California and Texas are worlds apart on governing philosophies. The former ardently believes in public investment, redistribution, and a government-centric economy whereas the latter has, for the past decade or so, emphasized a free-market approach characterized by low taxes, limited government, and personal responsibility.
For companies like Software Advice, Texas’ limited government approach is more appealing. So much so, in fact, that the company moved its base of operations to the Lone Star State. This success story was recently included in the Foundation’s 2013 Annual Report.
Software Advice, a company specializing in advising software buyers and generating demand for software vendors, was founded in 2005 in San Francisco by CEO Don Fornes. A few years after getting his Bay Area business off the ground, Fornes had a hard time rationalizing staying in California with its high operational costs, burdensome tax system, and tight labor pool. So in 2009, Fornes decided to move his company’s headquarters to Austin, Texas.
Taxes played a major role in Fornes’ decision. With California’s individual income tax rate at up to 12.3 percent-the highest in the country-Fornes recalls the frustration of not recouping his investment because of having to pay an excessive amount in federal and state taxes.
Since relocating to Texas, Software Advice has experienced a substantial amount of cost savings. In contrast to California, office rental rates are much lower in Texas, which significantly reduces operational costs and allows for more investment in the company. He states, “The money that we’ve been able to keep in the company has allowed us to invest in hiring more people.” With a job growth rate of 1,000 percent, the Austin team has increased from 5 to 55 employees, and is expected to rise. Austin attracts thousands of young adults every year which makes the Capital a prime spot for recruiting and retaining talented individuals.
Two contributing factors of Software Advice’s success are focus and execution. Fornes bootstrapped the business in 2005 with money from his personal savings and has grown Software Advice to $15 million in revenue, with healthy margins and 75 employees, taking no outside capital. When the business began, they focused on a specific market opportunity and have since expanded strategically into other markets.
Fornes noted, “When you bootstrap a business and are tight on a budget, you are more disciplined about where you place your investments. You lead your business with extreme focus and every dollar spent is carefully considered. We’re not as much focused on brilliant innovations as we are on choosing attractive opportunities and thoughtful implementation. This precision has allowed us to execute very well.”
Since 2009, the company revenue has risen by a whopping 460 percent, which is evidence that Software Advice is thriving.
There are thousands of stories like Don Fornes’ that reflect success made possible by the Lone Star State’s pro-business environment.