Kim Pearson, New Boundary Technologies, on the beauty of profits
Kim Pearson, president of New Boundary Technologies Inc. in Minneapolis, stands out from his tech company peers.
He doesn’t focus on sales growth. Rather, he focuses on profitability per business line and per employee. Nor does he care about the next hot tech thing. Instead, he wants to build a sustainable company that outlives any single technology.
Pearson could be called a prophet on profits, or at least a singular voice choosing to grow his company more slowly, using mostly internally generated funds, than those who seek outside investors. Upsize asked him to describe his business philosophy for his $3-million firm, formerly called Lanovation.
“We’ve been around since 1985. I started the company when I saw the PC coming out. It was an opportunity to do engineering work without needing millions to start. I’m a mechanical engineer by training.
I left GE in California and moved back here. I bought a PC and learned how to program it. I was young and naïve then. I was more focused on the technology side.
We have two product lines. The first one is Prism, technology that remotely installs software on Windows computers. We’ve developed software where an IT person can manage upgrades anywhere.
The second line is Radiem. It’s newer. I can monitor and control equipment over the wireless Internet.
Today the bulk of sales comes from Prism. Radiem is in its infancy. The growth on that is all ahead. It’s very likely that it will become the majority of revenue some day.
Prism started in ’92. I’m surprised we’re still in that business today. I thought it would be three or four years, and that either Microsoft would fix the problem of network upgrades or a dominant player would emerge. Now it’s a $5 billion market without a dominant player.
We don’t define our company on an individual product line basis. Rather, we focus on core values. That goes back to ’89. We got together as a company to define who we are. Amazingly, what we captured has gone through very little wordsmithing since.
Our mission: We take complex emerging technologies and make them simple so our customers can get the most out of breakthroughs. We take what’s complex and with high-quality software make it simple.
When the PC came out, we made PCs simple through individual programming. For example, there’s a researcher at the U of Minnesota that studies infant brain activity, and we did programming for them.
Then when networks came out we made it easier for IT people to manage networks. That’s when we started developing products. We started that for IBM in 1992 and then made our own.
The third wave is now, the wireless Internet. The technology is just coming together. Implementing that change to wireless changes the way you run your business, so a lot of companies will be laggards.
Our turnover is very low, typically under 5 percent a year. We have 30 employees — with contractors we’re approaching 50. We double our head count every four years. Sales increase by two-and-a-half- to four-fold in every four-year period.
That is really the metric we focus on: What are our profits, and what are the profits per employee? We have distributed one-third of the profits to non-commissioned employees each year recently. That’s not mandated but we’ve done it. You can see what would happen if I doubled the profits but tripled the number of employees.
When we set budgets, we have sales projections and we put it in writing where it makes sense to add people. If we over-shoot, we can add sooner; if we miss, we delay adding. Last year we grew by 18 percent. Over the years we’ve maintained 20 to 30 percent growth year after year.
In our guiding principles, there’s nothing about technologies — there are timeless values. An important sentence is our company will not grow so fast that we sacrifice quality.
There are opportunities that we don’t go into because nobody’s interested in that. There are all kinds of things we could do, but we ask, would we learn anything? Would it further anything else in the company? We’re trying to build a sustainable company that outlives any individual technology or market. For each technology we want the most bang for the buck. We look for as many markets as we can for each technology.
For example, with Prism we have direct sales. Many PC manufacturers use our software to build their PCs. Then there’s OEM, where other companies relabel our software and sell it. So our revenue growth is not dependent on increased head count. That area grew 88 percent last year, at a time when IT spending is down.
If you think about our culture, every four years you have twice as many people. So you’re dealing with a lot of change. That’s where I think you can’t stand still. I don’t know what the next technology breakthrough will be to create our fourth wave.
We did have some fleeting thoughts during the dot-com era that we should get in on that. But then the spigot closed.
Suddenly we’re back in fashion and profits are a good thing. In venture-backed businesses, during the ’90s, if you were showing a profit you were doing something wrong.”
— Interview by Beth Ewen
