Jamie Shulman and Jamie McDonald co-founded Toronto-based Hubdoc Inc. in 2012. Hubdoc is a platform that consolidates bills, statements and other important documents online all in one place. Users provide their login credentials for their recurring bills and statements and Hubdoc fetches these documents, extracts key information and notifies users when new documents are available.
The partners were pleased when the concept gained early traction in the market. Consumers seemed to like the idea of a service that automatically consolidating all of their bills and statements on a single platform. However, there was one glaring problem: consumers were reluctant to pay.
“We had a big monetization challenge,” Mr. Shulman says. So how could Hubdoc make money?
Mr. Shulman and Mr. McDonald each spent six years working in the tech industry in San Francisco and Seattle, respectively. They moved back to Toronto around the same time and co-founded a company in 2007, which they sold three years later.
That sale was important in the genesis of Hubdoc. “The buyers of our company flew up to look at our books, and reviewed several filing cabinets full of our company's financial documents,” explains Mr. Shulman. “Our records were all paper-based and we had been shuttling documents back and forth to our bookkeeper and accountant in accordion files. We knew there must be a better way to run the back-office of a business.”
The partners started looking at ways to automate bookkeeping and record-keeping.
It was pretty straightforward to build a prototype that consumers wanted to use. It was more difficult getting people to pay for it.
The first challenge was getting billers on side. “It should have been easier,” says Mr. Shulman. “It costs roughly $25 per year per customer to send out monthly bills, and although companies are setting goals for paperless billing, only 10 to 15 per cent of customers opt to receive bills online. This is why billers had indicated that they’d pay Hubdoc to convert customers from paper bills to e-bills.”
The billers were ultimately supportive, but it took longer than expected. Companies that send out millions of bills per month are large and bureaucratic, and have multiple internal groups involved with billing. “Our hypothesis about how long it would take to contract with these companies was way off. We thought it would take 9 to 12 months, but it ended up looking more like it would take 24 to 36 months of going to meetings and discussing proposals.”
What about the customer side of the platform? That not only took time to figure out but it also required rethinking their target market.
The partners realized that they needed to understand more about their customers in order to focus their efforts on the segment most willing and able to pay for Hubdoc. They analyzed their usage data to find out which kinds of customers were most engaged with the platform.
They discovered that the most engaged users were not typical household consumers. These users weren’t just connecting accounts with phone and utility companies, they were also asking Hubdoc to fetch bills and statements from websites used by consultants and small businesses, such as business bank accounts and services such as SurveyMonkey and GoDaddy.
The value proposition of Hubdoc was stronger as a business-to-business model, because it was businesses that needed to retain records of bills, statements and invoices to support their tax returns. Importantly, Hubdoc also provides businesses with a way to share this information with their bookkeepers and accountants.
Once the partners understood the needs of their business customers, they were able to focus on them. “We consolidate documents for our customers in the Hubdoc platform. Documents are either automatically fetched by Hubdoc or uploaded by the user (via email or by snapping a photo with the Hubdoc mobile app). Hubdoc then delivers this data to their accounting application (e.g. QuickBooks or Xero), creating a journal entry with the document attached,” Mr. Shulman says.
Hubdoc is mostly sold to bookkeepers and accountants rather than to small business owners directly, so one sale ultimately leads to multiple Hubdoc accounts. Mr. Shulman says that they’ve been successful with word-of-mouth recommendations to help the business grow. “Once a bookkeeper uses Hubdoc, he or she typically wants to get all their clients using it.”
In March 2014, the partners relaunched their product as Hubdoc Business. Customer accounts presently cost $20 per month for unlimited usage and, so far, roughly half of their customers are from Canada and the other half from the U.S., which they expect will drive the majority of their growth. And although it is still early days in the relaunch, the two Jamies are optimistic that they’ve now got the right focus, and have effectively doubled the number of paying customers in each of the first five months of operation.
Becky Reuber is a professor of strategic management in the Rotman School of Management of the University of Toronto.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.
Follow us on Twitter: @GlobeSmallBiz