Certifiably Different

Do you even business, bro?

When we started Test Double in 2011, we had no idea what we were doing. In many ways we started the business because we believed our prior employers were doing it wrong. In some cases, they certainly were, but looking back we had a fair share of arrogance to think that we knew better than most when neither Justin nor I had ever run a business before.

Our arrogance turned out to be a benefit though. It meant that we didn’t feel a need to be like other businesses. We had the freedom to figure out the best solutions for us, regardless of the norms. This led us to establishing Test Double as a place where we talked openly about the finances of the company every month. A place where we avoided excessive office space, kegerators, and ping pong tables in exchange for higher profits that we shared with our employees. A place where we encouraged anyone who was closest to the problem to figure out the right solution. Where we stockpiled cash in order to have sufficient runway and avoid any short-term decisions that weren’t in the best interests of the business.

This ultimately served us well, but any time I talked to someone else who was running a business, I felt like an idiot or an outsider. We were noticeably different and as a first-time CEO I often felt impostor syndrome acutely. Surely, the founder and CEO on his 3rd business who just got a Series E funding round must know better than I do? Well, maybe they did, but maybe they didn’t. Fast forward 8 years and that CEO has just sold off all of the assets of his business, yet Test Double is still growing and delighting clients. Maybe operating differently wasn’t an issue, but an advantage.

Like-minded CEOs

Fast forward to April of 2020 and Justin and I had just completed a decision that was arguably the most abnormal in the company’s history. We converted the business to a 100% owned ESOP (employee stock ownership plan) as we felt that we should be sharing the equity and growth of the business with all employees who were creating that value.

Shortly after that conversion, I became aware of a group called Tugboat Institute. Tugboat is a membership network of CEOs across industries who choose to lead private, purpose-driven companies without the intention of an exit.

There were a lot of ESOP companies within Tugboat, so I was intrigued as we were one of the few ESOPs I had ever heard of. After a long call with their membership team, I was convinced we should be a part of this group and we joined. Within Tugboat, I had finally found a group of business leaders who thought similarly to the way I did.

Business done differently

It’s hard to describe the feeling of fit that hit me when I went to my first Tugboat summit. Everyone I talked to there led organizations differently. No one was focused on exits, shrinking the balance sheets, or striving to provide the appearance of value so that they could get their next funding round. Within this group, business leaders were focused on a purpose that benefits others. They understood if they do this well, profits will follow, but focusing solely on growing profits (especially for the benefit of a few people) can often lead to the opposite effect.

Further, if their purpose is significant (like improving how the world builds software), the business must focus on growing sustainably for decades. Tugboat names companies with this mindset Evergreen and believes that for them to be truly exceptional, they must demonstrate alignment with the 7 Ps or values:

• Purposeful - Test Double is in business because we want to improve how the world builds software. Not because we’re chasing an exit or some level of profitability.
• Profitable - We have maintained a healthy profit margin of 20-25% for the lifetime of the company, however. This allows us to navigate the downturns without having to do something that isn’t in the best interests of our business in the long term, like layoffs.
• People First - Sadly, this still seems to be the exception in most software companies, as we’ve seen in the extensive layoffs over the last 12 months. It’s not just good fortune that has helped us avoid layoffs. It’s the fact that when COVID hits or a recession rears its head, we lock down expenses and focus on retaining every person on our staff. Unlike most software companies, we recognize that people are our greatest asset.
• Paced Growth - Test Double has had significant growth over the years but we’ve been focused on making sure that we do it at a pace that is sustainable. Further, we grow not just for growth’s sake, but to further the impact on our purpose.
• Private - It’s not happenstance that Tugboat has a value of being privately held. When companies are publicly traded or funded by private equity or venture capital firms, they struggle to live up to the other values that are outlined here, especially when times are tough.
• Pragmatic Innovation - Tugboat companies have a tendency to adapt to changing environments at a greater pace than their competitors. This is likely the area where Test Double most needs to improve; our industry is constantly evolving but it’s hard to balance innovation without chasing the hype - blockchain anyone?
• Perseverance - I mentioned that our profits and focus on people allow us to avoid things like layoffs and continue to grow during the difficult times. We’ve also learned from others in Tugboat that a focus on resiliency and governance allows businesses to persevere for decades and centuries in some cases.

Tugboat has done a great job of distilling the common values shared by businesses that tend to outperform their peers over years and years of growth. The 7Ps are obviously not the only reason for a company’s success, but Tugboat companies tend to do very well, even in the challenging times, which lends some credence to aligning your business towards the 7Ps.

Certified Evergreen®

At Test Double, we had carved our own path with no knowledge of the 7Ps, but wound up in great alignment with these values and with other companies within Tugboat. Today, we’re really excited to announce that Test Double operates in a manner so consistent with the 7Ps that we’ve now been Certified Evergreen®!

From Tugboat’s website:

Companies that are awarded Certified Evergreen status have undergone an extensive, rigorous assessment with the intention of continual improvement and enduring excellence around values, practices, and people. Once certified, these Evergreen companies join a select peer group of similarly purpose-driven organizations that attract top talent, valuable partners, and loyal customers. The Certified Evergreen mark calls out the commitment to excellence and longevity that these businesses share.

The certification process validated a lot of our assumptions and also provided us with some tangible feedback from industry leaders on ways that we can continue to improve and evolve. This certification isn’t an end goal, merely some validation on our way to building a business that has an outsized impact on the world, creating value for our shareholders along the way.

Maybe being different isn’t such a bad thing.