Posts Tagged ‘api’

A Year in the life of KashFlow – Numbers and Strategy

February 16th, 2010 by Duane Jackson

When I started KashFlow I thought a SaaS business would be a relatively simple affair in terms of what the costs would be and where the income would come from. Things never pan out exactly as you expect.

So here I’m going to share some numbers with your from our performance for 2009 and some of our strategy.

If you’re starting or growing a SaaS business then it might be useful for you. If you’re a customer or partner then it’ll hopefully give you an insight into what we’ve been up to and what our plans are.

The 2008 numbers for comparison

In 2008 we turned over around £250k and made a very small profit. We were based in a cheap office in Essex and there were only around 4-5 staff. A quick look at my blog from the beginning of 2009 shows we started the year with 2,500 customers.

The 2009 headline numbers

We ended 2009 with well over 5,000 customers and turned over around £500k. So essentially the business doubled in size.

Despite the extra income, we didn’t make much more of a profit. There are now nearly 17 of us in the company and we’ve ditched the office in Essex and have a lovely place in central London.

Revenue split

Only 60% of our income in 2009 came direct from end-users that pay us monthly subscriptions for using the main accounting software.

The remaining 40% came from the partners that we work with via our Partner Programme. These are mainly accountants of which we now have over 220.

A few percentage points of the revenue is from our add-on automated PayPal accounting service.

Where’s the money gone?

Of the £500k we brought in throughout 2009, close to 60% went on salaries and sales commission, about 7% on rent and the remainder is made up of lots of little expenses like hardware, desks, staff training, utility bills and coffee – lots of coffee.

Our phone bill for the year was close to £8k. We have an 0800 number so we pay for all the inbound calls, but the bulk of this was actually outbound sales calls to accountancy practices.

What surprises me is how little we spent on marketing. Far less than 10% of our total expenditure. And a sizeable chunk of that was on a single exhibition.

Growing the eco-system

A big part of our strategy is growing an eco-system around our accounting API.  This has grown a lot in 2009. We started the year with less than 10 integrated applications and now have well over 20 with many more on the way.

Really Simple Systems CRM have just started beta testing their integration and we have some cool stuff in the works with Receipt Angel.

The only hiccup we’ve had is with our FreshBooks integration. They were understandably unimpressed with the orginal version of my blog post announcing the integration because it had a sentence that pointed out one of the obvious reasons for integrating – that you could migrate entirely from FreshBooks to KashFlow if you needed a full accounting system rather than just a great invoicing app. So they decided not to list us on their site with all of the other apps that are integrated with them.

Having other applications integrated with us brings a number of benefits. We get exposure to the customer base of the integrated app, our existing customers get more benefit and KashFlow becomes a more compelling offering for potential customers.

It also helps to ensure customers stay with us. We don’t believe in vendor lock in so make it very easy for customers to leave us with all of their data  if they want to. If they’re using a number of applications that all feed accounting data back to KashFlow then it’s one less reason to leave us.

We”re continuing to add lots of new functions to our API so developers can deliver more usable products to their customers.

Our iPhone app is on the way very soon too. I promise!

White Label and Resellers

We’ve quietly launched a white-label version of KashFlow already and you’ll see a couple of well known names (including a FTSE100 firm) releasing web-based accounting software this year that is actually KashFlow under the hood. We’re also working hard on the reseller channel and getting some great (poncy buzzword alert!) synergistic partnerships up and running.

Resellers in other territories

We’re not currently planning on actively marketing in other countries – there’s still plenty  to do in the UK market. But we’ve been approached by many companies that want to resell KashFlow in all sorts of countries from Iran to UAE and the US, Canada, New Zealand and Australia.

It’s something we originally shied away from. Localising an accounting package isn’t fun. If you’re planning a global SaaS business now go with CRM instead of accounting!

But with the necessary localisation work now done, we’re about to finalise agreements  with resellers in two foreign territories.

Needless to say, we expect great things from these partnerships.

What I expect for 2010

We have a good office and plenty of room to grow in to. The expensive hiring of experienced people is done too. So I’m not expecting our fixed cost to increase by much. Although a lot of our new costs were only brought in towards the end of the year, so expenditure will increase in 2010.

We may need to increase our infrastructure costs if our user base continues to grow as it has for the last few months. We now average over 60 trial sign ups every day and we’re working hard on converting those into paying customers at higher and higher rates.

With everything we have going on, I’ll be disappointed if we don’t more than double our turnover to significantly > £1m this year.

So given I expect to double income and keep expenses relatively flat – what to do with the excess money?

We’ll probably start by hiring more developers. It’s important that we continue to innovate and add the new features our customers are asking for.

We’re also already on the look out for an addition to our support team. The vast majority of our new customers come from word of mouth referrals, and this is largely down to the great job the support guys do. So investing in support staff brings in more business.

We really should also be spending a lot more on marketing. People I speak to are always surprised at how little money we actually spend on marketing considering our relatively high profile in the accounting software space.

So it’s exciting to think what we could achieve with a solid marketing plan with some money behind it. The goal is to become the default choice when it comes to accounting software for small business and startups.

I hope that this was useful to someone besides the competitors that seem to be multiplying like rabbits!

Tags: api, eco-system, profit, receiptangel, RSS, strategy, turnover
Posted in Cloud Computing / SaaS, Marketing, Ramblings, Small Business | 11 Comments »