Westpac … greedy or scared?

1 April 2008

Six months ago Westpac announced record growth and profits … but I miss the Westpac that I knew five years ago …

Five years ago, I took out a mortgage with Westpac and they were great. I was just starting a new software business and Westpac understood this and gave me a business banking manager to help with my business and personal finances.

Back then, Westpac were more than happy to give me a guaranteed rate for 60 days on a pre-approved loan. They also waived all fees on all of my accounts because of my mortgage.

Recently, I had to adjust part of my mortgage and wow have Westpac changed. After agreeing to my changes and the new interest rate, it took a couple of weeks to get the papers sorted. During this time, the interest rate increased – but I hadn’t been given a ‘rate lock’, so I was stuck with the higher rate. I decided to sign a rate lock and to my suprise, its no longer a guarantee from Westpac of the rate I can get – its now a guarantee from me that I will take the loan, with a $250 fee if I don’t complete the papers on time.

On top of that there was the $250 documentation fee and the other $100 fee which they never explained – just charged me for. I also seem to be paying more and more bank fees …

What’s changed inside Westpac? Are they being greedy and exploitational or are they just scared of not getting their 12% growth this year?

4 Comments | Finance | Permalink
Posted by Andrew

Angel investors

27 January 2008

Another good quote from Paul Graham is regarding angel investors:

“Basically, the angel investors played chicken with us. They knew we couldn’t get money from anyone else, since we didn’t even know for sure if we owned our software. So they proposed to do a cramdown round where they would refinance the company, I believe, at a pre-money valuation of zero—meaning all the common stockholders were completely wiped out. To keep us around, since they kind of needed us to write the software, they were going to give us options. So we called their bluff. We said, “If you do that, we’re leaving.”

I’ve experienced two types of angel investors – someone who believes in you or is passionate about your product and the professional angel investors. From my experience, the former are much preferable, but you’ll probably get more money and more rounds of investment from the later.

Professional Angel investors are taking high risks by investing in startup companies, so expect high returns. One formula that I’ve seen is that they expect 1/10 to succeed, and they are looking for a 3x return on their money over 3 years. They have to treat each investment as if its the one that will succeed, so they expect a 30 x return on each investment.

Its no wonder that they often negotiate so hard … especially when they know the founders are desperate.

Rod has some useful info about Angel Investors.

Leave a Comment » | Business, Finance, Software | Permalink
Posted by Andrew

Now’s a good time …

22 January 2008

… to upgrade your small business accounting system to Xero.

Xero have just released their 19th update within the last 12 months and its only getting better and better.

To make it even easier, Xero will also get you up and running from your existing accounting system for $NZ199, so now’s a perfect time to get setup in time for the new financial year.

Shameless Xero advertising follows …

matthewxero.jpg
How can you resist? Sign up here.

1 Comment | Business, Finance, SaaS, Software, Xero | Permalink
Posted by Andrew

Its worth opening a bank account for

13 September 2007

I’ve just done my first bank rec using Xero’s brand new bank rec screen (released today) and its so good that I want open more bank accounts and spend more money just so I can reconcile it in Xero. Ok, so you think I’m probably just saying that because I work for Xero – so have a look at this short demo and see for yourself.

I’ve got two hints which aren’t mentioned in the video:

  1. If you import multiple statement lines that are similar, code the first, then hit F5 to refresh the page and the others will be automatically coded.
  2. Work from the bottom of the page – not the top, because this way you get to admire the way a new statement line will slide up onto the page from nowhere every time you click OK.

If you don’t know what Xero is … have a look at www.xero.com or XeroTV.

Leave a Comment » | Finance, Xero | Permalink
Posted by Andrew

Reporting made easy

6 May 2007

The Xero Report Centre went live to accountants on Friday (see the Xero blog for the official announcement). We’ve had a team working on the report centre since Jan this year and a lot of the initial concepts came (unknowingly) from users of Imprint, the website reporting package I built (now being sold as Silhouette).

The concepts were quite simple: what most systems call a ‘report’ is just a pre-formatted dump of data. Typically, a user has to take this data and massage it into a presentable report before it can actually be read and actioned. This means grabbing the relevant data from different reports and combining, adding charts, adding executive summaries and analysis and notes and then making it all presentable.

The Xero Report Centre allows accountants to do all of this within the app itself and then present a completed management report, board report or annual report to their clients – users of Xero. The report will then always be stored within the app, so future users can always access historic reports.

