Good NewsAfter Sage withdrawing their web-based accounting software last night and SAPs issues with its Business ByDesign rollout, I’m hoping I can add some positive news to the SaaS scene.  

I’ve never really spoken openly about how many customers we have, how profitable we are, etc. But despite the economic doom and gloom we’re actually doing quite nicely. Better than we ever have done in fact.

Last year saw a new web-based accounting application being launched in the UK market virtually every month. Some were from technically minded accounting practices, others from aspiring one-man web development companies and yet others were listed companies with huge financial backing. The year ended with software giant Sage releasing their own software-as-a-service (SaaS) offering, Sage Live.

We’ve been gradually building our customer base and continuously improving our software since I started the business with a Princes Trust loan 4 years ago. It’s been an amazing journey for me personally. I’ve done things and met people I’d never have met if I hadn’t gone into business:

I’ve hob-nobbed with the Dragons a number of times. Bill Gates praised KashFlow when I met him last year. I’ve had a private meeting with James Purnell (a future PM) about my thoughts on encouraging people off  welfare. Alistair Darling said he could so with some KashFlow at the Treasury (this was just as the credit crunch was starting to bite) and Prince Charles has been known to say nice things about me. All good for the ego!

In October 2008 we unexpectedly won the main Small Business Accounting Software category at the Software Satisfaction Awards, beating established products like Sage 50 and Quickbooks. The awards are based on a survey of actual users rather than the verdict of a panel of experts. The same survey showed that 70% of the votes in the web-based accounting software category were cast by KashFlow customers. The win meant a lot to all of us here and gave us a real boost – both in terms of morale and profile.

We now have 2,400 paying SME customers using our software. 95% of them are UK-based businesses with the remaining 5% scattered around Europe, UAE, Saudi Arabia, Canada, USA, South Africa, Singapore, Hong Kong and China.

In addition to the SME customers, we also have over 120 accountancy practices that are paying members of our Partner Programme, including two of the UKs biggest accountancy franchises; Abacus and TaxAssist Accountants.

I’ve not seen any other SaaS accounting software firms openly admit how many paying customers they have in the UK – they either give figures for their worldwide customer base, or the figures include non-paying users

I hope I can get the ball rolling by putting our numbers out there so we can all see how the take up of SaaS accounting amongst SMEs in the UK compares to other countries.

Considering the growth curve we’re on, I think we’ll easily double our customer base by the end of the year. We now have over 40 new companies take up our free trial every day, and this number just doesn’t stop growing. As we continue to add new features, more and more of these will convert into paying customers

The partnerships I’ll be announcing in the coming months will also help to significantly raise our profile and grow our customer base

All of this has been achieved with relatively little funding. All of the funding we’ve had to day has come from my Chairman the Rt. Hon. Lord Young of Graffham.

We’ve had a lot of interest from venture capitalists, especially in the past few months. But we’re fortunate in that we’ve not needed the money. We now stand on our own two feet – KashFlow is funded from cashflow.

The accepted wisdom seems to be that SaaS doesn’t make money. Maybe not at the mid-market or enterprise level, but we’re certainly managing to do okay in the SME market.

The entry of the UKs biggest software company, Sage, into the SaaS market place was long awaited but short lived. I know I was probably the most vocal of it’s critics, but that doesn’t mean I’m not disheartened to see it go.

Not because the product was any good (it wasn’t) but because SaaS needs Sage almost as much as Sage needs SaaS. With Sage in the market offering a viable SaaS product, awareness of the benefits of web-based software would increase and so would acceptance amongst some of the more reserved accountancy firms.

I think the problem they made was rushing to market with a product that wasn’t ready, suited or secure. The official line is that they have taken it offline to make improvements. But I know of at least two bloggers (besides me!) that will be saying it was taken offline due to their conversations with Sage confirming the security issues.

They need to build something from the ground up – using a language that’s designed for the web. Rather than shoe-horning an existing product on to the web using some sort of middleware.

I genuinely hope they come back to the market later in the year with a product that’s worthy of the mighty marketing machine they can place behind it. We’ll all benefit in the long-run.

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