As a 100 percent virtual company, Fire Engine RED, a Philadelphia-based education-technology company that customizes Web-based software products, conducts student search marketing campaigns and offers a CRM solution for university admissions offices, has employees spread throughout the Unites States and Canada. 

The team stays connected through a complicated web of communication aided by conference calls, Skype, AIM, and e-mail—working literally around the clock as employees in different time zones coordinate with each other to finish projects. Team members spend an average of three to four hours virtually meeting with team members, says Shelly Spiegel, president and co-founder.

"Often people are Skyping with one group of team members while simultaneously IMing with other team members," Spiegel laments.

It may seem a little hectic, but the constant communication and connection works for the Fire Engine RED staff, and the proof is in the turnover rate. In the midst of her tenth year in business, Spiegel notes that only one employee has voluntarily parted ways with her company.

"[She] actually accepted a job at a college in Greece, and she's now a client of ours," Spiegel says. "So, in fact, she hasn't left us."

With 40 employees and 315 clients, Spiegel beams that her company is growing fast. Perhaps more surprising than the company's miniscule turnover rate, is the fact that no one seems to mind that there is no physical headquarters.

So the question remains: how does an entirely virtual company foster so much loyalty and create a cohesive culture? Inc. reporter Gabrielle Blue spoke with Spiegel to about how to run a virtual company successfully.

When you launched Fire Engine RED in December 2001, what made you and co-founder Rene Smith decide to be a completely virtual company?
We never planned to have a virtual company. We initially began working from home because we couldn't afford office space and we didn't live near one another. Then in 2005, when we hired our first team member, the "perfect" candidate lived in Colorado not in the Philadelphia area. We decided not to let her location stop us from hiring her because our services are not location dependent. A year later, when we made our second hire, the "perfect" candidate lived in New York. Again, we hired her despite her location. After these two initial hires, we realized that we were on to something, by allowing people to work virtually, we could attract and hire top talent no matter where they lived.

Is there ever a time when you and your employees all physically meet each other at one time?
Typically every April we have an annual team meeting and everyone comes to Philadelphia for four to five days. There's a mix of both business and socializing at this event. It helps us make sure that everyone's on the same page. Because we're in meetings most of the day, we all have dinner together every night. We go different places in Philadelphia, but our team members go out together after dinner during their free time. Also I have conference calls with the team probably twice a month and everyone calls in.

What have you found to be the benefits of a virtual company?
The fact that we can hire the most talented people no matter where they're located, we believe, has contributed dramatically to our success. We're not asking people to take a chance and move to the city—it's a big decision to move across the country. In addition to that, we have hired, almost exclusively, through referrals and, as a result of that, our team members have been wonderful at recommending people that very much fit within our culture.

Any drawbacks?
That's a really interesting question because this structure has worked unbelievably well for us. I would say that one of the only drawbacks is that we need to be connected all of the time. So, for example, we might spend six hours a day on the telephone in conference calls with one another. We're constantly using IM and we use Skype all the time.

Why do you think you've been able to successfully gain and retain employees?
Well, for one, when it comes to hiring, Rene and myself have very good instincts and we really know how to select people from the onset that fit within our culture. Fit is just foremost especially because we're working virtually. We need people who are self-motivated. We need people that are very comfortable working as part of a team and people who don't need to be micromanaged.

What I think team members would say is that they feel very valued. In addition to feeling very valued, they get a lot of recognition. We're constantly getting positive feedback from our clients and I feel that if they're directing it towards one person, there's actually a lot of people behind that person that's making that person look so good. So everyone knows that whenever they get these e-mails—I send out a "Look Who Loves Us Now" e-mail to our entire team—that it's sort of a takeoff of Stephen Colbert 's Look Who's Honoring Me Now.

Retaining our people is probably our highest priority. It's probably even higher than client retention, which is also very important to us. We know businesses spend a lot of time and money with turnover. We are growing so fast that we cannot afford to spend the time training and retraining. We have to get it right from the beginning. Our company was not funded by any investors, so we really built this from scratch. We just have to nail it every time—we want to keep our people.

What else does your company do that could possibly contribute to your company's ability to keep employees happy?
We pay 100 percent of the person's health insurance and it's the best health insurance you can get. That has been a core value of ours. [Even] when we were really struggling as a company, one thing we never compromised on was health insurance. In addition, they all get unlimited sick days. There's a tremendous amount of trust, [and] we've never had anyone take advantage of this, but we feel that people shouldn't be using their vacation days when their sick.

How do you keep your employees motivated to work throughout the year?
We need a happy support team. A happy support team makes for happy clients that we can retain. In December our company will be 10 years old. [Since] people have worked so hard we wanted to make sure they had the energy for what we think is going to be a very big year. So we told everyone that we have a 10-10-10 incentive plan. In our tenth year, if we hit $10 million, which we think is very doable, every employee will get $10,000. It doesn't matter what position they have in the company, they are all appreciated, and we know very much that we can't reach $10 million dollars without everyone contributing. When we established the $10 million goal, we made sure that we chose one that was very doable or else Rene and I would become the most unpopular people. Last year, we sent out broadcast e-mails for colleges and we told everyone that if we get 100 million messages everyone would get an iPad. So they all got an iPad. That's something that we did that probably other companies wouldn't do.

What's one of the biggest lessons you've learned since starting Fire Engine RED?
It's all about the team. Its all about hiring the best talent, that's more important than anything. It's more important than money. Just having the right people, the right team and preserving that culture and really making certain that you continue to take every hire really seriously.