Managing expenses for companies is a highly profitable business as long as you know where to look, says one chief executive.
"This is the secret... don't tell anyone, but the enterprise [business] sucks," Expensify CEO David Barrett told Yahoo Finance Live (video above). "It is the worst, smallest, slowest to close, lowest margin part of the industry, and everyone is fighting over it."
And so “we just have a completely different business model than all of our competition,” Barrett added.
Shares of Expensify (EXFY) rose by over 45% on Wednesday after the company began trading publicly. Competitors include SAP Concur, QuickBooks Enterprise (INTU), Zoho Expense, and FreshBooks.
The Portland, Oregon-based company automates expense reporting by allowing customers to scan and be reimbursed for business expenses such as flights, hotels, and meals.
Instead of chasing the largest companies in America — ones that "everyone knows who they are" — Expensify is focusing on the small and medium business sector, where the "easy money" is, according to Barrett.
"Yes, we've got a whole bunch of public companies, like the Pinterests, the Atlassians... that use Expensify," he explained, but "we earn over three times more revenue per employee in the SMB than you can in the enterprise... because there's basically no competition."
Most customers in the SMB space "have never heard of Concur, have never heard of any of the competitors," he added, "so it's a completely different business model."
According to the company's S-1 filing, the company has "processed and automated" 1.1. billion expense transactions on its platforms since its inception in 2008.
Expensify reported $65 million in revenue for the six months ending June 30, 2021. It reported revenue of $88.1 million at the end of 2020.
Barrett said that Expensify also defies traditional business models in its plans to grow beyond expense reports.
“Our design is to create a viral platform that has word-of-mouth growth and can grow to capture the billion or so of people who are currently having these financial conversations offline,” Barrett said.
“Whoever connects a billion people through their financial conversations — that’s a trillion-dollar business,” he added. “And so that’s what we’re gunning for, and you can’t get it through a traditional business model.”