Why Did ScaleFactor the SME Bookkeeping Startup Failed?

Ahead of yet another funding round, multiple venture capital firms passed on investing, according Certified Bookkeeper to people familiar with their decisions, having determined that ScaleFactor was more of a services business than a software platform. To bolster this effort, ScaleFactor hired The Outsourced Accountant, an offshore firm in the Philippines, to help. But no matter where they worked, the unpredictable technology continued to lead to errors in customers’ books. In June 2020 the fintech startup ScaleFactor announced that it is winding down. The company raised $103M based on the promise that they were going to revolutionize accounting for small and medium businesses by automating their bookkeeping.

• He has over 15 years of analytical experience in industries ranging from health care and transportation logistics to food service and software.
• Compare the side length of the real object to the length of the corresponding side in the representation.
• It is used to compare two similar geometric shapes and also in other fields like cooking, where the ingredients can be reduced or increased according to the given situation.
• A common real-world use of scale factor is to bring vast areas of land down to small pieces of paper, like on a map.
• Simplify your audits and reduce your workload with G2’s 5-star rated compliance automation platform.
• A scale factor in math is the ratio between corresponding measurements of an object and a representation of that object.

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I for one welcome our robot overlords because I see this as an opportunity to shift our focus from data entry to data validation and advisory work. We should spend our time helping our clients navigate the challenges of small business ownership; be their steward and partner in the good times as well as the unprecedented, unbelievably weird times. Despite the votes of confidence from well-known investors, customers were finding that ScaleFactor was falling short. Nathan is a Senior Research Analyst at G2 focusing on finance and accounting software and their respective markets.

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In the spring, investors discussed ScaleFactor’s future before deciding to shutter operations, according to a person with knowledge of the discussions. With a scale factor less than 1, the shape experiences reduction. The length of each side in the resized shape becomes a fraction of the length of the corresponding side in the original shape. A negative scale factor not only resizes the shape but also reflects or flips it.

Up Scale or Enlargement Scale Factor

Employees received 12 weeks severance pay, and a small team was retained to maintain the needs of ScaleFactor’s current customers and to help them transition to alternative services. After their initial failure to automate the bookkeeping process, they tried to pivot to a marketplace for bookkeeping companies and SMEs. After all, ScaleFactor raised money like a tech startup, so they needed to develop a scalable tech product rather than to refine and grow their service business. None of this was known publicly last month, when Rathmann announced that ScaleFactor was closing. In an interview with Forbes on June 23, the CEO blamed the Covid-19 pandemic for almost halving ScaleFactor’s $7 million in annual recurring revenue as demand from small businesses crumbled.

• ScaleFactor makes online financial software that enables small and medium-sized businesses to automate back-office tasks including bookkeeping and payroll.
• A scale factor describes how much a shape has been scaled up or down.
• ∴ The dimensions of the original rectangle before the reduction were 8 meters by 12 meters.
• The side of the original square is 1, so the side of the enlarged square will be 4.

Our community is about connecting people through open and thoughtful conversations. We want our readers to share their views and exchange ideas and facts in a safe space. “We really thought we could automate the entire back office of a small business,” said Kurt Rathmann. We help our clients scale their revenue and profits by implementing our 7 Factors of Scale.

For example, if the scale factor is 2, the new square will be twice the size on each side. If the copy of the actual object is not made to scale, it will look unrealistic, like a little child’s toy. The lengths of the sides of the image are double the lengths of the preimage. As the founder of Accountingprose, I am living my best life and couldn’t imagine doing anything else. I love working with small business owners and helping to develop a team of accounting unicorns. Accounting can be hard work, but watching the people who rely on our team thrive is the greatest reward imaginable.

In the world of lean startups, (temporary) spit-and-duct tape solutions are expected. Faking it initially is not only tolerated but outright encouraged to prove there is a market for the solution you are trying to build. For these software services, ScaleFactor charged around $6k annually up to $30k for their most premium plans. I have over 15 years of experience delivering scaling results for B2B, B2C, and e-commerce companies. ‍Companies like Hyatt, Cisco, and Starbucks are just some of the noteworthy opportunities I’ve been a part of.

Scale factor examples

This formula can also be used to calculate the dimensions of the new figure or the original figure by simply substituting the values in the formula. To make scale models, you need accurate plans of the original item, like a scale drawing. A scale drawing is an accurate plan of the real object, drawn using a scale factor to make the drawing small enough to handle. A scale factor in math is the ratio between corresponding measurements of an object and a representation of that object.

ScaleFactor makes online financial software that enables small and medium-sized businesses to automate back-office tasks including bookkeeping and payroll. Business customers pay a flat fee to access the digital tools and services with packages starting at around $6,000 and reaching as high as about $30,000 a year. During due diligence, one of these potential investors learned that ScaleFactor had a customer service team who they were told functioned as “account managers.” Further inquiry revealed the employees were accountants.

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Compare the side length of the real object to the length of the corresponding side in the representation. You could create a ratio of left-handed students to all students, but that ratio is not a scale factor. The original shape has a base of 6, so the base of the enlarged shape will be 3.

• The height of the original shape is 1, so the height of the enlarged shape will be 2.
• After all, ScaleFactor raised money like a tech startup, so they needed to develop a scalable tech product rather than to refine and grow their service business.
• Suppose the current rectangle has a length of 8 units, a width of 4 units, and we want to increase the width by a factor of 1.5.
• As we go the extra mile to ensure it is done right, we pride ourselves on setting high standards for everything we touch.

Using the symbol “k” to represent this factor, acts as a special number indicating the relationship between the original figure and its resized version. It’s important to note that the scale factor only influences the size of the figure, not its appearance. In this article, we have covered the meaning of scale factor, its formula, types of scale factor — upscale and downscale, methods to find scale factor in different geometry shapes and applications of the scale factor. Scale Factor is a numerical representation that describes the proportional relationship between the corresponding dimensions of an original figure and its resized version. It quantifies the degree of enlargement or reduction in size during geometric transformations, aiding in precise adjustments. Scaling up means that a smaller figure is enlarged to a bigger one.

How to Find Scale Factor

Since the onset of the COVID-19 pandemic, we have worked extra hard to help our clients stay afloat and find new opportunities. Unfortunately, the major thing that customers got out of their experience was a lesson in the risks involved in being a first adopter of unproven, innovative solutions. While Covid might have been the final nail in the coffin (allegedly it halved the company’s $7M ARR), it’s likely mostly a convenient occasion to close shop and save face – something quite common nowadays (see our article on Quibi’s shut down). Lindsey Reinders’ business lost $17,000 because of one such error that wasn’t caught for a couple of months. And when she demanded to be compensated, she was offered a partial refund under the condition that she wouldn’t share publicly her customer experience. The situation was made even worse because ScaleFactor was delivering a pretty bad service and had some shady practices on the customer side of the equation.