While fintech businesses such as Nutmeg, Transferwise, and iZettle have attracted their fair share of column inches (and investment) recently, some of the biggest fintech success stories lie within more niche markets. There’s an awful lot of value in providing your customers with a tailored product that helps them overcome key financial challenges. Plus, sheltered from the whims of the consumer market, a lot of so-called niche B2B industries are actually flourishing.
Take the recruitment sector as an example – it’s worth £30 billion in the UK alone and Sonovate’s own research has revealed that more recruitment companies were founded in 2014 than in any other year. The contractor market in particular is booming but this poses significant financial and administrative challenges to recruitment agencies because they have to pay their contractors before they receive payment from their clients. Traditionally they’ve resorted to accessing finance from banks – but they don’t understand recruitment, and they certainly don’t understand the cashflow chasm that exists between recruiters paying their contractors weekly wages and being paid monthly by their clients.
As former recruiters ourselves, my co-founder Damon and I knew that there was a need for a contract finance solution that was specifically tailored to the recruitment industry. And it is this successful specialist service that our business, Sonovate, offers today - but this isn’t how Sonovate started life. Here are my secrets to fintech start-up success I’ve learnt from changing the direction of my business:
Don’t be afraid to pivot from Plan A, even if it works
We launched Sonovate in early 2012 as a complete “solution in a box” for start-up, micro and small recruitment businesses. This included everything that recruitment businesses needed to function and succeed – tools for website management, CRM, branding help, and software for time-sheeting and contract finance.
And Plan A worked. The recruitment industry was incredibly receptive to our product and we steadily gained lots of very content customers. This helped us build up our own brand, and soon we had a lot of attention within the market and people knew what we offered.
But after a while, we realised that the true potential of Sonovate lay in the contract finance we offered – it was the only thing we offered that no one else did. The banks weren’t supporting the recruitment sector and there was a real need for a finance solution tailored to their specific needs. So we pivoted, focusing our efforts into creating the technology that would enable our contract finance offering to work, becoming a fintech company in the process.
Listen to your customers, and your prospects
One of the not so secret parts of running a successful business is listening to your customers. Sonovate’s original offering was successful and we had many satisfied customers but we spent time listening not just to their needs but also to those of prospects. We received a lot of enquiries from companies wanting a stand-alone contract finance package; companies that were fed up of being force-fed outdated, inflexible products by the big banks – products which simply didn’t help them place more contractors and grow their businesses.
With a little due diligence, we discovered that our customers were on to something: focusing solely on contract finance would give us an even more successful and sustainable business model. And a result we arrived at Plan B.
Make sure investors realise that value is in you, not just your business
It’s vitally important to ensure that you work with investors who understand what life is like at a start-up, and realise that your business might change its direction somewhere along its journey to success. The best way to do this smoothly is to make sure at the outset that any investors recognise that the true value of their investment lies in you and your team, not necessarily in your original business model.
That idea is going to develop and mature as you gain experience and understanding of your niche, and it’s entirely possible that you will realise the “golden nugget” in your plan is slightly off your original track. After all, if your investors understand that you are the one who holds the talent, they will be confident in investing in your business wherever it leads.
Get everyone in the company on board
It’s not just the investors who need to be on board with your plans, however. Everyone in your company should be open to the potential of your business change and be prepared to work together to make it a reality, knowing that it will benefit the company as a whole considerably.
At Sonovate we were lucky in this respect as our employees recognised that our plans would benefit us all, and we didn’t have to run the decision past a board or a committee for approval. The greatest challenge we faced was keeping our existing customers happy whilst we built the technology that would support our new product, but with the whole team on board this was an issue we were well prepared to deal with.
Stay open to change
Finally, and most importantly, anyone launching a start-up needs to be open-minded when it comes to the possibility of change. You might pivot to Plan B perfectly well, but what if you need to get to Plan C, D or even P down the line? Like us, you could find that the real potential in your business idea isn’t exactly where you thought it might be at the start. And you don’t need to bury your head in the sand and ignore that realisation – embrace it and act upon it with confidence and agility.
It takes an enormous leap of faith to start your own business, and an even bigger one to accept that your business will be more successful if you change its direction slightly. Moving away from Sonovate’s Plan A taught me that finding a niche is the perfect way to penetrate a new market. Our pivot was a brilliant commercial decision – and the recruiters who loved our Plan A product loved our Plan B product even more.
By Richard Prime, CEO and co-founder, Sonovate