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A Reversal for InDinero, a Once-Struggling Accounting Software Start-Up

Via The New York Times : Jessica Mah was 20 when she helped found InDinero in 2009. Back then she believed she could help small-business owners track their finances with her start-up’s software. But as it turned out, Ms. Mah could barely keep InDinero afloat, let alone help others run their businesses.

In its first version, InDinero, in San Francisco, charged its few customers $20 a month for its software. Competition, which included companies like QuickBooks, was fierce, and a series of bad hires added to InDinero’s woes. “The company was going nowhere,” Ms. Mah said. But by the time she realized this, in 2012, InDinero had spent nearly all of the $1.2 million it had raised from investors. “A few years ago, I really didn’t know that much,” said Ms. Mah, the chief executive. In fact, she said, “I almost crashed the company.”

And yet, today, InDinero, which provides accounting software and services to small businesses, has 75 employees and just under $3 million in annual sales. It expects to double that in 2015, and has raised a total of $8 million from investors.

In a recent conversation, which has been edited and condensed, Ms. Mah talked about how she turned things around.

Q. What were the first signs of a problem?

A. I tracked the metrics — the number of sign-ups, upgrades and cancellations. The numbers that should have been going up weren’t.

Q. How close did you come to running out of money?

A. We were down to the last $150,000 of the $1.2 million we had raised, and were burning $80,000 to $100,000 a month. Once we got down to about $250,000 we knew we had to dial back.

Q. What steps did you take once you realized InDinero was in serious trouble?

A. We got rid of our office and employees so we had no expenses. My co-founder, Andy Su, and I moved into an apartment together and got our parents to cover our rent and food. I would have moved home, but my family is in New York, and the company is in California. Then, for most of 2012, we tried to figure out what magical feature we could build to fix InDinero.

Q. Did you figure it out?

A. I started asking, “What would InDinero look like if it were a $1 billion-plus company?” Looking at companies like Salesforce and NetSuite, I learned a few things. They all solve a big business problem that justifies a price point higher than $20 a month. They have seasoned executives and well-trained sales teams. They’re nearly 100 percent premium, with very limited free offerings.

Q. How did this help you change your product?

A. We knew we needed a product that we could charge a few hundred dollars a month for. I spent countless hours interviewing entrepreneurs of all different shapes and sizes to figure out their accounting and tax needs. We knew they wanted a one-stop accounting solution. It was a big problem for them that we didn’t file their taxes. We had to go from offering a cheap software solution that didn’t actually solve any problems to being an all-in-one accounting back office with accountants on staff. We had to do it all, including taxes and payroll.

A. Our 500 customers range from a two-employee start-up with no sales to a 100-employee company with eight-figure sales.

Q. What do you charge?

A. Businesses pay between $400 and $5,000 per month, depending on how complicated their accounting is.

Q. How are you marketing your service?

A. We’ve found the best way to get new business is to incentivize our current customers. For every referral a customer gives us, we give them a free month. We’ve found that, out of five customers, four won’t send any referrals, but one will send 50.

Q. Once you had the right product, how did you go about hiring the right people?

A. I thought about the mistakes I made the first time. I realized I had hired too many of my friends. I should have spent more time evaluating candidates outside my network — expanding the candidate pool through external recruiters, LinkedIn, specialty job boards and other methods. My original interview process wasn’t thorough. I had no defined criteria to evaluate candidates against.

Q. Do you have any favorite interview questions?

A. Yes, I ask the same ones to every single candidate. Some are, “What’s the hardest you’ve ever worked in your life, what’s your most lofty ambition and what are you doing for self-development?” I want to know what books and blogs they read, what conferences they go to, whether they’re working on side projects in their fields and whether they’ve ever run a company. I want a company full of mini-C.E.O.s. I also ask about their relationship with their last boss. If they talk about how horrible their last boss was, I’m done.

Q. Has your management style changed since InDinero’s early days?

A. Yes, I’m focused on going from being a C.E.O. who did the work herself to an effective leader. I’m taking the personal growth thing very seriously. I’ve hired executive coaches and joined Y.P.O. [Young Presidents’ Organization]. Last year, I read more than 100 leadership books.

Q. Is it hard to let go of the day-to-day?

A. In the past, I didn’t spend enough time recruiting for senior leadership. I tried to manage 20 people all by myself with no strong managers to grow the company. Now, I don’t spend any time having individual contributors report to me. I go straight to finding a strong V.P./director-level person who can build the team out for me.

Q. Did InDinero’s early problems test your relationship with your co-founder?

A. Andy and I have always had a strong relationship. We’re good friends — and still roommates. Living together is key because we can work on business challenges at all hours of the day. I don’t see this changing anytime soon.

Q. What’s the division of labor between you?

A. I’m responsible for customer happiness and customer acquisition. Andy, the chief technology officer, is responsible for product and engineering. We split all the other business functions — like legal, finance and operations — 50-50.

A. If we disagree on how to deal with something, we ask the other person how strongly they feel on a 1-to-10 scale about that particular issue. The person who cares more will make the decision. We also see an executive coach to help mediate our disagreements. On top of that, we go to co-founder marriage counseling! [The co-founders are not romantically involved.] One of our core company values is “rethink the obvious,” so I got the idea to reach out to marriage counselors listed on Yelp to see if any would work with us. Even though marriage counseling is usually for dysfunctional couples, co-founders often have the same petty debates. We wanted to be proactive.

Q. What have you learned about early success — and failure?

A. In the beginning, because of my age, I got a lot of wunderkind attention. It’s important to stay humble and not get carried away by early success — but the same is true of failure. Neither necessarily lasts. So, when InDinero was in trouble, I just talked to my parents and friends, lay low and focused on results.

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