‘You have to take a lot of shots on net’: How Wave empowered entrepreneurs to survive and thrive during the crisis

The following was produced by Tearsheet Studios. We worked with Wave, a financial software company for entrepreneurs and small businesses, to create a three part podcast series on what micro businesses and solopreneurs really need now from their banks, financial service providers, and financial software. See other episodes from the series here.

It’s never a simple time for small business owners. They live and breathe cashflow. Many function pretty much hand to mouth, so any disruption -- let alone the pandemic we’re navigating through -- any disruption can really challenge an entrepreneur. 

I, for one, wouldn’t like to see a world with all big box retailers, faceless corporations, hawking me throwaway stuff and disposable experiences. I think the crisis brought out the fact that small businesses are really important parts of our cities, towns, and communities. If they suffer, we all suffer. 

Kirk Simpson is the CEO of Wave, a provider of free accounting software for entrepreneurs. He lives and breathes what micro businesses deal with -- they’re his customers. So while he tracked the struggles of these folks, he also watched as many survived and thrived. It was also a time that a lot of people set out on their own to follow their own entrepreneurial dreams.

Kirk Simpson, Wave: Hi, my name is Kirk Simpson. I'm the cofounder and CEO of a software company called Wave. We build software and financial services for small business owners to try and help them survive and thrive.

One of the silver linings of the pandemic: I think the crisis has taught us all the importance of small businesses in our communities, and quite frankly, to the economy as a whole. I think we've all come to realize just how important those small business owners are to the fabric of our communities, and how the world of Amazon and Walmart domination is not really what any of us really want to see in our local communities.

I think it's taught us an important lesson: having empathy for the entrepreneurial journey for the folks who are willing to go out on a limb and create a small business. They want to thrive through hard work and determination and it's such a noble pursuit. I'm really excited about the fact that coming out of the pandemic, there's been a huge rise of new business creates. And I think it's going to mean really good things for our entrepreneurial community moving forward, despite having gone through a really challenging time. 

The irony isn’t lost on me. Kirk is an entrepreneur at heart who built financial software for other entrepreneurs. I asked him to tell us his own story -- if anything -- to shine a light on his journey and how it informed the products and services he creates and the communities he serves.

Kirk Simpson, Wave: I think I'm a very typical entrepreneur, meaning, I started two things, the first one failed outright. The second one was a very tiny acquisition. And in 2009, when James and I started Wave, we could have never hoped for the kind of outcome that we've had.

But I think that's very typical. You have to take a lot of shots on net to score a goal. And I think, for a lot of entrepreneurs, that will really ring true that there's a lot of ups and downs through the process. There's a lot of grit and determination required, but there's so much joy and trying to bring something to life out of nothing. That really sort of summarizes my journey.

I like that concept of shots on net. It really captures all the little decisions entrepreneurs have to take everyday without perfect clarity. Sometimes it’s about winning and landing that big client, ramping revenues. Other times, it’s about showing up, even if things don’t feel like you’re succeeding. It’s about doing your best until you find a way to make it work better.

Kirk Simpson, Wave: Through the pandemic, whether it's forced closures or with stay at home orders, changing consumer behavior so radically, the pandemic has had a huge impact on small businesses. And one would argue, it's been difficult to be a small business owner throughout more and more government regulations and government oversight and changes and tax rules and all those kinds of things. It's a lot for a small business owner to stay on top of, and the pandemic has, obviously, just been a complete game changer, in terms of its effect on small business owners. 

Having said that, as we start to see Spring arrive and vaccines go out in higher numbers and some of the economies open back up, I do think that there's a sort of golden age for entrepreneurialism that's starting to come about because through the pandemic, so much consumer behavior changed. And oftentimes when you look at history, entrepreneurs are some of the most positive minded, innovation driven people and they are much faster to act than large businesses. And so, as this much consumer behavior change happens, there's a huge opportunity for small business owners and entrepreneurs to be at the forefront of this new demand and really create new exciting businesses on top of all of these changes in the last year.

