Had FreshBooks CEO Mike McDerment been the type to be easily discouraged, 10 million entrepreneurs from 160 countries would be just a little bit more frazzled, and their lives just a little bit more difficult. FreshBooks is a company that creates accounting software for independent service professionals and is the world leader in this niche. McDerment’s reputation is that of someone who is caring, deeply ethical, and who puts people at the centre of everything FreshBooks does.
A website designer at the time, McDerment started FreshBooks in 2003 after accidently saving over an invoice created using Microsoft Word. Fed up, he endeavoured to write his own application. The idea didn’t take off immediately and McDerment spent three and a half years living in his parents’ basement along with his co-founders, Levi Cooperman and Joe Sawada. He has credited Sawada’s invincible faith and optimism for his own perseverance during this time, although he did come close to quitting on an occasion or two. In those types of situations, his counsel is to celebrate the small wins. If you have 10 clients and you obtain one more, he says, you can either view it as having no clients or as having made a 10% improvement.
McDerment has since had many other occasions to grow his courage muscle. A few years after FreshBooks launched, he was approached by Wells Fargo, which was interested in using FreshBooks’ accounting software and requested a presentation. McDerment asked for 10 times the money Wells Fargo offered and was shot down. FreshBooks had to go back to the grind, with only the belief that the company’s product was solid, and that it would catch on someday. History would prove McDerment and his co-founders right.
Another demonstration of business courage came in 2016. The realization had been dawning on McDerment that while the company was performing well, the market was ripe for competitors. Compounding matters was the fact that the company’s main code had been written over a decade earlier. McDerment calls this “spaghetti code” over which new lines of code had to be added. The time had come to offer a new product that could adapt to the future, but how could FreshBooks do this without alienating its existing client base and while also giving its team ample space to create and innovate?
The ingenious idea FreshBooks’ executive team came up with was to create their own competitor. A company called BillSpring was formed with its own identity, while its true relation to FreshBooks was kept secret. This gave the FreshBooks team the space to truly innovate and take risks while testing the market and gauging BillSpring’s performance. When, by all accounts, BillSpring’s software had surpassed that of FreshBooks, the identity of the company was revealed, and customers were given the option of switching over to the new platform or sticking with the old one while keeping all their data intact. The experiment had succeeded, FreshBooks’ platform was overhauled, and McDerment credits his entire team with the success, though he admits to having lost a lot of sleep over the risky move.
FreshBooks is one of the few high-calibre tech companies that had the option to move to Silicon Valley but chose to remain in Toronto instead. McDerment expresses pride in this and affirms that FreshBooks’ Toronto location has never been an obstacle to the company competing at a global level or to hiring top-notch talent.
Twenty-four months after launching, FreshBooks had exactly 10 customers, each paying $10 a month. By any standard, the venture at that point was a failure. Under such circumstances, quitting might have been the rational, logical thing to do, and yet, the product ended up catching on with customers and FreshBooks now serves millions of clients.
The story of how FreshBooks started drives home the lesson that failure and success are relative and depend heavily on what point in time one is making the judgement. Three and a half years living in your mother’s basement is enough to make anyone give up, but the will to hold on is what made McDerment’s success in the end. McDerment’s and FreshBooks’ story are a great example of the power of tenacity and self-belief, and that some ideas just need time and patience to catch fire.
Nezha Boutamine | Staff Writer