Unpacking FreshBooks’ Battle for Profitability

When Mike McDerment, the founder and board chair of FreshBooks, decided to transition from his role as CEO in early 2021, he placed great trust in Don Epperson, believing that Epperson’s unique skill set and experience were crucial for navigating the next phase of the company’s growth trajectory. “The next five years will be focused on scaling globally,” McDerment expressed in an interview with BetaKit, underscoring his ambitious vision for FreshBooks. The company, renowned for providing small and medium-sized businesses (SMBs) with a comprehensive platform to manage their invoicing, payments, and expenses, achieved a significant milestone just months later, securing $163 million CAD (approximately $130 million USD) in a funding round led by Accomplice. This successful fundraising effort propelled FreshBooks into unicorn status, and Accomplice's founder, Jeff Fagnan, articulated an optimistic outlook, forecasting that the company could evolve into a “$10 to $20 billion company.”

However, the path to this envisioned growth has been fraught with challenges. Since September 2022, FreshBooks has experienced a tumultuous period marked by six rounds of layoffs and the departure of nine senior leaders, raising concerns about the stability and direction of the company. This uncertainty prompted FreshBooks to secure a $100 million debt facility from J.P. Morgan to bolster its global expansion efforts while navigating these internal challenges. Amidst the executive turnover, FreshBooks has sought to stabilize its leadership structure by appointing new executives. Mara Reiff and Renee Pianka joined as chief data officer and chief people officer, respectively. Furthermore, in September 2022, Wayne Jackson succeeded Michael Washinushi as CFO, with Epperson highlighting Jackson's valuable IPO experience as a key asset for the company.

The company's struggles intensified recently as FreshBooks announced another wave of layoffs impacting 140 employees, marking it as the sixth known round of staff reductions within a span of just over a year. This latest round of cuts also included the departure of Chief Product and Technology Officer Stefano Grossi, bringing the total number of executive exits to nine since September 2022. The layoffs were said to have affected all teams globally, indicating a broad reassessment of the company’s workforce and operations.

In a blog post that accompanied the announcement of the layoffs, Reiff, now serving as interim CEO, articulated a commitment to steering FreshBooks towards profitability. She stated, “We’re taking a different approach, one that is less tentative and hopeful, but is rather bold and pragmatic.” Reiff emphasized the importance of operating within the company’s financial means, recognizing the need for a significant shift in how FreshBooks conducts its business. This marked a pivotal moment for the organization as it aims to redefine its operational strategies in response to the challenges it faces in the competitive financial software market.

Reiff's comments highlighted a commitment to fostering a more resilient organization that can adapt to the evolving landscape of SMB financial management. The announcement of the layoffs, while difficult, was framed as a necessary step towards ensuring that FreshBooks can better align its resources with its strategic objectives. As the company continues to navigate these changes, the emphasis on a more decisive operational strategy reflects a growing recognition of the need to innovate and adapt in a rapidly changing market environment. FreshBooks' leadership appears determined to emerge from this challenging phase with renewed focus and clarity, positioning itself for sustainable growth in the future.