Release Date 10/22/15 Episode Length 37:28
Brought to you byJotengine
Rocketship: Cool, so welcome to the show.
Rocketship: Tell us, for those that don’t know, tell us the background of Bench.
Ian: Yeah, absolutely. Bench basically just takes care of your bookkeeping for you if you’re a small business. We take in all your data, all the things that we need to do your books, so your bank statements, your payroll data et cetera, and then we just every month give you a nice, clean balance sheet and income statement. Basically the sensible basics that every small business needs and then we offer it at a price that we try to make super, super competitive. People come in, if they’re not sure they want to buy, we give them a free month. Basically, we’ll do, it’s October right now, we would do your Sept P&L now for free just to see if those are the basics you want and then basically charge a flat monthly fee. That flat monthly fee so people know exactly what to expect.
Rocketship: Where did you get started on this? Were you an accountant? Were you doing books? Where does your interest come?
Ian: Yeah, a lifetime ago, I was a bookkeeper in college. That’s how I paid for my tuition, which is actually a common profile of a lot of bookkeepers. It’s something they do temporarily to make some income during school and then they quit and go do other things after they graduate. That’s like … That’s I guess where you could say like the kernel of the idea or really deeply understanding like hey, there’s an opportunity here because like hold on a second, I’m a 19 year old with no experience, why are you hiring me, right? Interesting. Maybe I could do something better than what an average 19 year old with no experience can do if I really put my mind into it and put a few years of work into it, right? That I’ll actually coalesce later. That was just like one data point, but it was like years down the road, after talking to people and talking to people and trying to sell them other stuff, this light bulb went off of like, why am I trying to sell people better software? They don’t care. It was just like, yeah, that’s great. I’m trying to buy your software, but I don’t have a bookkeeper, so I tried to solve that first and all my books were a mess. Maybe if I had a great financial system, someday I’ll have that, but I don’t even know how this thing … And then I was approaching a problem. I was just trying to okay, I want to start a business. What are we going to do in intriguing people? Then like, oh darn. They’re not really open to new software solutions. I guess I should go talk to someone else to see someone who’s more open, versus the like man, he just told you exactly what he wanted. Let’s see if you can solve, but for some reason it’s like for some reason the biggest opportunities we’re completely blind too because it’s like, or requires a completely different way of thinking. I can’t really solve bookkeeping with just software. It’s this big problem and I don’t want to have this un-scalable service business and all those things. Over time realized like, what if I could scale it? What I could make it in a way that didn’t require super specialized labor and a way that could scale and we weren’t at the mercy of all these forces of like, oh I don’t want to get into the bookkeeping business. What if we could actually make those disappear and then we could actually solve people’s problem? It wasn’t until that came together that we realized oh Bench, that’s what we’re going to do.
Rocketship: How did you get started? Were you doing the books? Did you start I guess compiling a team of bookkeepers to do it at first? What was the first step?
Ian: I just started out. After I graduated and quit my bookkeeping job, went to work management consulting for two years and then after I quit that job, because I said it’s not really helping me get closer to starting a small business. I want to run a business and I’ve learned everything I can here. I want to go try something and I basically just … First off I just started interviewing people about the pain points they had in their finances and in bookkeeping and what kind of different software solutions I could build because I was seeing a lot of people building software, it seems like there is opportunities there. Then got very much, very quickly into interesting, okay. We’re going to actually solve their bookkeeping for them, so I’m just going to actually do their bookkeeping and see what it’s like. I had done it for one or two businesses before, but how could I actually approach this in a scalable way? Let me actually get deep into the process and start analyzing it and that means doing it yourself.
Rocketship: Right. You were doing it and then, how does it work today so we can see where it came, because I understand there is actually people doing the books behind the scenes, right?
