Running hipages, one of Australia's leading online marketplaces that connects tradespeople with consumers is a huge challenge, especially when the business routinely records growth of between 30% and 40% each year.
With such an upward trajectory, it's up to the finance team to ensure the ship remains on course.
“We're a business that has IPO aspirations, and we're working on a number of projects to make sure we're ready when the market conditions allow us to do it," says hipages' CFO, Karl Cope.
The business has recently completed its annual strategic planning and budgeting process. It is now undertaking a business process automation initiative, covering finance and administration systems as well as sales and service operations, and assessing whether the general ledger finance system is suitable for automation.
Using unit economics for better business planning
The finance team's central focus at the moment is a project that delves into the unit economics of the business. Unit economics are the costs of acquiring and servicing a client over its lifetime.
“We're spending time analysing our marketplace dynamics, our clients' lifestyles, the products and services we should be providing, and what client acquisition strategies we should be deploying so we continue to grow the business," says Cope.
“We have two customers: homeowners who use our platform and tradespeople who provide services,” he observes. "Our marketplace has more than 90,000 tradies, and we service more than one and a half million homeowners. We currently process over 100,000 jobs a month through that platform."
Understanding unit economics helps the finance team to deliver plans better tailored to business needs, creating opportunities for hipages to explore new customer acquisition strategies, develop appropriate pricing for products and encourage clients to stay on the platform for longer.
“A key driver of business success for hipages is how engaged our tradies are, how long they remain on the platform, and how frequently our home owners use hipages," says Cope. "We're constantly looking at ways to encourage both tradies and homeowners to participate in the marketplace more frequently and over a longer period of time, and we are prepared to invest money to improve the outcomes for both tradies and homeowners."
It's all about people
“The primary objective has always been building the business, " Cope explains. "Whenever there's been a dollar to invest, it's always been put toward growing the business and improving the user experience."
The company is fortunate in having access to advanced digital technologies across finance as well as the wider business. But for Cope, people are more important. “The most important thing is that I've got the right team in place," he says.
With more than 160 staff in Sydney, including a large team of software engineers, the finance team collaborates with all the different teams in the business to develop company strategy.
“We work very closely with the product team in particular. As they're developing their roadmap, and what to offer consumers and tradies, we work together on pricing and budget assumptions, for instance average revenue per user," Cope explains.
Finance also works alongside the operations team to identify and prioritise business automation opportunities that could benefit the business. With the marketing team, Finance monitors metrics and trends, feeding the insights gained into the decision-making process.
Digital tools to benefit the business
As a digital-first business, the finance team works with live data. “We have transactions happening every second. We track, analyse, interpret and report on that data, and that information flows into our accounting systems," Cope says.
The finance team keeps up to date with emerging trends in technology, and thinks about their relevance for the business. Having internal software engineering resources enables the business to choose between building versus buying technology. For example, hipages has developed its own tool to handle the customer lifecycle and contract management.
“We're not always just out looking for what other systems can do for us, but what we can do internally," explains Cope.
But digital technology is simply a means of creating a stronger business which delivers better service to its customers. Cope's advice for other CFOs is to be cautious when considering new digital tools.
“It's easy to be distracted by shiny new tools. Make sure you closely assess tools in terms of what they are going to do for your business. Implementing a new system or tool is costly and a distraction. If you get it wrong it can be a major cost to the organisation," he warns.
- Unit economics help to develop growth plans, explore business improvement opportunities and develop appropriate product pricing.
- Having a great team is essential to be able to generate, analyse and act on insights generated through performance metrics.
- Don't be distracted by every new digital tool: assess them for their ability to enhance the business.