Award-winning cloud accounting software specifically designed for freelancers and micro-businesses.
- Location Edinburgh, United Kingdom
- Investment sought: £1,000,000
- Equity offered: 3.21%
Product(s) and/or service(s)
An astonishing 95% of all businesses in the UK have fewer than 10 employees. These 5 million freelancers and micro-businesses all have one thing in common: the need to stay on top of their business finances. But this isn’t as easy as it sounds; chasing down paperwork, wrestling with spreadsheets and grappling with tax returns is time-consuming and stressful. That’s why we founded FreeAgent.
Since 2007, we’ve been on a mission to democratise accounting for freelancers and micro-businesses. Our award-winning, easy-to-use cloud accounting software is specifically designed for how these businesses work. FreeAgent helps them manage their business admin, gives them real-time access to their financial information and, with its unique tax filing capabilities, helps them relax about tax.
With an ever-evolving product and more than 40,000 enthusiastic customers, we now want to take FreeAgent to the next level and help even more freelancers and micro-businesses take control of their finances.
Financial management and tax compliance is a major source of pain in time, cost and anxiety for micro-business owners who want to spend their time growing their businesses – not tackling mountains of paperwork.
We have found that traditional accounting software can feel impenetrable and over-complicated. Usually built by accountants for accountants, it tends to be more suited to the demands of larger businesses, leaving freelancers and micro-businesses out in the cold.
FreeAgent is different. Easy to use and jargon-free, it’s designed specifically for micro-businesses and the way they work. FreeAgent helps them take control, and makes them feel smart – not stupid – about their finances.
As FreeAgent is cloud-based, customers can take care of business from anywhere they have an internet connection, including their smartphone. They can:
– Nail the daily admin by taking care of everything from estimates, invoicing and time tracking, all the way through to tracking bank transactions, out-of-pocket expenses and payroll.
– See the big picture by tracking their cash flow and profit, and staying on top of upcoming tax deadlines.
– Relax about tax by filing Self Assessment, VAT and RTI payroll returns directly to HMRC – many of which are completed automatically.
Over 40,000 paying subscribers already use FreeAgent to manage their business finances. Our customers tell us that as well as saving them time and money, FreeAgent transforms the way they think and feel about their finances.
We now want to bring these benefits to the wider micro-business community and believe the impact could be huge. The Federation of Small Businesses estimates the average small business spends about 12 days each year on tax administration alone. Our customers tell us that FreeAgent saves them huge amounts of time when it comes to filing their VAT and Self Assessment returns alone. If we could reach all 5 million freelancers and micro-business owners in the UK, we could free up millions of days for them to grow their businesses and delight their customers.
Substantial accomplishments to date
We’ve built an award-winning cloud accounting product, a loyal base of over 40,000 customers and a talented team of 70 employees.
Most importantly, our customers tell us they love FreeAgent and that it has transformed their relationship with their finances. In our most recent survey customers gave us an incredibly high Net Promoter Score of 76 – this is way above the industry average of 26, and on a par with world-leading brands like Apple.
– Best Practice Software at the British Accountancy Awards.
– Multiple wins at the Software Satisfaction Awards, most recently winning both the Small Business Accounts and Expense Management categories.
– Ranking in the top 20 of the Deloitte Fast50 list of the fastest-growing tech companies for the past two years.
– Listed in the 2014 FinTech50 rundown of Europe’s most innovative financial tech companies.
– Raising more than £7M from highly-respected technology investors to accelerate our product development and growth.
As a subscription-based business, we make money by charging customers a fee to use FreeAgent. To provide this service and grow the business we spend money on:
– Providing, maintaining and supporting FreeAgent.
– Conducting marketing and sales activity to bring in new customers.
– Investing in further product development.
– Paying for some administrative overheads.
We generate subscriptions through three channels:
Business owners can subscribe directly to FreeAgent on a monthly recurring basis at £19, £24 or £29 per month (plus VAT) for sole traders, partnerships and limited companies respectively. We offer a 30-day free trial before users enter their payment details to start their subscription. A discount is available for customers who commit to paying annually.
Just as it’s hard to fill a leaky bucket, it’s difficult to grow a subscription business if lots of customers cancel, so customer churn is a key business metric for us. As of March 2015, our direct customer churn was 1.5% per month, significantly below the 3.2% average for SaaS companies selling to small businesses. Low churn gives us predictable revenues and high customer lifetime value.
Over 750 accountancy practices use the platform and we count some of the largest specialised accountancy firms for freelancers as our customers. Accountants include FreeAgent for their clients as part of their monthly accountancy fees. Practices access their clients’ accounts from a single dashboard without having to log in to each account separately. Accountants also benefit from analytical tools, including exception-based reporting that highlights which clients’ accounts require attention.