Ian: Yeah, exactly. It’s laid out in just a very simple, clean, process behind the scenes. If you think about … We think of bookkeeping in terms of mass production here, because the philosophy behind it now, it’s not like we had this figured on day one. Many years down the line of like how the problem will actually get solved is, previously like in other industries, like car manufacturing for example. If you looked at car manufacturing before the assembly line, it was a skill, a team of skilled, very expensive artisans that would make the whole car and as a result, the car was very expensive because there was a lot of efficiency and you had these super expensive people and they were the makers of the car and they have all this bespoke knowledge that is mystical. It’s same thing in anything that’s mass produced like shirts. You can go get a custom tailored shirt from a skilled artisan still, right? It’s just super expensive. That’s why we don’t do it. We’re like, well, why isn’t there a mass production bookkeeping? It’s stayed in that state of, you can only get a skilled artisan to do it, but what if I just want the simple, sensible basics and I don’t have money to buy something super expensive? Especially with something that’s non-optional, right? Like okay, even if I have to like … Even if my only option is to buy an expensive shirt, maybe I’ll just buy two and it’s like stink all the time, right? Like, at least you have an option. Bookkeeping is like you don’t have an option to not do it and so people end up spending a lot of money and it’s like, it’s shocking how much a business that makes like $20,000 in revenue paying $4,000 a year on bookkeeping. It’s like 20% of your cost base on this thing because it’s not optional. The philosophy is, how do you actually mass produce in a way that’s high quality? We solved it in a lot of the ways that other mass produced products did which is first off, you provide pre-selectable options. It’s not customized. It’s just there’s a whole bunch of options you can choose from that will pretty much get you 99% of what you need. Maybe not every single thing is going to be customized for you, but if you just want … I just want a simple sensible basics then just choose for some pre-selected options. That will completely determine what the process is. There’s no human judgment in okay, we’re going to do it this way. We’re going to do it that way. The big cost in custom work is you have to decide what the process is going to be on every single different job. Whereas for us it’s okay … For example, to make it a little more concrete. If you walked into a car dealership and you say, I want to red car and it’s going to have a leather interior and it’s going to have this stereo system. You choose some options and it goes off to the factory. Then the factory goes okay, great. We know exactly the process that goes into making. We know we just have to change the painting step in the factory and we’re just going to select red paint and we’re going to, at the interior stage, we’re going to like the leather interior, but there’s like … You can only select from three options, right? It’s like cloth, leather and maybe one of the thing and then just depending on what you’ve selected, there is a predefined, super-efficient process for handling it that way. If you would actually map that to what we do, it’s like okay, so you have Chase Bank. You use Stripe to collect revenue. You use Shopify. You use ZenPayroll, Gusto now. Okay, so based on that, we know exactly what your process is going to be. It’s going to run through our Stripe process. It’s going to run through our Gusto process. It’s going to run through our Chase Bank process. Then this checklist is automatically created, because we know what you’re using and we know what kind of business. Okay, I’ve selected I’m an online retailer or I’m this. Then we’ll basically produce the simple sensible basics for you and we also at the end step, we do pair that with basically a … We call them a bookkeeper. They’re like a relationship manager/ project manager that makes sure that … They’re making sure the quality checklist was carried out. They’re making sure that you’re happy. They’re going have a personal relationship with you. Once that process is super optimized, there’s a whole bunch of money left over to spend on quality and relationships and stuff, right? There’s no need to reinvent every time we have a new store we go, how are we going to do it? Okay, maybe we’ll do it this way. Maybe we’ll do it that way and like build this thing from scratch. Basically we just have … There is one standardized process. If you use Stripe, it goes through our standard Stripe process and then down the line, as we spend more and more money on the Stripe process we go, “Okay, well how much money is it going to cost us to pay engineers to reduce the cost of that process by 50%?” We are just constantly evaluating how much that would cost. It’s very much like just managing a very controllable, printable business and upward.
Rocketship: No, that’s interesting. Is the team, are the bookkeepers, is it distributed? Is it crowdsourced or?
Ian: It’s actually all in the house.
Rocketship: It is? Okay.
