we should charge it. After all, if our users thrive, so will we. If they grow, we will too.
But most importantly, our growth should never come at the expense of the users who we serve.
The fruits of a customer-first business model
Instead of chasing the bottomless pit of "investor returns," we are content to charge a fair price for valuable products. And this, too, fosters trust and loyalty with our customers. When decency is more important than profits, it shows; in your company culture, in your customer relations, and in how and why you make big decisions.