FreeAgent is available on a monthly subscription basis through partner channels such as Barclays’ Bank (in their MyBusinessWorks package), and with both Lloyds and Bank of Scotland as part of their Business Toolbox app store.
Use of proceeds
Each time we’ve raised investment finance to accelerate, we forecast to return to breakeven on those funds within 18-24 months. We’re on track to break even within this period from our existing financing and growing healthily, but we think the opportunity is big enough for us to accelerate that growth even further.
We’ve already built a significant, sustainable business in the UK and plan to use this investment to:
There are a staggering number of freelancers and micro-businesses in the UK. Over 95% of all UK businesses have fewer than 10 employees, so that’s 5 million entrepreneurs who could be using FreeAgent to take control of their business finances and win back some precious time to spend on growing their businesses!
In our experience, our competitors tend to cater for larger, more complex businesses or take a ‘one size fits all’ approach and as a result, their software can leave freelancers and micro-businesses dazed and confused. Bloated with functionality that smaller customers simply don’t need and written in accounting jargon, these software packages often cause more headaches than they cure.
By contrast, FreeAgent is specifically designed for this huge, under-served section of the market: the 5 million freelancers and micro-businesses who represent the fastest growing type of business in the UK and contribute a massive £300bn to the country’s GDP.
For the 28,000 accountancy practices in the UK, FreeAgent can make it easier to work with their micro-business clients. Customers can stay on top of their books and work with their accountants in real time, looking at the same set of up-to-date data. This frees up accountants from much of the time-consuming financial admin that has traditionally been part of supporting these smaller clients, and as a result they are able to focus on providing valuable advice and helping their clients grow.
Characteristics of target market
Whilst micro-businesses span a diverse range of industries and have their own goals to achieve and challenges to face, they have one thing in common: they need to stay on top of their finances with maximum efficiency and minimal stress. Here are a few quotes indicative of our market research:
“Before FreeAgent, I found it a total pain to keep on top of my business admin. I recorded everything on spreadsheets and would invoice my customers manually using a PowerPoint template! I would spend ages ploughing through endless spreadsheets and receipts to try to pull all the paperwork together in time for tax deadlines.”
– Jo Halliday, Talking Medicines
“My accounts used to be something I’d do once every quarter when the VAT return had to be done. They had to be done under time pressure, under extreme emotional pressure – because I’d feel “I’m an idiot, I’ve left it too late” – and I had to get bookkeepers in to help me, so it was just a nightmare.”
– Piers Gibbon, voiceover artist
Over the years, we believe we’ve built a proven strategy for reaching our target market through our three key acquisition channels:
Reaching direct customers
FreeAgent has an enthusiastic and rapidly growing community of direct customers. We use helpful content, SEO, social media presence and a proactive outreach strategy to build brand and product awareness among potential customers.
We also use data extensively to understand customer journeys through to subscription. This influences ongoing work on both our website and the product itself to improve the number of customers who try FreeAgent and subsequently subscribe.
Driven by our customers’ very high levels of engagement and satisfaction, we also have an established and popular customer referral programme in place. Most of our subscribers first heard about FreeAgent via word of mouth, and 9 out of 10 customers have said that they would be happy to recommend us to a friend.
Reaching accountancy practices
In addition to our direct customer acquisition activities, our accountancy practice sales team drives the growth of FreeAgent among the UK’s 28,000 accountancy practices. In line with our product focus, we concentrate on practices with significant numbers of freelance and micro-business clients. We already count many of the UK’s largest IT contractor accountants among our customers.
Reaching out with partners
Building on our existing relationships with organisations like Barclays’ Bank and the Lloyds Banking Group, we work to nurture partnerships with other banks and service providers who have significant customer bases within the freelancer and micro-business sector.
We have found that most accounting software products are aimed at the more generic ‘small business’ market – businesses with up to 50 employees – and ignore the big differences between these companies and the micro-businesses that we focus on.
Because our customers don’t need the complexity of accounting functions like ‘cost centres’ and ‘revenue recognition’ we can instead make a product that’s easier to understand and that does truly useful things, like filling in customers’ tax returns and filing them directly to HMRC.
Our customer satisfaction ratings are the best in our industry. In the latest AccountingWeb Software Satisfaction awards, FreeAgent scored nearly full marks from voters on its ease of use, functionality, support and value for money. A PC Mag survey also puts FreeAgent at the top.
We believe that competitor products who claim to be aimed at the micro-business market fall far short in their capability to perform important time-saving tasks such as forecasting tax liabilities and supporting the business workflow with features like projects and time tracking.
FreeAgent’s tax forecasting and filing capabilities are not features that our competitors could easily emulate. They are an integral part of our real-time, tax-aware, double-entry accounting engine that has evolved continuously. We believe that we are 3-4 years ahead of many of our competitors in this regard. We also have a growing number of customers outside the UK.
Founder and CEO
Co-founder and product director
Co-founder and CTO
Business development director