the hounds

Next Time Just Ask

So we got a cease-and-desist letter from Xero. To be fair, outdated information is still incorrect information and of course we don’t have any problem amending anything to match up with how their product works, now.

That said, does Xero really feel the need to go through some lawyer to ask someone to amend some facts on a website? How old-school are these guys?

We consider that bad form and we certainly wouldn’t do something like that – below is our response to that letter, inviting them to next time just open up a dialogue, before releasing the hounds.

Hi Jack Quirk,

Thanks for getting in touch. I have been informed that our information was accurate at the time of original publication but of course we get than plans and features change (as perhaps you feel some pressure from your competition?) and we’re happy to correct any information which may be outdated on our website, about the Xero starter plan.

We couldn’t find any information to back up your claim about job tracking being available without any add-ons on a basic package but of course if you can point us to maybe a website which explains this, we’ll be happy to amend that too. It currently says you can do this with an add-on.

In terms of the limitations for custom invoices and showing information about Xero’s other plans, please understand we are not in the business of promoting someone else’s entire line of products and we feel a comparison against (only) the basic plan is perfectly reasonable – and consistent with our comparisons of the basic plans from other competitors. If it is any consolation, we do mention in the text that you can upgrade to one of the other plans if you want more than 5 custom invoices per month.

Can I make a suggestion? Xero employs hundreds of staff, in many different departments and of course while we are certainly flattered that they are checking us out, we can still be “friendly” competition. Next time just ask.

Best Regards,

Anita Brown

eLEDGER Team

Maybe this is a little bit cheeky, too, but hey we’re not spending millions promoting ourselves to you as a bunch of really cool people who just want to make your accounts look “beautiful”…

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

hard truth

The Hard Truth About Startups in Australia

 

hard truth

Startups are a bit of a thing in Australia, right now. You probably know or have heard of someone who has recently become involved with a startup – or may even be that person, yourself. It is no big surprise, considering the steady decline of jobs from traditional “big business” employers who are failing left, right and centre – and either packing up and shifting their operations overseas or shutting up shop entirely. There has also been a more cultural shift away from traditional “nine to five” type work for the past two decades, which has not only seen many people jump from one employer to the next every couple of years but also expanded the concept of “work hours” to basically 24/7, as well as the “work week” from around 38 hours to anywhere between 20 and 70 for many.

This trend has not gone unnoticed.

Many institutions and government bodies have taken note of this shift and have recently begun to say kind words and make token gestures about the burgeoning “startup community” of late. Banks, in particular, have begun to make moves to at least look like they are embracing startups but there are many other examples – mostly from those traditional “big business” employers, like Telstra and Optus.

There are brand new buzzwords like “Pivot” and “Unique Value Proposition” and even dopey catch-phrases like “Fail Fast” and “Celebrate Your Successes“. My favourite is “Vanity Metric” – this is when you are measuring something completely inconsequential which makes you look good – for example pointing to thousands or even millions of people downloading your app which is free and doesn’t make any money but actually cost a fortune to develop.

Now creating a “startup” may sound pretty glamorous. We’re all familiar with the mythology going all the way back to the 1970’s of companies that were founded in someone’s garage which are now major global players and we’d all like to think we could be that guy who creates “The Next Facebook“. You know you’ve become a part of the national conversation when 60 Minutes has a segment on creating that million dollar iPhone app.

 

THERE’S NO MONEY IN IT

Unfortunately, the reality is not quite so gilded in sunshine and roses. Typically the “founder” of a startup leans toward the 70 hour end of that work week – usually unpaid. Often under-appreciated. It can lead to depression – especially for sole-founders – and of course it can drain away all your funds. More often than not those funds are your own precious savings, because the somewhat less obvious but more important fact here is that there is little to no investment for startups in Australia. Worse still, this is exacerbated by successive governments who like to say all the right things about supporting small business and startups, remember, but actually do little more than get in the way with a tax system which borders on punitive.

Steve Sammartino has some useful advice for anyone who is interested in making the transition from Employee to Entrepreneur and notes the most important thing to keep in mind about your startup: IT IS PROBABLY NOT GOING TO BE A PATH TO RICHES. If you just want to get rich, stay in your job and get good at investing in property because that is a far more certain way to achieve the outcome you are looking for.

The hard truth is Australia is not really very well set up for this whole startup thing to actually work, for a number of reasons.

The single most important of those reasons is the one I’ve mentioned above: there’s no money in it. So-called “Seed Investment” (another buzzword) in Australia is a lot like the pot of gold at the end of the rainbow. This is the earliest investment in your business – the legendary $10,000 credit card loan that Bootstraps (another buzzword) your company from idea to ASX-listed billion dollar valuation. The closest thing we have to this (foreign concept, born out of America’s Silicon Valley) is the rising number of “Startup Accelerator” (another buzzword) programs we have, backed for the most part by that Big Money mentioned above – banks, telcos, etc.

The idea is they give you what has come to be colloquially called “Ramen Money” – that is, just enough money to be able to get by but not what you would call an actual, proper salary – and only if you pass through their Reality TV style audition process, where you basically have to prove to them that if they do invest this small amount of coin they have found lying around in the back of a couch, they aren’t just throwing that money away.

