For all their strengths, most entrepreneurs and small business owners are not CPAs.
They may be experts at providing a top-notch product or service, but when it comes to keeping books or sending invoices, many business owners are beside themselves. They might not have the resources to hire an accounting department, and either can’t afford or don’t feel sophisticated enough to use most accounting software — most of which is often designed for larger enterprises, anyway.
It’s a situation with which Kirk Simpson, CEO and founder of small-business software developer Wave, has had first-hand experience. He started two small businesses of his own, and during these endeavors, he claims to have grown to “despise everything to do with accounting, invoicing and all associated with it.”
To solve some of the problems he experienced, Simpson, along with Wave co-founder James Lochrie — who became familiar with the small business software landscape during his time at a tax preparation software company — worked to build an accounting and invoicing solution specifically designed for microbusinesses. The solution would serve small organizations with fewer than nine employees and less than $2 million in revenue. Wave seeks to attract fledgling entrepreneurs, in part, by providing free accounting and invoicing software along with paid card processing and payroll solutions.
“Most of these businesses are sitting on the sidelines when it comes to this kind of software, using spreadsheets and Word documents and shoeboxes full of paper receipts,” Simpson told PYMNTS in a recent interview. “I saw an opportunity to come at it from our customers’ perspectives in terms of how to build a brand, how to talk to them in a way they can understand and how to build a tool that is, quite frankly, simple enough that people like me would want to use it.”
Designed for microbusinesses
When Simpson and Lochrie sat down to design their software offering, Simpson said, the goal was for their new company to stand out from many software providers already offering back-end solutions. To do this, the pair decided to specifically target only the tiniest operations.
With 95 percent of American companies falling under the microbusiness umbrella, Simpson was not concerned about finding a customer base for Wave. With his experience at the helm of the small startup, he knew these businesses often didn’t have the resources to expend on a luxury such as accounting software.
“Our belief was that most of these businesses were on the sidelines because, typically, accounting software was too costly and complicated for them,” Simpson explained.
Simpson and Lochrie launched Wave in 2010 to turn that belief into action. Seven years later, the Toronto-based developers offer the company’s accounting and invoicing solutions to small businesses for free. They also provide more deeply embedded financial services tools with fees attached.
The idea differs from the freemium business model, Simpson said, because rather than limiting functionalities or run-time before driving customers to spend to keep using the full-service offering, Wave boasts full-service accounting and invoicing solutions that can be used for free, without upgrades hiding behind a paywall. Wave generates revenue by selling additional software systems to these businesses, including payroll or credit and debit card processing.
“Through that process, we can develop a relationship with these new businesses,” Simpson said. “We can prove to them that we have unique insights into their businesses so we can offer financial services right when they need them, and we, as a business, can make really smart decisions about who we’re offering services to and at what price point.”
Keeping it simple
Simpson and his team not only designed the pricing and purchasing model based on the specific needs of the smallest businesses, but the features and functionalities offered by the software as well. Because most startup founders are neither accountants nor math whizzes — and do not have the time to become either — even those that can afford software to manage tasks like accounting and payroll avoid adopting new systems.
These small businesses also tend to act quickly, which prescribed that Wave needed a simple and quick on-boarding process, Simpson said. Most of the target companies lack a procurement or IT department, which can slow down adoption time. Entrepreneurs needing to make quick decisions typically do not have the flexibility to wait that out.
“They’re very task-oriented, so they might have found their first customer, and they need to send an invoice,” he said. “So, they go to Google, they’re looking for software and they need to get that done right then and there so they can move on to their next task.”
Better, faster, stronger
Simpson said Wave is currently working to add new features focused on helping small business clients get paid faster and increase revenue. To that end, the company recently rolled out a recurring payments software allowing small businesses to enroll their own customers in automatic bill pay. Then, when an invoice is sent, the bill will automatically be paid via a pre-registered credit or debit card, reducing friction for the customer.
As it works on more new features, Simpson said, the company’s goal is to combine two important business services to help small business owners do what they do best, rather than burning time on accounting or other tasks.
“Essentially, we are really attempting to blend software and financial services together for the smallest end of the market,” said Simpson. “The goal is just to let these small business owners take care of what they need to, and do everything in one place.”
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The PYMNTS.com Developer Tracker™, powered by Vantiv, provides the payments ecosystem with a view into how software developers are using new technologies to create innovative business opportunities and enable merchants to optimize the ways in which they engage with shoppers today. The developer community within the tracker is separated into three categories: Shopping and Payments, Operations and Marketing.