Cloud Software Association

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How TSheets solved a problem with my previous company, Cartridge World

You might think the founders of TSheets developed a great big plan after seeing a need in the marketplace, but that’s just not true.

Before TSheets, I owned a company called Cartridge World. We had four locations and 35 employees.

One night, one of my most honest employees was closing down the front of the store. As she said goodnight, she wrote her name on a little piece of paper and stuck it in a manila folder.

For some reason thought, “I should check her timesheet.” I never checked anybody’s timesheet, but for some reason I checked hers. Oh no. She’d given herself 15 minutes.

You’re thinking “This guy is a lunatic. Why does he care about 15 minutes?” But small businesses have super tight margins. And I knew not everybody was as honest as she was.

So again, like a lunatic, I hid in my truck the next day. During lunch I watched everyone leave and then ran in to check their timesheets.  Sure enough, I validated my hypothesis.

I had an issue – time theft –  that I thought would be easy to solve. But this was 2005, back before SaaS was even a word.

I explained my problem to Office Depot and they tried to sell me some old metal cube where you stick a piece of paper in and it goes chi-ching.

…I said thanks, but that’s not what I’m looking for.

I turned to whatever version of Google we were using at the time and started searching: timesheets, time tracking, everything. There was nothing. The only similar thing that existed cost about $20k to implement.

So I called up my co-Founder, Brandon and asked if he could build me what I needed. He built a basic version. When our bookkeeper processed our first payroll we saved $2400. That was big money for a small business.

She turned her chair around toward me and said “This system is amazing. Can you sell it?”

I called Brandon up, and that was the beginning of TSheets.

What does TSheets do?

TSheets is a time tracking system where a business owner can sit anywhere in the world and see who’s working, what they’re working on, and how long they’ve been working on it.

You’re now in control of the single largest line item on your P&L – labor.

Like flying off a cliff

From the outside looking in, TSheets looks like a big growth hockey stick success story. But it wasn’t always that way.

I’m a pilot. And one of the scariest ever airports to fly into is Telluride, Colorado. Because – and this is illegal now, by the way – at the end of each runway there’s a cliff! I’m talking thousands of feet deep. So if you go off that cliff it’s not just a little bump.

Starting a company is a lot like that runway in Telluride. You sit at the end of the runway. You make a plan.  You’re going down the runway, you’re gaining momentum, you’re ready to takeoff any second now. But then you get close to the edge of the cliff and you don’t have any air. What do you do now?

The big decision: Quit or go full throttle?

At TSheets we were going down that runway with our first big go-to-market launch.

To say it failed was an understatement. It was absolutely horrible. Then we had our second big go-to-market failure. We had four total.

…Then we ran out of money.

Sure, we got a little bit of publicity. But the comments section went something like:

• “Mobile. Time tracking. Worst idea I’ve seen today.”

• “Will never succeed.”

• “I’ve been in business for 20 years, seen software forever. LOSER.”

• “FAIL.”

We got hammered. The good news was that I had learned how to be a CFO at my last company, and I could see the end of the runway.  We were forced to make a decision: do we keep the throttle down in the hope that you can gain some altitude before the end of the runway? Or do you just throw back the throttle and slam on the brakes and hope you can recover and stop before the edge of the cliff?

We almost decided to close down the company that day, but we decided to sleep on it.

The next day I came in and asked my co-founder Brandon “What do you think?”

And he says, “Man, I still believe.”

I said, “Me, too.”

And that was the last time we ever looked back. Don’t let anybody ever tell you when to quit. Your decision to quit is on you.

How TSheets changed strategies to become successful

If you have read The Lean Startup, I recommend it. It changed our trajectory. It saved us.

The premise is this: don’t make big bets, make little bets. Don’t use your gut to determine what’s working, use data. Take your team and make two lists on a whiteboard. If it’s working, do more of it. If it’s not working, do less of it.

But the kicker is you have to prove it.

The way we implemented the Lean Startup method is that we instrumented every single point in the customer lifecycle, and every single point in our partnership lifecycle. We can tell you all the conversion metrics from one to begin. We can tell you the time it takes to develop against our platform. And the same goes for our company Intuit.

Drinking your own champagne

Intuit does this thing called “follow me home.” We do it at TSheets too, but we call it “drinking your own champagne.” It’s where we use our product inside and out, backward and forward. Today we have 320 employees and all of them use TSheets every day. We catch bugs before customers do.

