I’ve written before about Wave Accounting, a vendor that is hoping to turn SMB accounting software on its head by delivering a product at a zero price point and monetizing through the smart utilization of aggregate data. The jury is out as to SMBs appetite for their data being used, and whether it is viable to run a business purely monetized through targetted offers to customers byt anyway Wave is pressing along on their plans.
To this end they recently announced the acquisition of Small Payroll a small SaaS payroll application based in Canada. Small is going to be rebranded as Wave Payroll and rolled out to the US early next year. Judging by the specification, Small Payroll seems to tick most of the boxes that SMB users require. In particular it allows;
- direct deposit to employees’ bank accounts
- calculations of wages and overtime
- withholding deductions; and monthly remitting to the government
- income tax forms (including the Canadian T4) and Records of Employment
Small Payroll founder Sean Walberg correctly identifies a hole in the market for a very simple and easy to use payroll product. As he says;
I had worked at a big payroll company, so I understood what needed to be done. Even so, I found it to be a pain to use the government’s online calculators and then keep track of things on spreadsheets. And the payroll companies are too expensive, especially for the little guys
In a departure for Wave, the payroll component will be a charged product. Wave is saying that payroll will be charged at “a few dollars per employee per pay run”, that’s not overly clear but Wave are promising that pricing details will be forthcoming soon. What fascinates me beyond the cost however is whether or not this is a tacit admission by Wave that offers-based monetization isn’t a sustainable model and that the future for their model lies in offering charged add-on modules the fact that Wave is stating that “Wave Accounting and Wave Payroll will operate as complementary but separate applications. Wave Accounting will remain 100% free” suggests that may be the case. If this is indeed the case that then changes the story significantly and, in my view, lessens the marked point of difference that Wave currently enjoys. I wonder if this move isn’t somehow tied to their recent $5M funding round and a much closer look at their prospects from their VC backers.
Either way it is good to see Wave building out their offering – so many SMBs employ one or two staff and having an integrated payroll offering is a no-brainer.
(Cross-posted @ The Diversity Blog - SaaS, Cloud & Business Strategy)
Thanks for the writeup about Wave Payroll, Ben. We look forward to unveiling our pricing details once we’re out of private beta. Rest assured, it will be an everything-included price that will put a smart payroll solution within the reach of the small businesses for whom existing payroll solutions don’t make sense.
You wonder in your post whether the business model for Wave Payroll (paid) is a “tacit admission by Wave [Accounting] that offers-based monetization isn’t a sustainable model.” I’d like to make it perfectly clear that nothing could be further from the truth. We’ve just passed our first anniversary, have over 100,000 small businesses signed up, have engaged top-tier advertising partners including American Express and Dell, and we (and our investors) are very pleased at the results to date. Our business plan has been proven out to be accurate, and we intend to keep building and growing Wave Accounting with exactly the same pricing model that we launched a year ago: that is, 100% free. Not freemium, not a free trial, but free.
Our intention from the very beginning was to expand into ancillary products when it made sense, and to evaluate a pricing structure for each one individually. A year ago we suggested that these products might be paid products, and indeed that’s how it has worked out for Wave Payroll. That’s consistent with our original plan, and doesn’t signal any change in strategy for Wave Accounting.
If your suggestion is that having an ancillary paid product changes the core value proposition of Wave Accounting, I’d have to disagree. Only a fraction of users will use payroll, so our strategy for Wave Payroll is independent of our Wave Accounting strategy. In other words, Wave Payroll doesn’t exist to support Wave Accounting. Both are viable businesses on their own, that happen to have spectacular synergies, which is why we’re in the space.
The point remains that Wave Accounting is unique in the market with unlimited transactions, unlimited invoices, unlimited collaborators, all in a complete double-entry accounting application, and all of that for free. Given that most of the other paid-for accounting applications don’t offer payroll of any description, I’d argue that the launch of Wave Payroll, paid or otherwise, makes the value proposition of Wave Accounting stronger than ever.
Thanks again for covering our ongoing adventures. It’s been a great first year, and we’re thrilled to enter year 2 with Wave Payroll on the horizon. Feel free to contact us any time you have questions about what we’re up to.
Kirk
Co-founder and CEO
Wave Accounting
Wow i like this post about tax forms. but how can i get my state tax forms from internet