Jim interviews Mike McDerment, CEO and Co-founder of Freshbooks about building a company
To build a business, solve a problem
[Note from Jim: Wait… I know what you might be thinking… isn’t Freshbooks the sponsor of your podcast? Did they require you to do this and is it going to be a 30 minute commercial about accounting software? In a word, no.
While I’m fortunate to be aligned with Freshbooks as a sponsor that has a great product (that I use), treats their customers well, and is aligned with my audience, this was not required in anyway. It is an interview with a CEO of company followed the age-old formula of starting with a frustration, having an idea, moving to a basement, solving that problem, and now has grown to more than 5 million customers. I ask the same questions as I do in any interview, and I think you’ll get the same value from hearing what steps this entrepreneur took to become a success, and the lessons learned along the way. Enjoy!
As always, the best way to listen to an interview is to download the podcast or press play above, but here is a summary:
Getting to know Mike
The interview with starts with Mike’s background, a Canadian from Toronto the started building websites for people. He then delves right into the story of how his company was founded:
– He was invoicing customers at his design company using Word and Excel
– One day, (as we’ve all one at some point), he opened up an existing one document, updated the details, forgot to rename it, and saved over the file, losing the previous one
– That was the Aha moment – there had to be a better way
– He found that most of his pain around “accounting” as a small business owner was doing the billing and receivables
– Thus, he built his own invoicing for customers in January 2003
– Turned it into something others could use
– He started the official business in his parent’s “nice” basement in Toronto (the complement to a garage in Silicon Valley)
– Now it has 5 million users
Who is the typical customer?
– Target is service-based business
– Purpose-built for freelancers to save time billing and get paid faster
– Usually they have a particular knowledge or expertise… could be a plumber, could be a marketing agency
– Between 0-5 employees is their main target, but some companies have hundreds
“We try and keep things really simple… we recognize that lots of people who go into business have little to no desire to actually learn accounting, they just want to do the work they love and serve their customers.”
Wait, a butler?
Isn’t a cloud computing user someone like me that is internet savvy and a social media guy or designer? Not true, some of the more interesting clients Mike has seen include:
– A Butler
– Dog walkers
Side note: Yes, a BUTLER. I didn’t know people still HAD Butlers. Interesting. Also interesting that actor Gerard Butler dominates Google Image search for the word “butler.” Think you need one? Evidently DomesticPlacementGroup.com can help. Who knew?
Going Pro means being an amateur or newbie in a business but then taking it to the next level. You have your logo, business card, website… Now you can put your logo on your very official looking invoicing system. When you’re a small guy, there’s not a lot of places where you can customize your business.
“It is part of your brand experience. Sending an invoice is an extension of your brand, you’re communicating with your customer at a critical point in time, so being able to have your logo on your invoice and present a professional looking invoice and be able to collect online payments is key.
Even if you are an independent graphic designer who’s sending their first invoice, immediately out of the box you bring a presence to your work and to your clientele that says:
– I’m organized
– This is going to be efficient for you
– It’s going to be straightforward
– You’re probably going to pay it quicker because you’re going to respond to it as a professional”
Going Pro and using a system such as Freshbooks introduces confidence into what essentially was a period of disadvantage when it’s time to present an invoice. You’ve already done the work, they have what they want, and it’s their choice to pay right away, or sit on it, or send it to their back office to process. But if it’s professional and efficient, they are more likely to pay faster. But what this does is shift the dynamic a bit during a critical point in the relationship.
They’ve collected stats by asking their customers to compare previous billing methods vs. Freshbooks, and people get paid faster.
Tips for getting paid faster:
Story: Mike was in the office basement with three other people, doing research why people use the product. He would individually call customers and take them through a survey and remembers one individual business owner, that let him and his team know that they were on the right track.
He asked him: “What is the single greatest benefit of using Freshbooks?”
His answer “It changes my behavior.”
What does he mean by that? He told Mike 3 insightful things:
1) Instead of waiting until the end of the month, it’s so fast and easy that I actually send my invoices straight away.
2) As a result of that, I actually get paid sooner. I don’t put it off for 2-3 weeks.
3) I actually charge more. The reason I charge more is that I don’t forget things that I did.
What is Mike’s typical day and what are the challenges facing him right now?
– Time management during the new launch
– Sent an email to all customers, and got more than 1,000 replies from customers with multi-paragraph letters relating to their story
– Learning how to build and operationalize a business
– Teaching people how to think strategically
Does he find he needs to help educate people on what being in the cloud means?
Has been there before with explaining invoicing. The cloud captures what is important to business owners of today… accessing via mobile, being able to work from anywhere. They may be early in the cloud process, but others will catch up.
Launching an iPhone app – What was that process like?
– Their first “new product” in 10 years
– A massive undertaking
– They invested time and dollars and partnered with an agency customer
– Built it out over a year
– You learn a lot of new things… how to market and distribute an app, how do you get rankings, what does that translate to in terms of business?
– But mostly, an iPhone app isn’t a simple thing that you can design in a week and get rich quick… it’s a massive undertaking if you have a serious product
What is the best way they’ve marketing and advertising?
– Internet design and advertising background
– Started with $400 text link ads in newsletters
– Started with direct marketing, then to blogging, then went to word of mouth
– Biggest driver is word of mouth by having a great product
What is the best move he has made, any key takeaways?
– It’s all about the people, from employees to advisors
– Have shared values
– Promote alignment within the company
– Have incredible focus and build a great product
Finally, be sure to listen in order to find out:
– If he wasn’t running Freshbooks, what would he be doing?
– What was the lesson learned from a book his mom gave him as a kid?
– You won’t believe what he does to unwind at the end of the week.
Sponsor Message: Freshbooks
Why use Freshbooks?
• Simple to use: Includes phone based customer service.
• Work from anywhere: Available on all devices, automatic secure backups
• Saves time: Track time for clients, get paid fast online, capture expenses
Switch to cloud accounting and join over 5 million people using FreshBooks to make billing painless at Freshbooks.com.