After coming up with the idea for a bookkeeping service specialized for the eCommerce industry, we asked ourselves…
What’s the best way to learn if there’s a market for an eCommerce bookkeeping service?”
The answer: Go straight to the source and talk to 100+ eCommerce business owners to see what they thought and if there was actually a market for the bookkeeping service.
Here’s what we asked them:
- Where are you currently selling online? For example, Amazon, eBay, Shopify, Etsy, Walmart, etc.
- What is your current bookkeeping and accounting set up? I.e. Are you doing it yourself? Do you have someone in house? Do you have a service you’re using? Etc.
- What do you like and dislike about your current set up?
- What are the biggest pain points you see with bookkeeping and accounting in eCommerce?
- What other eCommerce bookkeeping solutions have you heard of?
- For you specifically, what does an ideal bookkeeping service look like?
- Based off of your experience and knowledge of the eCommerce industry, do you think there is a real need for this type of bookkeeping service?
In this article, I’ll share our findings about the bookkeeping market for eCommerce business owners and online business owners in general. The findings opened our eyes to new opportunities that we hadn’t seen when we first started. I hope it opens your eyes to this burgeoning market as well.
Why Did We Spend Months Conducting These Bookkeeping Interviews?
Nathan Hirsch and I have been building businesses together since 2009. It’s been over 10 years and EcomBalance is our fourth business that we’ve founded together. Throughout our entrepreneurial journey, one of the biggest lessons we’ve learned is that you need to validate the market before you launch the idea. Even if you have the best idea in the world, if there’s no active market, then it’s not a great business idea.
We knew that before we could launch EcomBalance, we had to go out and get some market validation. Luckily, we both had connections in the eCommerce world from running FreeUp and Outsource School and being Amazon sellers ourselves back in the day. We tapped into our networks and slowly set up quick, 15 minute interviews with 100+ business owners in the eCommerce and online spaces.
Had we not conducted these 100+ interviews, I don’t think we would have had the information we needed to get EcomBalance off the ground and to make our launch a successful one.
Another benefit to conducting our market research prior to starting the business was that we were talking to our ideal customers. While we were collecting information that would help us make a decision on whether to start the bookkeeping business or not, we were also slowly, quietly spreading the word to 100 possible customers that we were interested in this space and looking to disrupt it.
I recommend this strategy to anyone that’s starting a new business. Make sure that you talk to your customers before you go out and launch your idea. You’ll learn things you never knew, you’ll make initial connections that could help you if you decide to launch, and you’ll potentially land a few first customers that want to take a shot on you if you decide to start the business.
Who Did We Interview? Who Made Up the Subset of the Interviews?
As we set up these 100 bookkeeping interviews, we took special care to find business owners that ranged in size, stage of their business, and other qualities.
These are the common characteristics among the majority of the people that we interviewed:
- Involved in the eCommerce industry –> The majority were sellers themselves. A minority were ex-sellers, eCommerce software owners, or eCommerce agencies.
- Selling on Amazon, Ebay, Etsy, Walmart, Shopify, WooCommerce, and other eCommerce channels.
- In business between 1 year and 10 years
- Doing between $100,000 to $15M in yearly revenue
- Majority located within the United States. Some located in Canada and the UK.
Our subset of interviewees worked out quite nicely. We were able to speak with first time, young sellers that were just getting started and didn’t have much set up for their bookkeeping. We had calls with sellers in the growth stage of their business expanding sales, expenses, their team, and sales channels. Then, we finally had a handful of more established companies that had a team in place, had been selling on multiple channels for years, and were experiencing revenues over $1M per year.
It was eye opening to speak with eCommerce business owners from all walks of the industry. Everyone was extremely open and forthcoming with answering our questions and sharing everything they possibly could. We greatly appreciate all of those business owners that spoke with us and thank them for their time and generosity. Without them, we wouldn’t be where we are today.
The Results and Our Findings
Throughout the 100 interviews, we took notes on each call so that we had data to go back to as we tried to understand all of it. Below are 9 key findings that we took away from the interview notes that stood out the most amongst all of the interviewees.
1. Bookkeeping is a true pain point for the majority
From our 100 phone calls, we learned very quickly that bookkeeping is a part of running a business that most owners don’t enjoy handling.
From solo entrepreneurs to 8 figure businesses, we heard similar comments centering around not enjoying and not wanting to handle the bookkeeping on their own.
When you dig deeper, what is the true pain point?