If you have not developed against your API or if you have not, on a personal level, experienced what your platform is like, or what it’s like to be a partner with your organization, do it.  You will instantly begin to get empathy for the customer and what they experience.

Boise, Idaho: The next Silicon Valley?

Boise, Idaho was a huge advantage for us. Honestly, we have an unfair competitive advantage against Silicon Valley companies.  It sounds crazy, and there were some downsides to being there. We don’t have the Silicon Valley networking capabilities, for example.  

But in Boise, Idaho we were able to hire 275 unbelievable people organically with zero recruiting budget. TSheets was the number one best place to work in Idaho for 3 years in a row.

And the compensation, I will tell you, is different in Boise, Idaho than it is in Silicon Valley. The quality of life is off the charts. This sounds like a sales presentation for Boise. But my point is that great companies do not have to be in Silicon Valley. Great partnerships don’t have to be in Silicon Valley. I really encourage you to look outside the Valley. Because, honestly, investors are looking outside of Silicon Valley to invest.

Raising capital: Yes or no?

We were basically a bootstrapped company.  Sure, we raised a little bit. We raised 600 grand back in 2008 and we burned through that money in about a year. From there we bootstrapped ourselves, skipping all those other rounds until we had a proven product market fit.  

It was April, three years ago, when  I started thinking to myself that maybe we should raise money. I was getting emails every day from investors who had found me somehow. I set aside a day where I took 2 hour appointments with VCs who flew out to Boise. They were pitching us just as much as I was pitching them.  

But we were a profitable SaaS startup growing at 100% year-over-year.  We didn’t need the money. And people ask, “Why would you do it? Why would you raise money and give up some of the stake?”  

What I wanted was their brains. I wanted the single smartest people I could find to wrap their minds around our problems and challenges.

And if you haven’t done that, do it. Be vulnerable with your colleagues. If you’re not transparent, and you don’t tell your colleagues what you’re struggling with, no one will be able to help you solve your problems. Be honest about the problems you want to solve and people will naturally come to you and want to help you. If you ever choose to raise money, I will say you can’t find a better partner than the Cloud Software Association.

How TSheets won the partnership with Intuit that changed everything

Lastly, and this may be of interest, is our partnership with Intuit. What does it look like? What was the process really like and how is it so successful?  

I’m going to be transparent with you about our formula for success. From the outside, it looks like we came into the marketplace and Intuit just took care of us. That we had an easy path. But this is what really happened.

We knew our customers. They were small businesses. And Quickbooks owns 85% market share in the United States. We had a hypothesis that our customers live inside Quickbooks. And our hypothesis was validated.

Our second hypothesis is that our customers would want an integration between the two. So we wrote a basic flat file integration and we sent it out to our customers. They loved it. They were seeking data and they wanted more.

We built against their marketplace SDK and saw that we had a competitor, Ebility. Intuit had just killed their own time tracking system and were sending everybody to Ebility. The deck was stacked against us. We tried to get a meeting with Intuit but were told that Ebility was their partner.

The number one thing we did to change their minds was to find out what was important to them. And that’s key. Go into partnerships asking “What’s important to you? How do you measure success?”

And don’t just ask as a company. Ask them individually: “What’s important to you? What are you measured by? What does success look like in your role?” And when they tell you, now you know. And that’s your focus. You get to make the deliberate choice whether you’re going to make that investment.

We never approached partnerships asking “How are you going to send us customers?” And in the beginning, we got zilch. But we knew our customers, and knew they loved the Quickbooks integration. So every single customer that came through we would present the Quickbooks integration and try to get them connected. Our NPS score would instantly go up, and we began to get traction.

We also found out that Intuit valued customer reviews.  We now have three thousand five star reviews. And we’re the number one rated app. But before we had three or four reviews and Ebility, our competitor, had 300 or 400. This gave Intuit an easy back out until we built up our review count.

We also built relationships at every level of the organization — from the CEO to developers and every place in between — and it’s not easy. We made it about them and about how we were willing to work our asses off. At the time we didn’t know that Intuit was going to make partnerships a huge investment. So there we got a little bit lucky.

Finally, after looking at how our mutual NPS scores were so high, they came to us and asked “What would it be like if you embedded your functionality inside Quickbooks Online?”

