FreeAgent’s Kevin McCallum took some time to share some of the secret sauce behind their online accounting software. In today’s interview we learn about how FreeAgent started, what fueled their growth, and what has made their referral program such a huge success.
Let’s start with what FreeAgent is?
Okay, so, FreeAgent is online accounting software specifically for freelancers, contractors and small businesses. We have been in business since 2007, founded by three guys who were all running their own businesses, and who were feeling the pain of managing their small business finances as much as dealing effectively with their accountants who were always at arms length at best. It’s a fact that a lot of small business owners face: they’re not trained accountants, they’re not trained book-keepers, and all they really want to do is run and grow their businesses. That was really the genesis for FreeAgent.
Since then (2007) we have gone on to extend the product, its capabilities and the solution to be a comprehensive double-ended book-keeping application. But the thing that differentiates FreeAgent from most of the other people who serve that same market is that we really focus on the user experience, on keeping everything simple, on the intuitive work-flows, and the user interface and processes. All these things that people care about as a business, that stuff shouldn’t be as hard as it needs to be, and we absolutely don’t assume they already know how all the finance stuff works.
What we try and do as much as we possibly can do is to “hide the wiring” that you would otherwise need to try and understand to be able to get value from complicated and over-engineered accounting software. Sadly, there’s a lot of it about…
The feedback we’ve get from our customers/users is that they love what FreeAgent does. The way it does it for them, the way it thinks about them as much as it thinks about itself. That’s something that’s demonstrated through the feedback that we get, the positive word of mouth effect that we get, all of which will lead on to our referral program.
We are currently the largest provider of online accounting software in the UK, where we were founded, and growing rapidly in other territories such as the US. We have paying customers in 83 countries around the world. We have a team of about 53 people today and growing pretty rapidly.
Cool, can you give us the origins growth story? How did you guys get your start?
Yeah okay, so at the very beginning, the three founders, Roan, Olly and Ed, released FreeAgent and initial uptake, as you might expect, came from the communities and groups of people who faced the same kinds of problems that FreeAgent was designed to address. A lot of “people like us,” but that worked massively in our favour in terms of word of mouth spreading positive vibes about us.
So at the end of the first year in business, customer numbers were in the low hundreds. What was growing very well was positive buzz about FreeAgent in the freelancer community and our user numbers began to grow exponentially so the following year 2008 there were about 1200 -1500 subscribers by the end of that year. And then 2009 is when we released the referral program, and that gave us a real and very significant bump in terms of our customer numbers.
Like most software as a service, or cloud applications, we offer prospective users a free trial process and what we do see is that the conversion rates of people who go on from this trial period to become paying customers if they’re referred by an existing customer, is very significantly higher than that seen with people signing up for a trial who come to us unreferred.
We have three main loops to our customer acquisition.
We have our direct customers who find us via word of mouth as well as other marketing, awareness work, SEO and advertising.
We also partner with large financial institutions, such as Barclays Bank in the UK who offer FreeAgent to their small and start-up customers. As you might imagine, this has been quite significant for us from a acquisition point of view as well.
We also have a focus on the CPA community, directly and with a company called Iris Software who are the largest provider of CPA software in the UK. We just launched an accreditation program as well for accountants and we also provide accountants with other management and reporting tools for their own use and also work very actively with them to help them make their clients aware of the benefits of using these kind of online products.
That’s a good growth story. Could you explain to us how well the referral program worked for you?
It has been very impactful, as well as appreciated and adopted by our customers and we even get some blatant copying going on in our space, which we like to think is more a form of flattery than a lack of imagination in others..
It’s really the “what’s in it for me” bit that makes it successful. I don’t mean that in a mercenary way or in a negative way, but there’s a very defined and jointly beneficial component to the way we structure the referral program for FreeAgent. If I’m a FreeAgent customer I have a unique referral code and each time I refer someone else, colleagues, friends, work contacts or what have you, then each of us get 10% off the monthly subscription fee in perpetuity or as long as we’re both actively paying for a subscription.
