Amid much chest beating, Kashflow’s Duane Jackson announces the company has hit 2,500 paying customers. To be strictly correct, the company claims 2,400 end users and 120 practices. Good for them. But then I looked back.
Kashflow was formed in early 2006 although it launched the product in mid-2005. Trawling back over past posts, I notice that Canadian Freshbooks had something aeround 65,000 subsribers in 2005 and now says 600,000. Canada’s population is 33 million but it has the benefit of drawing upon the 300 million of its US neighbour. That’s a huge advantage.
When I last spoke with Mike McDerment, Freshbooks CEO, he reckoned around 15% of Freshbooks total subscribers were coming from non-US english speaking countries and that around 9% were coming from the UK. The latest stats say about 8% come from the UK. that means some 48,000 UK users. More impressive, Freshbooks has expanded its non-US reach to 25%.
So where is Kashflow going wrong? At a macro level the UK is almost always 12-24 months behind the US in the technology adoption curve. However, when it does catch the ‘bug’ the UK can accelerate just as quickly as any other market.
However, the BIG flaw is in the lack of vertical market attention. Book-keeping is…err…book-keeping. The system has been around some 600+ years. There is no point in re-inventing the accounting wheel. It’s a road to nowhere because Sage has already done that and dominates the UK SMB market. Businesses change accounting software once every 7-10 years so unless there is a compelling reason to do so, no-one is going to buy a generic on-demand system. In order to be successful in new services, developers have to find niches that are sufficiently large to sustain a business model going forward.
Examples: Freshbooks and FreeAgent Central are both targeting the contractor market. Freshbooks is public about its numbers, I am privy to FreeAgent and can say it is doing ‘ok’ despite having zero marketing and has pretty much bootstrapped since launch. Xero is broader in its approach but still targets verticals that include consulting and real estate. The same goes for accountsIQ in Ireland.
Does that mean Kashflow is a dead man walking? Absolutely not. But it’s not going to get rich with the current levels of growth, even in a market that is becoming increasingly aware of the value that on-demand can offer. It needs to be far more focused and ramp up marketing. One person can do a great deal but it is not enough. What for instance is it doing about onboarding clients of those 120 practitioners? That’s key in my view.
And one more thing – constantly bashing the competition isn’t going to win business. It’s a damaging strategy that does nothing for the industry. I know Larry Ellison (CEO of Oracle) and Marc Benioff (CEO of salesforce.com) enjoy taking swipes at their competitors but they’re big boys playing big boys’ games. Minnows don’t have the same luxury. Far better to concentrate on building out your own market based on strengths and steer away from competition that can eat you up without breaking a step.