The Nitty Gritty
- How Mike transitioned from growing his design and marketing firm to creating FreshBooks, an invoicing software tool for small business owners
- How a strong value of honesty seeps through the company and results in an open and transparent team that makes the product better
- Why Mike created a pretend competitor to test new product features, how they tracked that projectâs milestones, and when they knew that their new version would be a success
If youâre a small business owner, no doubt that youâve heard of FreshBooks. In fact, you might even use the software to bill your clients. But what you might not have heard is how FreshBooks came to be and how itâs improved over time.
Mike McDerment, FreshBookâs cofounder and CEO, joins the podcast today to talk about how he structured his design agency to create more time to work on FreshBooks, why they used a secret company to test new features before launching them to the FreshBooks customers, and how important strong values are to create a strong company culture.
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Creating time to develop your businessâ side project
âI built my firm in such a way that I got a lot of time back. I helped curate the work of my team members and push them to do as much of the client engagement work as I can. Thatâs the one thing that I felt that I was still involved with and should be — but I wanted to just show up to meetings and grooming work.â — Mike McDerment
For the first two years, FreshBooks made only $100 a month in revenue. That meant Mike and his team needed to get creative. Mike started by pivoting about 80% of his time from the firm to FreshBooks, which at the time was an unnamed side project. The rest of it was financed by agency staff who, when they had extra time, put that into FreshBooks. âThatâs how we financed it without being explicit about it,â Mike explains. âWe would have that company running and we were paying those employees, but more and more of their downtime was working towards the side project.â
Soon enough, FreshBooks started to take off — a founder bought in and so did his mom: she wrote him a $10,000 check to invest in FreshBooks. At that point, Mike knew it was time to start firing clients from the design firm to work on FreshBooks full-time.
Testing and changing your product by pretending to be a competitor
âHow are we going to figure out if this is a better experience for people and know that conclusively from a business results standpoint? We had a variety of other considerations but it basically led us to: how do we test it before itâs live? But, I was also thinking: weâre doing this to build something thatâs a step change for us in a our business that helps us move faster and get ahead of the competition. If theyâre able to watch us work along at this, thatâs not very helpful or very stealthy — and we donât get the benefit of being ahead.â — Mike McDerment
Creating a secret competitor — a company they called Bill Spring — isnât the average way to test new features or products. But thatâs exactly what Mike and the team at FreshBooks did. âWe used that as a petri dish,â Mike says. âThat was a very important thing and Iâve learned a lot about innovation.â Particularly, he adds, how larger companies sometimes lack the ability to innovate because itâs too big of a risk.
But they wanted to take huge risks. To get around that, they created a logo, website, and articles of incorporation for Bill Spring — but there were no legal ties to FreshBooks. That way, the team could experiment and test out their ideas to see if they worked. And it did. They knew it once they got the first email from a FreshBooks user requesting to close their account. They were moving to Bill Spring.
Culture based on strong value set, including honesty
âWeâve built a strong culture on a value set called CORETRUST. Thatâs an acronym for our nine values. Among those are things like honesty which is not so much the word that matters, itâs how you define it which is: weâre straight forward and we communicate directly. Inside the building, we value people speaking their minds. It doesnât need to have a lot of drama associated with it — itâs just: what are you thinking?â — Mike McDerment
At the end of the day, FreshBooks wouldnât be what it is without a strong culture and value set. With honesty at the forefront of their company values, it encourages staff to be open and direct about their thoughts — and itâs encouraged — because thatâs what results in a better product. And no doubt, as Mike mentions in this episode, has contributed to making FreshBooks better over the years — with the best up ahead.
Listen to this episode to hear more from Mike McDerment, FreshBookâs cofounder and CEO, about why he started the company, how he structured his agency to create more time for side projects, and much more.