Its as easy as:

  1. Start from a default report – ie a mgmt report including executive summary, cashflow, P&L, balance sheet, aged reports
  2. Use the drilldowns to examine the information more closely
  3. Export to Excel if you want to try some ‘what-if’ scenarios (all calculated values have formulas in Excel – allowing quick and easy analysis)
  4. Write your summary, highlights, lowlights, explanations, action points, etc directly into the report
  5. Annotate individual pieces of data directly with footnotes
  6. Add additional pages with information that is relevant for the month
  7. Add charts to highlight the most relevant info (coming soon)
  8. Publish to Excel, PDF or live within Xero

While other systems are focusing on providing customisable “report builders” – I think a lot of them are missing the point. All they’re doing is allowing people to customise the “data dump”, not actually build a presentable report. Data doesn’t become a report until it has been analysed and this is something accountants are trained to do, which is why using an online collaborative accounting system like Xero makes so much sense.

1 Comment | Business, Finance, Technology, Xero | Permalink
Posted by Andrew

From concept to profit

27 March 2007

I’ve had a few conversations recently with people who want to build a software product and were wondering what the true cost would be. Their general feel is that they could build a v1 app with about 6 months of dev work. This is quite plasable with the tools we have today – especially for building a web app. The natural next step, is to think that with 6 months of dev and 6 months of sales, then you have a nice little software company ready to make some killer profits.

This led me to try to think up some simple formula for estimating the cost of building a profitable company from a concept. Obviously there’s no silver bullet, but when people ask a software engineer to estimate the size of a job, they’ll take the answer and double or triple it. Why? Because the developer is likely to give their answer in terms of development effort only and its generally understood that development is just one part of the software development lifecycle and so you obviously need to account for all of the other work that needs to be done.

If your six months of development work becomes about 18 months (x 3) of work (and therefore cost) to actually build and deliver the software, then what would be a fair multiple for estimating the cost of taking that software to market?

Read the full the article.

2 Comments | Business, Finance, Software | Permalink
Posted by Andrew

3.2.1. Xero

6 March 2007

Sir David Tweedie (Chairman of International Accounting Standards) once said, “Accounting is a primitive subject still. There are lots of things we haven’t got right. Much decision making and many businesses sit uncomfortably in the framework of the traditional accounting model, which is a creation of the manufactoring era … balance sheets are like haggis, if you knew what went into it you wouldn’t touch it”.

So what’s the solution? Should all business owners go out and take a degree in accountancy so you can run your business on valid and relevant info? No, its simple really – we just need smarter business tools and this is where Xero comes in…

http://www.drury.net.nz/2007/03/06/xero/

“Xero is an online accounting solution for small businesses, delivered on a Software as a Service (SaaS) basis. I believe it is one of the biggest market opportunities out there and a global opportunity we can credibly go after from New Zealand.

We’ve been heads down on this for some time. We have a number of beta customers on board and will soon move into a limited release. A challenge for SaaS offerings is building out operational capability. As the software is getting to where we need need it we are now beginning to now ramp up that investment so we can deliver a customer experience in line with the quality of the software. For that reason we’re bringing in customers in small batches, learning where they need guidance, rinse and repeat.

Xero is all about people. Making a difference to the people that run small businesses and providing an opportunity for our best talent to build a world class company. The next step in my career is to build a long term company and culture that attracts and fosters talent, to earn export revenue.

Xero is design led. We recruited early some of the top interaction designers we could find Philip Fierlinger and Grant Robinson.

We’ve put an awesome technical team in place with Craig Walker, Kirk Jackson, Andrew Butel, Fletcher Brown, Adam Burmister and Jeff Wegesin.

We’ve invested heavily in product management and customer care with an exceptional group of customer advocates: Michelle Perera, Andy Leeb, Catherine Walker (Orange Girl), Catherine Robinson, Donna Wylie, Larissa Paris and Louise Roebuck.

We managed to attract Kate McLaughlin from the National Business Review to run Xero marketing and communications and the very talented Darryl Gray is in house brand guy.

Small business accounting identity Hamish Edwards brings the domain expertise to ensure what we deliver is not only technically world class but really does improve the performance of a sector that makes up 95%+ of all businesses.

It’s early days but we think we’re doing something special. “

Check it out: www.xero.com

Leave a Comment » | Business, Finance, NZ Companies, SaaS, Software, Xero | Permalink
Posted by Andrew

Employee Share Ownership Plans

9 February 2007

I did some research last year into employee share ownership plans (ESOPs) because we were looking for a good way of not only motivating staff, but rewarding them for their hard work when there isn’t a lot of surplus cash.

In the early years of high-growth companies, there’s a lot of hard work before any returns are made and every dollar earned is re-invested back into the company, so often salaries have to be kept low, but you still need to get, keep and reward good people. Shareholders and potential investors also like to see that the staff (especially management) are being incentivised to stay in the company long term and the investors I’ve talked to are looking for between 10 and 20% of the company to be owned by staff.

Share schemes can be especially motivating for developers – who are the ones behind the scenes pouring everything into software while the salesguys take all the commissions. Here are a few ways of doing it.

1 Comment | Business, Finance | Permalink
Posted by Andrew