The benefit of that is the second time I refer someone I get another 10% off, and then another 10% off, up to the point that certain don’t pay anything for a FreeAgent subscription. They have referred a sufficient number of people to actually get up to that 100%.
We also have some people who have gone even further than this, and we can appoint them as FreeAgent evangelists, where we actually pay them money, you know, because they’ve successfully referred more than 10 other customers.
We have people who make some not insignificant sums of money on a monthly basis, and a few who have referred hundreds of other freelancers and businesses to FreeAgent. We’re very proud to recognize these people for what they do on our behalf in telling others about how perfect FreeAgent is for their own business.
It sounds like your customer base is really tuned for your referral program.
Yep, and the objective bit of this is the difference we can see in conversion rates of people choosing to sign up after a free trial. We can see a 60-70% increase in conversion rates for trialists that were referred, compared to those coming unreferred through other traditional methods.
The point we’ve heard — without leading you there — is that referred customers not only convert better but also stay longer. Has that happened for you?
Yeah that’s true, and without letting you lead me there I would agree whole-heartedly! I think the reason, to be subjective for a minute, is my belief that an active referral is effectively a five-star review. You don’t say “Logan, I saw a film last night. it was the shittiest film I’ve ever seen. You should go see it!” It is understood that it’s implicitly a good thing just because you’re talking about it, and we’re in a good position because our customers love what do do and are quite happy to tell other people.
All of this stuff feeds into that psychology of decision-making these days and in a much more meaningful way. You guys know this, you deal with it everyday. The point is it there has to be something in it for people. The fact is that we want to reward people who do stuff that’s beneficial to us on our behalf. That in itself has played out quite well because we are quite honest and transparent with that – the importance of there being some value for our customers to actually take the time out to actively promote something they believe in.
We care deeply about our service, our support is genuinely world-class, and we know that because we get feedback on it. All of these things have to be in place before you can truly have a successful referral program. It’s got to be authentic, it’s got to be believable, it’s got to be supported by something that actually stands up to fairly close scrutiny when it comes to what it purports to be.
Can you tell us more about how a referral program helped accelerate existing word of mouth growth?
Yeah it’s not difficult to recap and quantify these. I’d prefer not to say exactly what our numbers are, but definitely we can see the rate of incline of customer acquisition being very significant from it being introduced. But we can put our hand on our heart and say it’s one of our most significant drivers of growth.
Virality is one of these things that if you the more you try to force it, the less likely it is going to happen. If you try too hard it won’t look authentic. That’s something that I think we do well in terms of being referral-worthy. People can feel comfortable talking about us because of the “voice” that we use to talk about FreeAgent – we can be irreverent without being unprofessional, in the way that we actually communicate with our customers. That’s not always easy to do if that’s not the way you already are. This comes from the very start and the three founders themselves. It’s them, it’s their voices that kind of resonates in the way we talk. That’s fantastic for us because we don’t have to force it: It is innately who we are.
Yeah for sure, so what you guys are saying is to focus your time on being referral-worthy?
Yes, although we might not call it exactly that. What we think about is we’ve got to be “as good as we can be” and care very deeply about that. We have a very high proportion of designers to engineers, certainly more than most other people in our space, because we care. And these aren’t just designers who are designing pretty things. These are people who really understand work flows, what processes work, and undoubtedly on of the reason we care so much about this is because we want people to recommend FreeAgent to other people. As you say, referral-worthy.
That’s perfect, do you have any other wisdom/lessons/words of advice that you can summarize for our readers?
Yeah, I think that the the authenticity of something like FreeAgent can’t be forced or developed in a lab – rather it evolves over time.
Every aspect of what we do is informed and driven by a team of people who care very deeply about this business as well as our interactions with our customers. Every one of us cares about the quality of the work that we do, and we know our customers appreciate our efforts.