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7 ways I’ve almost killed FreshBooks

This story was submitted by Mike McDerment, cofounder/CEO of FreshBooks, and sponsor of StartupsAnonymous.com. From now until the end of April, you can ask Mike or FreshBooks anything. 

I’ve often said, “were it not for my cofounders Joe and Levi, I would have run this company into the ground long ago”. The fact is, truer words were seldom spoken.

Here’s a list of ways that I’ve almost killed FreshBooks over the years:

1. Thinking we had to move faster than we did
I remember back in 2005 feeling that if we did not blow our lights out and spend every penny we had on marketing “right now!” someone would obliterate us. I had this impending sense of doom for *years* based on our speed. Turns out I was wrong, and I owe Joe and Levi a world of thanks for repeatedly pulling me back from the ledge.

2. Placing my faith in a spreadsheet
Rocking a spreadsheet is important in my books – it gets you thinking about your business. But trust me, whatever numbers come out of your Excel jockeying, they’re wrong. If you saw our business plan from 5 years ago you’d see what I mean…

It’s really easy to stare at a spreadsheet and say, “that’s it! I totally get this business… I understand how it all works and look at that year 5 revenue!”, when the reality is it will take 10 years to get there, cost you twice as much as you thought, and you’ll probably be running a totally different business by the time you get there. All of that is okay in my books, just so long as you don’t actually delude yourself into believing what the spreadsheet tells you.

3. Thinking we had to spend more than we did
There is something about the act of spending money that breeds confidence—don’t ask me why. Just because you are spending money does not mean things will work out like you modeled them, or that you are learning a lot or being efficient—and all of these things are crucial when you are building your business. We like to try things and look for “signs of life” with our marketing before we increase our spend in any medium. It’s always the right approach because there are no silver bullets, so don’t kid yourself into thinking there are.

4. Placing my faith in consultants
Nobody cares about your business as much as you do, and frankly, people who are smart—consultant/MBA smart—don’t know your business as well as you do despite the fancy words and references to past success. You are in business because of the way you see your opportunity. Try as you may to change this fact, no one will ever possess your unique perspective so don’t kid yourself into thinking a consultant knows your business better than you. At the same time, stay open to their advice and take it into consideration as you make decisions, just don’t bet the farm on what they think you should do.

5. Underestimating word of mouth
This one is sort of tied to number one. It takes *years* to generate word of mouth—it’s a slow build, but slow burning fires burn the hottest. So be patient and do your best to take care of your customers/users even if you can’t find a way to measure the ROI.

6. Believing we could not get this far without doing “x” 
Many believed we could not get anywhere without signing a “deal” with a “partner” or taking “VC money” or “whatever”. Here’s my advice: sign the right deals with the right partners at the right time for the right reasons. You can build a business without being forced to work with the wrong people at the wrong time for the wrong reasons. The choice is yours—don’t forget it. Opportunities will present themselves if you keep your feet moving and you string together a series of small successes. You need to decide what the right deals are for your business and when they are right for your business. I’ve learned to spend 80% of my time thinking about what not to do, instead of all of my time thinking about what we can do.

7. Doubting ourselves too much
Over the years I’ve met a lot of smart people and I’ve invited them to tell me what they think. For years people did not “see it” and that exacted a toll on my confidence. Doubt is born out of fatigue and loneliness, and there is a lot of both when you are running a start up. Hang in there and keep your feet moving—there’s still a lot of time for you to change the world.

Now please don’t get me wrong—there’s still plenty of time for me to kill FreshBooks. This is a list of what I’ve learned so far and if you ask me, we’re still just getting started. That said, thinking about catastrophes I’ve *almost* made, got me laughing and inspired this post—hopefully there is something in here for you.

  • Mike, your comments are very helpful as I am now launching my own start-up (signing web development team tomorrow), and knowing how many things will now come my way that might kill the whole project: from poor partners to market competition, to the non-sense in setting up a 5 year plan in order to get investors. I’m living it step-by-step. Once I’ll get to the accounting part of my start-up, I’ll think of your services, I promise! God Speed.

    Reply

  • A few questions

    1) were you wide eyes entrepreneurs when you started or is this not your first rodeo?

    2) bootstrapped or VC?

    3) MVP launch or stealth till first polished beta?

    4) how you get your first 100 customers?

    Reply

        • This wasn’t my first company – before FreshBooks, I was running a web design agency and making about $200K/year. When I wrote the first version of FreshBooks, it was originally designed as an in-house tool. Soon after, we realized others could benefit from it, so we used the money from the design company to fund the project, even working out of my parents’ basement for the first 3 years to keep things going. Some might call it insanity, but to us it made sense.

          Our agency had an expertise in Internet Marketing, so we started advertising online to get our fist users. There was no big launch, not even a beta – FreshBooks really grew organically out of our dedication to the idea that we could help a grossly underserved constituency we knew well – small business owners.

          How we built our service – using language that made sense to small business owners who let’s face it are NOT accountants –with the value it brought of saving time, money and getting paid faster, was a powerful combination. We coupled this with personal customer service. Everyone worked the phones in the early days – real people connecting with our customers. It’s something that we still do today. All combined, our customers loved the experience and it was word of mouth that got us our first 100 customers.

          Reply

  • Nice post, Mike. A couple of questions:

    1) What was your background growing up? Were you always entrepreneurial? Schooling/Work experience, how did they play a factor in where your career went and what you decided to do?

    2) What did you spend the majority of your time doing in the early days with a small team? Interfacing with users, building out the product, recruiting, marketing, etc?

    3) What, if anything, from your younger days prepared you to build your vision and run a company?

    Reply

    • Great questions, let’s take them one by one:

      1. What was your background growing up? Were you always entrepreneurial? Schooling/work experience, how did they play a factor in where your career went and what you decided to do?

      A) My mom once gave me a book on starting your own business way back in high school. At the time, I had no idea why she gave it to me and I stowed it away on a shelf only to be pulled out years later. She saw my entrepreneurial nature before anyone else did—including me. It was that inclination I suppose that took me to Business School’s but I left university in my fourth year to carve out my own path and take a more hands-on-approach to learning.

      B) When we started FreshBooks I sought to find a network of people that could advise me on running and growing the business. We were a small team in the early days and we needed support and guidance along the way. I am forever indebted to our advisors and they have become our biggest champions and challengers along the way, their support and encouragement has helped us to do things differently, challenging convention, and ultimately lead change within our industry.

      2 What did you spend the majority of your time doing in the early days with a small team? Interfacing with users, building out the product, recruiting, marketing, etc?

      Talking to our customers is like breathing to us. It was certainly important in developing our service, branding the company, and understanding how we could most provide the most value. Today, the same rings true, though of course my purview has expanded. Today I focus on the three Ps. People, Product and Promotion, and am grateful to work alongside experts in these areas and everything else.

      3 What, if anything, from your younger days prepared you to build your vision and run a company?

      I’d love to tell you that I had the vision from day one of what FreshBooks could be. The truth is, I didn’t. What I did have was a gut instinct of what was right for me. I knew the kind of people I wanted to work with every day. I knew what kind of service we wanted to provide to our customers. Ten years later, these instincts have served me well and keeps us on a well-defined path with few distractions.

      — Mike

      Reply
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