Ian: In the same way that Tesla manufacturing cars. When you’re running this very like, you want to have high quality and this process has to be followed to a tee. You can’t have people doing whatever they are doing and making it up on the fly, right? Tesla has very highly trained specialists in each area that are going to make sure that your Tesla model S is made to within one micron of precision, right? The same thing with Apple phones. Crowdsourcing definitely has its place in a lot of different industries, but if you have a very precise process that needs to be followed, that needs to live again in to all these other steps, because there might be 60 steps involved in producing a book keeping. It’s quite detailed and quite complex. It’s just that if everyone does their step exactly the right way, and exactly the same way and we’re measuring it to make sure it’s carried out correctly because we have 180 employees now, that’s how you get quality. That’s the only way … We can’t sell 95% correct book keeping. People come in, they need 100% correct book keeping. The numbers are off. In a crowdsource or marketplace situation, your response to quality is, “Oh well, too bad. I guess you selected the wrong book keeper. Go find another one.” Whereas we want to attach our brand to, “No. We’re going to get it right for you every time. You can trust us.” We actually want to build a brand around, this is just the default. You should do it because you know it’s going to be good. You know it’s a great price and you know you’re going to be happy at the end of the day, which in a marketplace you don’t really know. Marketplace is great for, “Oh, I’m going to hunt something.” Then you find opportunity, but the work is on you to make sure that you’re getting the thing that you want. Whereas for us it’s like you don’t want to think about how the book keeping is going to get done. It’s not really an exciting process for you, selecting a book keeper. Selecting shoes, awesome. Awesome marketplace business. Selecting a book keeper, not so much the process that people want to go through.
Rocketship: Is Bench meant for startups and freelancers or can it really scale up to any size company?
Ian: We specialize in businesses with less than $2 million in revenue. When you start getting big, that’s when people start wanting very customized stuff. They have the resource to pay for it. They don’t blink an eye. I’ll pay $300,000 a year for our finance department to figure out all of the niggly details. Whereas a small business … so again, the big businesses they don’t want the simple sensible basics. They want complex, expensive, non-basics. That’s why we’ve actually decided very, very concretely, if someone comes in and they’re too big we say, “Sorry, we can’t really serve you. This isn’t going to be what you want.” We’ll point them in a different direction.
Speaker 2: As a hybrid product and service, what does the breakdown look like of your team? How many people are working on the book keeping for your clients daily versus working on the product and the marketing and the branding of Bench?
Ian: It’s about half and half just at a high level. How do I explain it? The number of people we have is just completely defined by the number of customers we have. We know okay, if I have 200 customers, how many people I’m going to have to staff on the process side because again, we know the processes to different tolerances etc. We know exactly how many people, how much it’s going to take. On the other side on the product side, that’s actually more of a decision. It’s not so straightforward. You have to decide, “Okay, well how fast are we going to move? What do we want to accomplish this year? How much capital are we going to raise? How much are we going to spend on improving our solution, how fast?” There’s nothing saying that it would have to be split half and half. We could, if we didn’t want to move as fast on product or on rolling new stuff out, we could definitely have half the number of product and marketing people or if we want to go more aggressively, we’re going to have twice as many and the ratio would be different. The one side is determined by what we have to do based on the customer base and who’s coming in the door. Then the other side is completely based on oh and how fast and aggressive we’re going to move on building stuff.
Speaker 2: Is there much of a divide between the team in terms of, I guess how well they get along or communicate from the service to the product side? How do you reconcile what’s happening with customers on a daily basis and translate that over to the product people?
Ian: It’s really important. We believe, again I don’t want to speak for all businesses, but we believe it’s really important to keep one culture. Our culture is really based around producing awesome experiences for the customer. We put that. Whenever we have a list of priorities, it’s like, “Hey, number one is did the customer having an awesome experience?” Because if not, why are we even here? We’re not just trying to send a product out the door or just make a good margin or whatever. It’s, “Well, we could be doing a lot of business where we’re making margin. Or we can be doing a lot of businesses where we could be building software. There’s infinite software to be built. It’s really about are we actually solving people’s problems? Are we actually making a difference? Because there are a lot of people here who were really frustrated before. That’s really the unifying factor, but different people are accomplishing that in different ways. Every department has to appreciate what the other departments bring to the table. They definitely have different perspectives and different ways of looking at the problem. Operations, which is the book keepers and the process people, definitely their focus is okay, how did the process go today? Did anything break? Is there anything we have to fix? It’s very much like, there isn’t a single day where you can be like, “You know I’m just going to relax today. Let’s just relax on process, see what happens. I’m going to go through a thought mapping exercise.” It’s like, “No. There’s stuff coming through the door. People need stuff today and we need to make sure that our processes are running to a tee every single moment.” Then they’ll get into a room with product people or certain engineers who are thinking, “Okay well, how do we need to build this that’s going to scale for the next two or three years?” Everyone just brings a different perspective to the table. Everyone needs to appreciate everyone else’s perspective because they all need to happen. It’s not like you can just say, “You know what, what’s really important is just the long term engineering roadmap and whatever happens today, meh.” It works I guess when you don’t have customers yet, but once you actually have a customer base, the whole reason that … every month between 40% and 50% of our new customers actually come from word of mouth and the reason is that there’s a lot of people who’ve had a great experience. The minute that stops happening and the operations people let up, people stop having a great experience. Then you have marketing and design who are thinking about, “Okay, what’s the experience going to be tomorrow?” Obviously they have no power to impact what’s going on today because it takes time to build stuff so they can’t be today focused. They have to be, where do we want the brand to be six months from now? Where do we want the design to be six months from now? I don’t know. Is that an especially long winded answer to your question?