Here’s what we found:
- Time: Business owners don’t have the time to handle their bookkeeping each month. They want that time to spend on other things within the business so they can grow faster.
- Knowledge: Most business owners don’t know how to use Quickbooks and manage their monthly transactions and create P&Ls, Balance Sheets, and Cash Flow Statements. It’s frustrating to not know and to have to learn how to do it.
- Accuracy: Even if a business owner can do it themselves, they don’t know if it’s actually accurate and correct.
- Communication: For those businesses we spoke to that had hired a service or a bookkeeper, their biggest frustration was poor communication. They tried to take it off their plate and then the bookkeeper didn’t communicate and didn’t deliver on time.
There were other reasons that business owners were frustrated with bookkeeping as well. Overall, the message was clear…business owners do not enjoy managing their books and they want a reliable solution that will do it for them.
2. There were 3 common ways that business owners are currently solving the bookkeeping problem
From the 100 business owners we spoke with, the current solutions really boiled down to three common ways:
- Doing it themselves: Around 20% of the 100 business owners were handling the books themselves. They had either tried to hire it out and it failed or they just decided to always keep it on their plates.
- Hiring a freelance bookkeeper: Around 50% of the people we spoke with hired an individual bookkeeper or had a bookkeeper on staff that was recommended from someone in their network.
- Using a bookkeeping service: And around 30% utilized an online bookkeeping service like Bench or Xendoo.
Now, granted these were the most common solutions, it isn’t safe to say that the business owners were 100% happy with the current solution they had. A lot of them continued to express their frustrations and wants for a more reliable and customized solution.
3. Word of mouth rules in bookkeeping
This one smacked us right in the face.
From the 100 business owners that we spoke to, close to 80% of them had hired the bookkeeper or had started using the bookkeeping service they used because of a recommendation or referral from someone they personally knew or someone in their social network.
It made sense as we heard it from the majority of the calls, but it also surprised us that it was such a major factor in the bookkeeping industry. It was rare to hear someone say that they had just gone to Google, searched for a solution, and went with it. It was also rare to hear someone say that they had been advertised to and they went with that solution.
Takeaway: The bookkeeping industry is driven by word of mouth referrals. Bookkeeping is a piece of your business that is “personal” in a sense and business owners want to hire someone that they know they can trust and that someone in their network trusts as well.
4. Sales Tax and Inventory are the most common eCommerce bookkeeping specific pain points business owners struggle with
One of the questions we really dug into with each interview was…
What have your biggest pain points been when it comes to eCommerce bookkeeping in specific?
This question elicited a wide variety of responses, but the 2 most common were sales tax and inventory.
- Sales tax: We learned that while Amazon helps with sales tax, most of the marketplaces and platforms do not. For example, Shopify provides you with some sales tax data, but it’s still up to you to handle the filings. We also learned that the majority of business owners didn’t fully understand which states they had nexus in which impacts their need to file sales tax with those states. Overall, it’s an involved part of the bookkeeping and accounting that most business owners were confused on and frustrated with.
- Inventory: On inventory, we learned that the majority of business owners struggle with properly accounting for their inventory levels and the actual COGS (cost of goods sold) in relation to their sales on a monthly basis. As we dug deeper into this problem, it became very clear that there are lots of softwares out there that will help you, but at the end of the day, it’s still an issue in the eCommerce bookkeeping space that has not 100% been solved.
Hearing these eCommerce pain points from our calls opened our eyes to opportunities where we could really push the industry forward.
If there are still these problems, why isn’t there a simple solution out there that can help business owners handle them?
It’s a goal of ours as we grow as a company to tackle these problems head on and to make it easier for business owners to really understand their standing with sales tax and their numbers when it comes to inventory.
5. The market is wide open –> there isn’t a dominant leader for eCommerce bookkeeping
When we asked “Who else have you heard of in the eCommerce bookkeeping space?”, more than 50% of the business owners we spoke with couldn’t give an answer.
They had been introduced to their bookkeeper or their bookkeeping service by someone they trusted or they were handling the books on their own. And if they had been advertised to, it wasn’t memorable enough that they could name that service or bookkeeper.
This statistic truly surprised us. From our competitor research, we knew of the leaders in the space and a handful of others that seemed to be running decent sized businesses. To hear silence on the other side of the phone when we asked this question showed us that the space is really wide open and that there is a huge opportunity for a business to do it differently.
