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MenuWill a startup only focused cloud accounting software work that also provides metrics for the startup? What financial metrics would startups use?
I want to create a startup only focused cloud accounting and metric software company. Will it work? Is the market big enough?
Answers
Recently launched Subleger http://subledger.com/ is trying to do some or all of what you describe. It doesn't mean that there isn't room for others but consider that many early-stage companies don't have complex revenue in-flow so the core of what you're describing (converting or merging income into other operational metrics) might not have a wide appeal especially for startups.
Hopefully you get some good answers here but really whatever anyone (myself included) says here is far less valuable than asking startup CEOs what their financial painpoints are with respect to reconciling their app's internal metrics with revenue and expenses.
Finally, the question "is the market big enough" is too open-ended to answer for you. Big enough for what? To attract significant outside funding? Maybe not big enough. But to build a great income for you and a few others? Perhaps!
Happy to discuss this with you further to help you in your evaluation of the opportunity but as I say, best thing to do is canvass the potential market first.
As a CPA/Chartered accountant that's worked in a Big Four Firm, run the finance department at a venture back startup, as well as run my own businesses -- I can confidently say that the only accounting concept that matters for a startup is cash in the bank.
Specifically, how much is there and how quickly is it running out. Everything else really is a distraction as it doesn't matter: when a ship is sinking, you don't care about GAAP compliance.
Metrics matter more for revenue than expenses, which is why this forces the market to be for later stage companies. And those later stage companies have multiple offerings from the mature accounting and management reporting market.
I mentor startups in the product management process so they can make better decisions.
Quite frankly, you are asking the wrong questions. What accounting problem are you going to solve for startups? Without knowing this and verifying it with people that would be potential customers, you can't possibly know whether or not your vision of the solution will work.
I will go one step further and warn you that feedback you get on here about whether or not it will work should be taken with a grain of salt. Always beware of second hand customer validation information. If you need some help getting first hand information, I expect that I can help point you in the right direction.
Cheers and good luck!
A start-up cannot sustain value creation if its most basic and key metrics do not add up. If you are starting a new venture, this is probably all that you are thinking about, turning your vision into reality by building a start-up product that solves customers’ problems and is worthy of their financial commitment. Your KPIs can change as your start-up grows. For instance, when you launch your start-up, new registrations or activations can be an important KPI to evaluate the validation of your start-up idea and viability of the solution in addressing your customers’ needs.
LTV or lifetime value of a customer is the revenue that a customer can generate for your startup over the lifetime of their membership. CAC or customer acquisition cost is the money that you spend on acquiring a customer. CAC includes your expenditure on sales, marketing, and distribution activities.
You can read more here: https://www.forbes.com/sites/abdoriani/2020/12/21/9-basic-financial-and-analytics-metrics-every-startup-founder-should-know/?sh=74affacb41a5
Besides if you do have any questions give me a call: https://clarity.fm/joy-brotonath
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Can I use Bench.co + Xero for my business?
This is a great question. The world of accounting/bookkeeping can be a confusing array of options for non accountants. Let's address the software question first. Let me start by saying that my firm is relatively agnostic to software, we work with dozens. I'm familiar with Xero and my firm has worked with it, and if someone comes to us already on it, we stay with it. It's a solid piece of software, certainly works. And it's a very fashionable choice right now due to inroads their marketing has made with the startup community. The big dog in the market is QuickBooks On-Line (QBO), and when I say big dog, various version of QuickBooks have easily 10x the number of current customers that Xero has. Why does this matter? The usability of the software from a user experience is about the same, but Xero is still trying to play catch up to QuickBooks On-Line in terms of features. For instance, they have payroll rolled out for "a few states and are adding more each month". Anything innovative that Xero comes out with QuickBooks is going to quickly copy and add to their product, because they are huge and have the resources to quickly adapt. This is not a situation of the iPhone putting Blackberry out of business, QuickBooks isn't going anywhere. Likely end game is that at some point QuickBooks acquires Xero and moves everyone over to QBO. Lastly, every bookkeeper knows QuickBooks, some know Xero, and there are hundreds of developers developing software that integrates with QuickBooks. So, while Xero is a perfectly adequate piece of software, we’re talking the platform for your accounting, go with QuickBooks On-line. The subject of a bookkeeper is tricker. Do you go with a person or a process solution? Full disclosure here, my firm does outsourced bookkeeping for a living, so you have to take that into account when viewing my answer. I haven’t worked with Bench.co, but it looks very intriguing, and pricing is quite aggressive. They also look very easy to engage with. The down side is that is appears to be a person based solution. You get assigned a bookkeeper, and then good luck. The skill of individual bookkeepers varies widely from damn good to truly awful. They often hook up with several services like this, so their loyalties are divided. Additionally, they are often working with up to a dozen clients, and what typically happens is one of their clients starts growing quickly. All other clients get pushed aside while they focus on their largest client because they can’t afford to lose them. A couple of other disadvantages are that, because they are on their own, you are limited to just their skill set, they have no one else to check with in sticky situations, and when they go on vacation, your accounting goes on vacation, too. These are all things that may be fine for you if you’ve got a relatively small business that doesn’t need daily attention to its accounting. The other alternative is a firm that specialized in outsourced accounting. There are several firms out there, you can find them (and us of course) with a simple search of the internet. The advantage to the better firms in this space is that they typically will assign you a team of bookkeepers/accountants so that you have backup in case one member of the team is on vacation or leaves to take a full time job somewhere. These solutions also will typically come wrapped with software they would suggest for your business. Finally, you aren’t limited to knowledge base of the one person working on your account. You have a team, and really the knowledge base of the entire firm at your fingertips. Of course you pay a little more for this, but the hourly rates are often not that much more than individual bookkeepers. And in the long run you may end up spending a lot less by not having to come behind a bookkeeper that maybe wasn’t so good and clean up the mess. So if you plan on scaling your business beyond a few $200k a year, it may be best to start out with a firm based solution rather than an individual solution. Side note on Bench.co: I can’t tell what software platform they are on. If they are using a proprietary platform, you will find it very hard to move your accounting to another solution if you’re not satisfied with their solution. Something to ask if you go with them. So, I think that about covers it. I’ve probably told you way more than you wanted to know, but I’m always available to schedule a call if you want to dive in a little deeper. Just let me know.CM
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Should I hire a bookkeeper? (what does one do exactly?)
NIcole is right. When I first started my business I thought I was saving money by doing my own bookkeeping. It took me much longer than it would take a bookkeeper - all time that I was not spending on marketing or billable activities. And in the end I made errors which made the initial work of the bookkeeper longer. I now have a consistent routine. My bookkeeper picks up all my material monthly and does my books in less than 2 hours. Very worthwhile.RL
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