Late this afternoon, I spoke with Michael McDerment, CEO of FreshBooks. I’ve wanted to speak with Mike for a while because his kind of company is on my radar as one that’s solving business problems in a novel and innovative way that professional accountants can digest. I have others I want to speak with as well.
Mike’s company is in an emerging class of service designed to take away the business pain of billing and collection for the very small business (VSB.) It’s not just a cool service but essential in the small business survival stakes. How many small businesses get screwed over cash flow yet don’t have the tools with which to help keep receivables in check? FreshBooks is endeavouring to fill that gap.
Mike is a web marketing and design consultant by trade and was faced with similar problems. How to bill in a professional manner such that the processes don’t get in the way of doing business? FreshBooks thinks it has the solution. I can’t comment in detail but I can say that from a design and usability perspective, it’s a cracker. Check out what the Usability Institute says about a product that is rapidly evolving yet retains its design ethos of pain removal.
FreshBooks effectively grew out of a need for which there was no simple solution. 27 months on from launch, the company counts 70,000 customers of which around 9% are in the UK. That’s a surprise. It’s largest customers are QuickBooks refugees. That’s no surprise. (James/Stephen/Cote – remember that QB billing issue James talked about?)
At the current level, that’s about 6,300 small UK businesses who will be turning up to their professional accountants’ office with a user name and password. Not a pile of papers. Not a disk or CD. Maybe not even turning up at all. That’s what Tom Raftery might call ‘getting slapped over the head with a cluestick.’
More stats: FreshBooks has added 10,000 customers in the last 6 weeks. Here’s the killer:
We’ve not made any attempt to connect with the professional accounting community. It’s all been word of mouth among our target audience of service professionals, freelance designers and the like.
Again, I wasn’t surprised. Mike didn’t seem concerned with reaching professionals but I am wondering how long it will be before CPAs in the US/Canada and CAs in the UK meet clients who, effectively, are light years ahead of what they themselves are able to do. My guess is 3-6 months. That’s when the profession on both sides of the pond starts the ramp towards tax filing season.
By that stage, Mike expects to have multiple job and team time tracking in place with expense tracking either out the door or close to. Great for people like Vinnie perhaps 
What will be the response from professionals? Will they see the implicit value of such solutions?
OK – so we’re only talking about outbound billing processes but that’s a good start towards a set of books. Mike’s very clear he’s not going after the accounting market. Yeah – maybe right now but I think the temptation to take this forward will prove too great in the future. Payables is already on the slate. Despite what the Sage’s of this world might say, AP/AR represents the bulk of what small service businesses need. Professional accountants can share in using the service so it should be a win-win. Mike’s customers certainly think so and that to me is the acid test.
As the conversation progressed, I found myself increasingly in agreement with Mike’s thinking. The ‘under the radar’ VSB opportunity is huge. Professionals find it hard to get out of their comfort zone. He knows that traditional advertising is a waste of marketing money:
Mentions in three national Canadian newspapers didn’t register a blip on the number of registrations.
So much for perceived PR wisdom about ink on pages.
Mike thinks the user ramp will be relatively slow because VSBs are hard to reach. I’m not so sure. His growth is in line with what I see elsewhere and it way outstrips that of the big boys. I believe you only need a handful of professionals to effectively seed a substantial market. Since we’re talking about a market that’s largely untapped and unmeasured, it is difficult to be sure. Early indications are promising and my sense is that Generation M is only a couple of years away from seeing this type of solution as a natural. This is a generation that thrives on gossip and anything like this has to be a talking point.
I wish Mike well. Not an accountant in sight yet he’s serving a defined business need armies of accountants have failed to grasp. Might that have something to do with his perspective? You go figure it.
Thanks to Mike for making the time at virtually no notice. Thanks to Stowe Boyd for facilitating the conversation (he’s shamelessly pimping FreshBooks per his words) and last but not least, thanks to Gary Turner for introducing me to Stowe – all through the power of blogs. Yay!
Standard disclosure stuff: I have no commercial connection to FreshBooks.
PS – One of Mike’s geeks – Levi Cooperman told me my site doesn’t render correctly in 1024×768 in IE6. It’s been a problem in the past but I’d not heard about it recently. I’m nowhere near as geeky as these guys but a 20 minute email exchange sorted it out. See what happens when accountants are nice to geeky people? Thanks folks.
Technorati Tags: FreshBooks