Speaker 2: Yeah. It’s always complex and really what I was getting at and what I was curious about was, bringing together a service team and a product team under one team umbrella really.
Ian: I guess the challenge is, I think that some software companies they get away with just hiring, like the litmus test is, “Oh, this person is like me. That means they are a fit.” For us we had to hire different types of people right off the bat. At the beginning, there was actually a little friction around the early product people. It was all product people. We started with zero sales people. Then we went to … I was like to start off, I’m doing all the book keeping and closing all the customers and then we had people building product and then hired a couple of book keepers. Then they really were book keepers. They weren’t people we call book keepers that are actually doing just a fraction of what an old book keeper because so much of it has happened through, happened through the process of automation. They were actual start to back handling every process. Then they were onboarding customers and doing sales because that’s all we had. They had to be book keepers/sales persons. If someone calls in, pick up the phone, okay Luke, you’re on. Just someone else, but then getting to a point where okay, now we have six book keepers and we hired our first sales person. That first sales person was very different from everyone who came before. I think it was hard at the beginning for the product people to be, “This person is different from us. They don’t fit the culture.” It’s like yeah, but we need people who are going to be focused on day to day, closing new accounts and actually onboarding people and caring about how their process is going. Yeah, they are not going to be super forward thinking focus, but we’re defining a new culture of how we’re going to work together and it’s going to have to include more diversity and not just like, “Hey, let’s just carbon copy ourselves and find people that look exactly like we do.” It ends up being, “How can I work with someone who thinks differently but we really both have the same end goal in mind? Hey, maybe we still like the same TV shows.” Whatever it is that you’re going to select is the unifying factor across your culture. Like okay, there have to be some unifying factors. You have to have some things in common, but they don’t necessarily have to be the same things like exact, everything in common with the founders. You have to select because the more people you hire, the less they’re going to be like you, so you have to figure out what’s really important and what’s like, you know what? It’s cool that all people are different in all these different ways and embracing diversity a little more, because you don’t really have the option. There aren’t that many people exactly like you, that you can hire eventually once you start getting to scale.
Rocketship: Right. That fill all those different roles too.
Ian: Yes, exactly.
Rocketship: It’s impossible.
Ian: Exactly. I wouldn’t be that happy in a sales job. How do I hire only myself and then build a great sales organization? I’m probably going to need to bring some different people to the table with different priorities.
Rocketship: Absolutely. I’m curious, so with that, as you guys are growing, book keeping isn’t necessarily the sexiest topic to talk about or maybe it is in some circles. How did you guys …
Ian: I don’t relate to what those circles are.
Rocketship: Yeah. Probably you’re still looking. How do you guys approach going to the market and getting out in front of people to tell them about Bench?