We did that, and it was wildly successful. Next, they came to us and said, “What if we think about something more than a partnership?” That caught us off guard, but for Intuit, we were willing to have that conversation. They have 85% of the market share. They’re the single most successful small business software on planet earth.

People asked me what I’m thinking. I think I may be the only person who sells a company for $340 M and works harder the next day. But this partnership has taken off. And I’m having fun.

Questions

Question: You said you were able to leverage relationships with people at Intuit into an integration. Can you speak more about that?

I can’t underestimate how important it was to get in front of people. Relationships are one of the most important parts of all business. Whether it’s with employees, colleagues or at conferences like SaaS Connect. We would find anyone inside the company, we’d find a reason to meet with them, and we would build some level of a relationship with them.

And every time we met with Intuit we would bring a suitcase full of TSheets t-shirts. And not some little suitcase. I’m talking about the big oversized ones that are hard to get on a plane. We’d offer everyone we met a t-shirt, even though that got us some funny looks. But then they’d go back into their office and lookup TSheets. And that was one way we became known at every level of the organization. In fact, when I eventually got a meeting with [Intuit CEO] Brad Smith, you know what I did? I gave him a t-shirt.

It’s not easy and it feel likes a waste of time when you’re in it, but we invested in relationships to the very core and that paid off.

But please listen to me and don’t underestimate the data part of a partnership. You put a ladder against the building. You climb to the top of this ladder and you realize you’re against the wrong building. And you have to go back down the ladder. Always use data to make sure that it’s the right partnership.

Question: How did you use data to determine that you were going to focus on the Intuit partnership?

At that point we were struggling to find anything that would move the needle up or down. We were desperate, so we put our time anywhere we found an inkling of hope. Some data points we used included:

• Is there value in the partnership? With Intuit that question was “Is there value in pairing a payroll system with a time tracking system?” And the answer was yes.
• Is the value proposition easy to communicate? With Intuit, that was a yes.
• When we put the proposition in front of a prospect on our website were they more likely or less likely to convert?
• How much longer did they engage?
• When you present this integration to someone on a trial, are they more likely to convert or less likely to convert?
• How likely are they to enter their credit card?
• And once they are a paying customer, how much activity goes on in their account?
• We scored customers, then asked do the people who use that integration score higher as customers?
• Do they last longer as customers?
• Do they pay their employees more?

Those are some of the data points we used to evaluate a partnership.

Question: As a partnerships person, how do you determine where you’re going to place your bets? And how do you communicate that to stakeholders?

You need to approach people internally the same way you approach partners. Go to your CEO or the person making the decision and ask “What’s important to you?”

Is it new customers? Increasing customer retention? Higher conversions? A long term exit strategy? Find out what’s important so you’re not guessing. For me, it was top line growth. So when something was presented to me, that was always the first filter I looked through. You need to find that first filter for your CEO or founder and then bring them the best partnerships on the planet that will fill that need.

Question: What is your role at Intuit?

Great question. Intuit has a consumer business segment, like Mint and TurboTax, and a small business segment like Quickbooks Online, desktop, payroll, and TSheets.  I am leading the TSheets segment.

Question: Do you have any cautionary tales of partnerships that didn’t go well?

Yes. We overinvested in a bunch of partnerships that never came to fruition. (I won’t name names because that’s not fun for anyone.) I mentioned the whole “never quit” thing earlier. But sometimes you do have to know when to say quit. My pain threshold is really high, unfortunately. And there was a cost to that. Sometimes we continued to invest in bad partnerships.

When you find yourself in that situation, it’s good to evaluate the partnership at a very high level. Does it make sense? If it does, is there a path to a win here?

One of the things we ran into was companies who simply did not value partnerships. They never actually invested, and so we’d get less traction. There are just different levels of partnerships.

Question: How does NPS play into your partnership strategy?

First off all, I normally discount the NPS numbers that people give me because most companies use it as a marketing tool.

When we first used NPS at TSheets it was because we had a problem. Our churn was starting to slip further than what was comfortable for us and we wanted to figure that out.

Just like with everything else, we took a data-centric approach. If it was an ugly score we were going to live with it and figure out how to improve it.

But what you’re really looking for when doing NPS is what your company likes and what drives their success. With NPS, Intuit found that their customers were using TSheets, payroll and QBO. And that was how NPS made us look good to Intuit.