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In challenging times like the ones we’re living through, some people have decided to go out on their own. Sick of working for the man or having lost their salaried jobs, many entrepreneurial types are starting up new businesses and making a go for it. Without the comfort of a paycheck, they’re living out new dreams.

Kirk Simpson, Wave: Across the board, yes. Just look at the small business create numbers in the US -- they've skyrocketed through this. And then you hear some really cool anecdotal stories of people who have turned hardship of layoffs into new business creates, because it gave them the opportunity or in some ways, forced them to take a chance and start something new. And for many of them, they've been thinking about it for a long time, but couldn't make that leap from the every two week paycheck to taking a shot. And despite how sad it is in terms of the number of people who lost their jobs, many people turned it into an opportunity to create something that they've been looking to create for a while.

We love hearing those stories. I'll tell you one really amazing example of an entrepreneur who had started a new business of bottling shots, like alcohol shots, into really cute bottles that they were selling and doing quite well. When the pandemic hit, they completely transformed that business into shot sized doses of hand sanitizer. And it's a perfect example of the resilience of an entrepreneur and the forethought of thinking, there's a new opportunity, it's probably bigger than the old opportunity I had. And so I'm going to pivot into it and grow something really cool out of it. I think that's what we're seeing across the economy now. And it gives us hope.

I love that story, that example. I love this idea of passion driving people to create new businesses. I asked Kirk, given everything he’s seen, what kind of advice he would give to somebody starting a business now.

Kirk Simpson, Wave: I think the first thing is to realize is consumer behavior has changed a lot, and to really study that for what's happened, and to not rely on old assumptions about how people did certain things, because so many things have changed and are unlikely to go back. As I think about that, I really think about digital tools, where so many of us have really changed behavior, and in some ways, don't want to go back to the old world. Entrepreneurs need to realize that. 

Probably the biggest example of this is e-commerce. We have a neighborhood pet food shop. They were amazing in very quickly pivoting to curbside pickup. But that requires a different technology set up than they had before when they were using just a simple point of sale unit. I think entrepreneurs need to look across the gamut and say, what business am I in? And how can I leverage digital tools to make it easier.

For Wave, we service businesses that do business through invoices and estimates -- service based businesses. We've seen a huge spike in digital payments associated with those invoices. In the pre COVID days, only a portion of our users used digital payments, because they could go see their customer and collect cash or a check or those kinds of things.

And through the pandemic, that's really changed. What those users have found is they get paid on average three times faster by enabling digital payments on their invoices. It's a really great example of how a new small business owner can start with that paradigm from day one and can integrate that into their pricing structure, and know that they're going to get paid much faster through the process. Their cash flow will be better.

We’ve gotten this far in the conversation about starting up and running businesses without mentioning financial institutions, without mentioning banks. Part of the reason is that entrepreneurs are also taking advantage of opportunities in banking and in payments for small businesses. 

Kirk Simpson, Wave: I think it's a great example of where innovation is starting to happen in a way that it hadn't before. We've seen innovation for small business owners in the payment space, in the e-commerce space, in the point of sale space, in the digital invoicing space, but we've seen very little in banking. The average small business owner is paying about $450 a year in bank fees and not getting a lot in return. Quite frankly, they're generally not satisfied with their banking experience.

That certainly holds true when they look to get a loan from those banks. There's a lot of dissatisfaction that the typical bank doesn't understand my small business. We've built a product called Wave Money. It's its own bank account in the US. And it's very tied into software, so that you can really integrate invoicing and banking and payments and accounting and bookkeeping and all the way out to tax in a single place. Our goal there is to really allow small business owners to get back to doing what they love, which is running their business, not having to deal with any of the financial stuff behind the scenes. It's really important to get it right.

Speeding up payments and digital invoicing seem to be low hanging fruit for SMBs to service their customers and improve their cashflow. Again, more entrepreneurial spirit is coming in to financial services and financial technology to service small commercial accounts. Fintech appears to be leading the way.