Ian: I’ll actually address both aspects of the question, which is first off the book keeping business isn’t sexy. How did you get through that? Because that’s also much … The people who have a pain point and they don’t care whether it’s sexy or not. They just need it solved. Customers are not the only people you need to bring into the business. You need to bring in, definitely you need to bring in employees and depending on the type of business you’re running, you may need to bring in investors. If you have decided the unsexy space where investors or employees aren’t going, “I’m going to work in the book keeping industry,” but that’s the reason people might think about an industry or a space a certain way that’s particularly unsexy is because that’s just the way that it was done before. People don’t think about Bench and go like “Oh, that’s a really unsexy company. Eew, book keeping.” They’re like “Wow, that’s cool, but wait, you do book keeping? How does that work?” I don’t understand how I’m feeling this new feeling about that space now, but it’s because, it’s just because that’s the company and those were the service providers that were there before and that’s what you’re thinking of. We look at anything, like the payment space, the payment space 15 years ago. No one was going, “Oh, yeah payments, like EBC payments, so sexy. Oh, let’s all work in the payment sector.” Then along comes Stripe, Square and a few awesome companies and all of a sudden payments is hot, but not because payments is just inherently hot space, but because of the really cool things that people are doing in that space. I would actually argue if there’s nothing going on in that space, that’s actually an opportunity for you to become that company and it takes years and it’s a big challenge. You don’t get to look at a hot space right away, but eventually you become the category definer and people are like oh man, what an awesome space. I bet like 5 or 10 years from now, we’ll probably have a few competitors that by that point, people are going to be like, oh man, they’re like … And it will be called something different. It won’t be called book keeping. It will be called financial something. I don’t even know what the buzzword is going to be, but there’s going to be some buzzword for it and they’re going to be like oh, that buzzword thing, what a hot space, but that’s how things change. Like with any new product or anywhere that’s worth changing it’s because it’s crappy right now and it’s not that interesting.
Rocketship: Right. Then I’d love that perspective. I’ve never heard that before, but it makes a ton of sense.
Ian: Thanks and then, the other piece of it. Sorry, actually I forgot the original question.
Rocketship: How did you go to market? How did you go out and position Bench and find those initial customers or even today, what channels are working for you guys?
Ian: The customers was the easier one to figure out, because after we’d figured out oh man, all these people have these pain points, like we could just walk in and it took some time to figure out exactly the finesse of the pitch, but we’d just be talking about it and people are like, “Oh man, I need that.” It was actually intuitive where it’s like oh, here’s what we solve. We give you financial statements every month and it costs starting at $135 a month. Like wait, what? Can you say that again? Like that’s a thing? You can do that? Awesome. That just solves a big pain point. If you found something that really deeply solves a need, really it’s more about just asking what their pain points are and then saying oh, I can solve that for you. It’s not like hey, here’s the thing we do. If you use this software in a certain way, here’s all the cool things you do. Anyway that wasn’t our approach. Actually I’m sure there’s a lot of approaches that have more to do with generating interest or generating demand in an area and all the things you can produce, but ours was just really like oh, so tell me about what’s most frustrating. Oh man, I have this pile of receipts. I never want to look in that drawer. It’s like the drawer of horror. I just try not to think about it. I’m like oh, what if you don’t have to think about that anymore? What if we just took all that off your plate and you just had a nice, clean financial statement every month? Oh man, that would be awesome. You can do that? That’s really, that was our approach at the beginning. At the very start it was just literally having one on one conversations with people and every customer was just knocking on the door and our internal goal because and this was … again this is just one approach. This is our approach, but we set an arbitrary goal of 5% revenue growth per week.
Rocketship: That’s aggressive.
Ian: It’s not that aggressive if you have one customer.
Rocketship: Okay, true.