They are basically a work-for-the-dole program.

 

AUSTRALIANS ARE VERY RISK-AVERSE

It is a very lazy way for someone who has gone down path B (stay in your job, learn property investment) to get themselves a nice, easy seat on the board of some shiny new company that could potentially become a great business – for very little money down and even less risk. As an investor I spoke to recently put it, it is a completely upside-down model – turning investors into the prize, with far too much emphasis on pitching, rather than the way it should be: the prize being a share in your business, with more of a focus on who is making that investment out of a pool of literally trillions that are actually available, just from super funds alone.

We all know Australians are very risk-averse (ignoring the billions in annual revenues from gambling, the subtle blurring of the lines between sports and betting and a particular horse race in November which is actually a public holiday in Victoria) and perhaps it is not surprising that what we have in this country is literally thousands of startups desperately circling like vultures over a handful of VCs (another buzzword) who prefer to sit back and let the business plans fall into their laps like manna from heaven, cherry picking only the best bets to be the recipients of their walking around money.

What is a little less obvious is WHY things have become like this. Is it really as simple as just being so much easier to let business opportunities come to you – or fail – rather than try to find them yourself? Are we really so blind to opportunity we will not even be interested in talking to you unless you’ve already built up enough “Traction” (another buzzword) to prove your business actually makes a profit – at which point you wouldn’t actually need our money any more so what is the point in even bothering to ask us, now?

Surely every one of those prize winners has thought “where were you last year, when I was spending all my time building the product instead of working in a ‘real job’ and spending all my own hard-earned cash bringing it to market and living on Ramen Noodles with whatever was left over?” – as they contemplate another year of the same, this time in search of the Series A funding their new shareholders will be demanding.

 

THEY WANT YOU TO FAIL

A recent article about “Mutual Obligation” mentioned the often uncomfortable fact that multinationals “assert their right to government assistance, both direct and indirect, avail themselves of legal systems, infrastructure, political influence and the many other benefits of civil society” – which they are usually forgiven for (even while actively avoiding their obligation to pay taxes) because they are regarded as “job creators” in a society where that idea of the 9 to 5 “real job” is deeply entrenched. That idea comes from the Industrial Revolution and was in part popularised by Ford – a company which is closing its factories in Australia – which ironically found that it doubled the profits from its factories.

When Ireland offered sweet tax breaks to companies like Apple, it was in exchange for jobs. Despite all the rhetoric about support for startups and gestures like co-working spaces and free seminars on how it works in Silicon Valley and what all the various buzzwords mean (and of course those accelerator programs) it seems like what Australia really wants is to go back to that Industrial Era way of doing business. It is almost like they want you to fail – and then get a real job.

We recently had someone interested in working for us who liked the product, had a relevant background, was excited about the space we are operating in – and was also looking for other work. While we were able to offer a pretty sweet deal in terms of employee equity options, there was little in terms of cold hard cash on the table and even with the extremely part time approach he had adopted, it was never going to work. We still have some ways to go if we want our startups to fulfil that “job creators” promise we (I will admit even I) find so attractive.

If you define a “small business” as one with less than 20 employees, then that represents 99.98% of all businesses in Australia. Change your definition to less than 5 employees and you’re still looking at 98.98%. Big industrial era employers are a shrinking feature of Australia’s landscape but if you’re thinking of maybe creating your own startup in this landscape, there are a few hard truths you are going to need to be aware of before you begin.

 

Michael Mehmet

Michael is founder and managing director at eLEDGER and his opinions are usually the result of having a bad day.

Money To Burn? Watch That Cash Flow!

In every business, Cash Flow is King – this is just as important when you’ve got loads of “money to burn” as when you have a very limited budget. money to burnBesides the obvious risk of running out of money, high cash burn rates are a bad idea because they mean poor strategic agility. Poor what now?

If you spend all your cash on fancy frills, you’re probably not growing the business and scaling. If you burn too much money hiring, you’re not really leading. If you kill all your cash, you can’t adapt quickly if the market changes.

Silicon Valley is really starting to worry about it, as expressed recently by the likes of Marc Andreessen (Netscape), respected venture capitalist Bill Gurley, and Fred Wilson (Union Square Ventures).

Raising a lot of money gives the illusion that a startup has made it: salaries can be high, offices can be glamorous, and it can make employees feel a false sense of relief, like all its hard work is done.

Here are some things to watch out for:

BLOAT

Hiring people is easy. Laying them off is devastating. The more you hire, the more the business starts to bloat, burns cash, and begins to run poorly. What was once a singular vision of the Founder is now beginning to diffuse, in the hands of more and more people. This is actually a fairly natural progression which is to be expected – and can be mitigated through proper brand continuity and standards, in place of the Founder holding everyone’s hand. Hiring binges may signal growth but can also demonstrate lack of control. Make sure the overall vision of the company flows through management, operations, and into each and every individual who comes aboard.