We’re extremely excited to tackle the online bookkeeping space with a different approach than what others have done. It’s our goal that if we were to go out and interview 100 different eCommerce business owners 2-3 years from now, EcomBalance would be a name that came to mind. We’ll see what we can do!
6. Businesses are willing to pay as long as the service is reliable, affordable, communication is strong, and it’s off of their plates
From the 100 interviews that we conducted, we were able to collect estimated pricing on what the business owner was already paying for bookkeeping services or what they thought was a fair price for monthly bookkeeping for their business.
When we averaged everyone’s responses together, we found that the average monthly bookkeeping price was around $500 per month. Now, keep in mind that the size of the business owner ranged from solopreneurs running small businesses to international businesses selling millions in product every year so this average is across a wide variety of business sizes.
Regardless, this data helped to show us that business owners are indeed willing to pay for monthly bookkeeping services and that they value it being handled for them. It saves them time, gives them information they can use to better run their business, and is an important part of running a business.
The biggest comment we heard from business owners was that the service needed to be reliable, the communication needed to be strong, and that they wanted some form of analysis in addition to the normal monthly financial statements.
7. Businesses want an all-in-one solution for bookkeeping, accounting, and taxes
As we asked each business owner about their current set up, around 60%+ said that they were using a bookkeeper and then had an accountant for their year-end tax needs.
However, the majority of people we interviewed also stated that they’d rather all of their bookkeeping and tax needs be handled by one person if possible.
To them, it means less people to communicate with and organize at the end of each year.
Takeaway: It’s important to be able to offer both bookkeeping and tax services all in one business. As we’ve started EcomBalance, we’ve kept this in mind and are planning to add tax services within the first 6-12 months of running the business. We want to perfect the monthly bookkeeping service first then we’ll focus on adding tax services that can complement them. As business owners, we’re all about systems and processes…we want to perfect one offering before we start on another.
8. The majority of businesses we interviewed stated strongly that they believe there is a market for this eCommerce bookkeeping idea
One of the questions that we asked in our interviews was “As someone in the eCommerce world, do you believe that there’s a real market and need for a monthly bookkeeping service specialized for eCommerce and that offers some form of monthly analysis?”
Here’s some responses that we got during the interviews:
With the right money and right marketing, this could be HUGE.
Definitely space for it. Just got to make it super simple and at a good price.
Yes, it’s a major issue finding someone to do it well and getting it at a price that people can afford.
Definitely a market for a bookkeeping service to provide better data and advice that is actionable. Having graphs and charts and comparisons and sku specific data that really helps the business owner get a good look into their business on a monthly basis.
No brainer if you can get the eCommerce expertise, strong communication, and proactive analysis on a monthly basis.
There is a pretty niche market to be made there.
9. There is a desire for monthly analysis in addition to the normal financial reports
As mentioned throughout the article, one of the biggest takeaways we had from our 100 interviews was that businesses want more than just the monthly financial reports.
Business owners want a higher level of personalization to come with their books each month. They want analysis on their reports so that they can better understand their numbers each month without having to dive in too deep themselves.
A lot of feedback that we got was that they were somewhat happy with their current bookkeeper because they were delivering the financial reports, but they really wished there was analysis each month that accompanied them.
Through our conversations, we learned that a lot of business owners don’t want to look at every single line item of their Profit and Loss statement, Balance Sheet, and Cash Flow Statement each month. However, they do have specific figures that are most important to them that they’d like to see analysis on each month.
As business owners ourselves for the past 10 years, we could 100% relate. We have a financial habit of meeting every month to go over our financial reports. We dive into specific areas to see how they’re trending and it’s important that we have all of the key information in one place where we can review it and make decisions based off of it.
We conducted these 100 bookkeeping interviews in an effort to validate the market for a monthly eCommerce bookkeeping solution. We achieved that goal and really got to understand the current market out there right now. There’s a wide range of businesses in the digital landscape right now and they’re all handling their bookkeeping in slightly different ways, but the greater majority understand the value of having their books handled in a reliable fashion and they want someone that can give them more than just the books each month.
Everything we learned is being poured into the founding and growth of EcomBalance. We believe in building solutions to real needs based off of the feedback of the actual end customer. With these interviews, we learned things we didn’t know before and we’re applying them to EcomBalance.
Want 1 free month of bookkeeping?
Interested in working with us at EcomBalance and getting your books caught up and under control? We’d love to speak with you to see if it could be a fit. Sign up here for 1 month free and schedule a phone call with Nathan Hirsch to chat more about what you and your business need.