Ian: 100% growth this week, but over time it gets harder and we do not have a 5% growth target anymore per week. At the beginning it’s to keep you focused on, what do I need to do this week and what do I need to put in place this week, that’ll keep me covered for next week and the week after? At the beginning there was just so many things you could do and so many directions you can be pulled. You need just a guiding force that is going to say okay, here is my goal right now. This clarifies exactly what my priorities should be, so you’re not running out like, maybe we should be looking at business development partnerships with a bank. There were all these things where people are like, if you want to make it big you should do this. We’re like yeah but … A lot of people said this. There was actually a surprising amount of people that said this. You need to be able … Sometimes you need to be able to run before you can walk. I’m like, I don’t even know what that means. It’s almost like, I don’t know, I think a lot of people have this idea that you’re supposed to go from zero to 100 and at either … one investor reported to me in six months we’ll either know if you’re a zero or a hero and it’s like it didn’t work like that at all. It was very just keep growing relentlessly, 5% a week and then it just compounds into something big eventually. At first just knocking on doors is fine enough or just emailing people and saying hey, do you have any friends that run a small business that I could just buy coffee? That was totally fine. Totally easy to hit 5% growth goals and then it got a little bit harder, because we’re working off a bigger base. Now 5% means more than one customer a week or even a month and then you start doing things like okay, how can I do this more scalably? I still have the same fixed amount of time, but I have to get more customers in that same amount of time, so what am I going to do? Okay, maybe that means I don’t have enough … Do we not have enough means to work with? Is that why I’m not signing new customers? Is it because I have a whole bunch of people stuck in this interest phase that I haven’t been able to move forward through my funnel? Is it because I just don’t have time because I’m only spending 5% of my time on it? The process is fine, but I’m out doing all those other things, building product and raising money and I don’t have actually time to dedicate to this. Then you just figure out what the constraint is and then just fix it. I know it sounds really simple when you put it like that, but it doesn’t feel simple at the time. It’s more like you’re in a shower stressing about how you’re going to make your goal and you’re like, “Oh man, what the hell. What the hell are we going to do?” Then you’re like, “Oh, wait. Oh, I can just do that.” All you need to do is find someone to help. Okay, great and you’re like resolved. Let’s go do it but it’s like, if you don’t have that function, you’re not going to be thinking about it when you’re in the shower and actually going and fixing it. You’re going to be on autopilot and then wake up three weeks later and go like, oh man, we didn’t bring in any new customers. Oh oh, what does that mean? That’s why it’s super important to stay focused because there’s just so many potential distractions that … There was an infinite number of things that do not matter that people will try to convince you that matter, but really don’t. I don’t know. Again that’s my perspective and maybe I’m just skeptical or something, but I think there’s a lot of stuff feeling like you don’t know enough people or you’ve gone to enough conferences or have met enough like … Done enough coffee meetings or whatever that’s actually irrelevant to your goal. They might not be irrelevant, because there might be some goals that ties into, but you just need to know what you’re going to accomplish and then go do the things that accomplish that rather than starting from what are all the possible things. I guess I’ll just meander through all of them.
Rocketship: Right. It sounds like you guys … Did you guys self-fund it at first and then eventually raised some money?
Ian: Yeah. I had a little bit of savings from my previous job and then we all obviously worked for free at the beginning, but we actually gone to Techstars pretty earlier on. I spent a year working on it, not spending that much money. I didn’t have employees. It was just myself and my co-founder and one other guy and then Pavel and then things just started picking up momentum and we brought on our third co-founder, Adam and he’s now our VP of design. That was really a turning point, because we had someone who really deeply understood the customer. He’s a really nice, soft spoken person, but he kicked the crap out of us with his very soft spoken demeanor in terms of how we were not thinking about the customer enough and our design sucked. Within three months we had something that looked and felt massively better. It’s one thing to just solve the need. It’s another to solve it in a way that leaves you feeling great and that was his expertise. He’s a great designer. He actually worked for the design firm that designed Slack. Metalab.
Rocketship: Metalab, yeah.
Ian: He knew a lot more design that we knew nothing about. We had expertise in other areas, but he brought that to the table and then within three months of meeting him, we were accepted into Techstars New York. It was the last piece, the missing piece that we didn’t know we didn’t know. That’s the hard thing also at the C stage is like there’s so many things you don’t know, but you don’t even know that you don’t know them and you’re wandering around going, why am I not making progress? What am I missing? Then random things happen that you learn and it’s really hard to speed up, because you don’t even know what the problem is. It’s this open ended learning experience that’s really hard. I don’t know.
Rocketship: Very cool. It’s awesome to see such a manual process turn into something huge, which is inspiring I think to me.
Rocketship: Where can we hire Bench and keep up with you online?
Ian: There’s our website at Bench.co. We actually have an offer for listeners, which is at Bench.co/rocketship where anyone who signs up through that will get 20% off for the first six months.
Rocketship: That is awesome. Thank you.
Ian: Yeah and you can find us on Instagram at Bench Accounting, on Twitter at Bench and I’m on Twitter too and Ian W Crosby on Twitter.
Rocketship: Awesome. Thank you so much for coming on. I really appreciate it.
Ian: Awesome. Thanks for taking the time. Really appreciate it.