COMMUNICATION OVERHEAD

Too much cash and too many people usually leads to communication breakdowns, as the business loses its clarity of purpose. A big shiny office with lots of new staff can give you a (fake) “we’ve made it!” feeling and distract from the need to actually deliver results. This can exponentially slow everything down as you lose sales to smaller, more agile competitors and become obsessed with differentiation – and in the process, lose your edge. A lack of balance between decisive edge and communication makes your startup a bad place to work, fragmenting your culture and your offering. It becomes too complex and unwieldy to easily change course.

At some point you have to build a real business, generate real profits, sustain the company without the largess of investor’s capital, and start producing value the old fashioned way.

There are no exceptions to the above but if you’re reading this, you’ll probably be OK – here are some things you can do now:

CUT THE FRILLS. Stay Lean and don’t worry about things like office design and expensive coffee machines. You can have the Herman Miller chairs when you’re cashflow-positive and pulling in decent monthly sales – until then, grab your coffee down the street and get to work.

HIRE WOLVES, NOT SHEEP. Spend your money on top hires who bring immediate appreciable value to the business and who can move the needle for you. If a new hire isn’t already making a dent the day they land, their value is questionable.

INVEST IN MARKETING. What to know what’s on every analyst’s mind? Brand Or Die. Differentiating on the basis of brand can be the extra you need to overcome competitive pressure and analysts are telling tech companies to stop worrying about whose widget works better and start brand building. Figure out who you are, what you do and why you do it.

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

eBay And PayPal To Split Into Two Separate Companies

there can be only one – NOT!

eBay splitting off Paypal into a separate company is definitely good for Paypal, with lots of new opportunities on the horizon, but will it necessarily be good for eBay?

Can Laziness actually HELP you succeed?

Community creator Dan Harmon recently spoke to Fast Company about how he doesn’t have much of a work ethic, doesn’t commit to a schedule, and how you should embrace your laziness.

Find the thing that you really like to do, and try and figure out how to make that your job… truly, that is the only way I manage to stay productive — is by finding ways to get paid to do the things I would rather do.

We’ve all heard the idea of finding the thing that we are actually driven to do, before – although perhaps not phrased in quite the same way. Is being as lazy as Dan openly admits to being, actually the secret to success?

What motivates you to get out of bed in the morning – is it the daily grind of some job you’d rather not do, or the “dream job” where you get paid to do the things you actually love?

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

There’s nothing wrong with you!

confused Joey“Everyone keeps telling me Xero is awesome but every time I try to use it I just get confused and can’t figure out what I need to do. What’s wrong with me?”

There is NOTHING wrong with YOU!

The problem isn’t you. The problem is the fact that most accounting products – including Xero – were designed by accountants and if you don’t happen to know anything about accounting, then you are naturally going to be a little bit confused when you’re using something that is meant for your accountant.

FOR DUMMIESCan I just use a self-help book?

Sure – there’s one of those “for dummies” books which, if you’ll pardon the insult to your intelligence – once again, assuming there’s something wrong with YOU – is only going to cost you an additional $30 on top of what you’re paying to use Xero, in the first place.

Rod Dury asks nicely

Xero was having a usability problem

The creator of Xero actually asked the author to write it! I guess there were a lot of other people out there, like you, who couldn’t figure out how to use his product…

Why does all this cost so much?

Well… it depends what you need.

You might be able to get away with Xero’s basic entry-level product, BUT you are extremely limited by that product and you might not be able to get everything you need done with it. This is no small coincidence! Xero hasn’t yet made a profit since they began in 2006 – they get their money from shareholders and rounds of investor funding. They need to maximise the amount of money they can squeeze from their customers, so they can turn around those losses and start making those shareholders happy.

Make no mistake:

they want you to upgrade to the $50 a month version – and then pay extra for other things you need, maybe even a self-help book they helped to write!

Here’s a quick comparison with eLEDGER:

comparison chartNotice the lack of green arrows on that $25 a month plan? Even if you upgrade to the $50 a month version, you still need add-ons to access some features – features which come standard on the “Executive” plan with eLEDGER, at less than their limited, basic package – features which will cost you extra and complicate your accounts because they come from third party providers that charge you separately!

What if my needs are simple?

Good news – you can get away with the most basic package from Xero! You might want to take a moment to consider what you are paying, for that. If you don’t need all those fancy “Premium” features, do you really need to pay what you might call a “Premium” price?

If your needs are simple, there’s no reason your accounts need to be complicated.

If Xero is not really helping you to cut down the confusion and save time with this stuff, try a “Leanaccount with eLEDGER – it’s going to cost you less than half the price and you can try it FREE for 30 days to see if it works for you.

 

The best part is there’s no such thing as “eLEDGER for Dummies”!

 

Sterling Smith

Sterling has extensive experience in important sounding stuff and something about his opinions and blablabla are you seriously reading this right now?

 

 

When Payment Processing Becomes A Commodity

this is something we have identified early – having spoken about it in a recent topic on “bank reconciliation” and the usefulness of bank records to your accounts, and exploring better options for using data from payment gateways instead