Kirk Simpson, Wave: There's been a lot of talk about small business lending over the last five or 10 years and the innovations that have happened there. My personal view is that the most important thing that small business owners can do is get paid faster. You might have $2,000 or $3,000 worth of outstanding invoices. And if you could get your customers to pay you more quickly, you'd actually satisfy a lot of your cash flow concerns and wouldn't have to be worried about finding an alternative lender.

So, I think the number one thing small business owners can ask themselves is how can I speed up getting paid and getting access to that money. And that's where we spend a lot of our time. I know other suppliers do too -- how do we get small business owners the money that they are owed in their pockets and accessible to them faster, so that they can expand, hire an employee, and feel more comfortable themselves in taking some business risk. That doesn't happen when you're really concerned about your cash flow.

In his role running Wave, Kirk has a birds eye view of how micro businesses and solorpreneurs have changed their behavior during the pandemic. What tools they’re using. What techniques they’re employing to ensure they keep their customers happy, their doors open, and their bills paid.

Kirk Simpson, Wave: What we've seen in our data is very much representative of what's happening in the market: there was a lot of pain. One of the areas where we saw this -- Wave offers payroll, and so we can help you pay your employees and your contractors. If I rewind to last March and April, we could just see that small business owners were laying off staff in very high numbers.

They were really appreciative of the changes that we were making as quickly as we were making them to keep up with different government changes that were happening in order to try and help these small business owners.

Out of all this pain, there's all sorts of good signals that this will get better, but let's not underestimate for the average small business owner, this has been a very, very challenging year on so many different fronts. I think empathy for that journey is really, really important, while also being positive and excited about what what can come out of this. Entrepreneurs are at the forefront of innovation.

What doesn't kill you definitely makes you stronger. As we come out of this, Kirk envisions more bright spots in the economy and business returning. Those entrepreneurs scrambling to get their nut will have the benefit of an improving business climate and more fintech products and services to help them optimize their businesses.

Kirk Simpson, Wave: Broadly, if you're in a position where you really understand your business at any given time, and you try, and as difficult as it is, not to procrastinate, staying on top of your financial situation, many small business owners still have that corner of their desk that's filled with receipts and bills. They just have a growing level of dread about taking it on.

With modern software like Wave, we're trying to make it easy for you to spend 10 to 20 minutes a week, and just stay on top of this. I know, it seems like a bit of a chore, and we're trying to make it as easy as possible. But the benefit of that is that as situations on the ground change, you can make adjustments. Knowing that you're on top of stuff, you have a good idea of what your outstanding payments are. You have a good idea of whether or not your pricing structure is right and is driving to profitability. You have a good sense for your bank balance and what it means for cashflow at any given time. And I think that's really, really important. Because without it, you're flying blind. The world can quickly change drastically. And so having a great idea, or as clear an idea as possible about what's going on in your business, is really important to being able to adjust.

Entrepreneurs wear many different hats, including accounting. Many of them do that work begrudgingly. They dislike it and even hate it. I asked Kirk about the role of automation in the future -- if many of these repetitive tasks around bookkeeping and accounting can’t be replaced by algorithmic automation.

Kirk Simpson, Wave: I think it's a really interesting question. We've been doing a lot of talking with our customers about this very issue, because, broadly, we all think automation is going to solve everything. And I would say there are two really important parts of it. One is yes, let's automate as much of this friction as possible. But the big thing that we've heard from our customers, which resonates with me, is make it automated but give me control.

That's very much that the mindset that we're working under: let's build all of those automated tools, but let's make sure that we surface what that automation has done and make sure that the small business owner has full control over that automation.

That was Kirk Simpson, CEO of Wave, on the role new financial technology will play in serving the needs of entrepreneurs running micro businesses. It’s part of a 3 part series Tearsheet Studios is running with Wave. Go to our website to listen and read the other parts of the series.