Why I Started Engage: Part III, Market Analysis
This is the third part of a six-part series answering the question of why I stated Engage for CPAs. Part I explains why using engagement letters is important for accountants. Next, Using Engagement Letters in my Practice describes how engagement letters were a persistent pain point and how it led to my thinking about possible solutions. Part II describes what we built and why Engage improves small accounting practices with automatic engagement letters and advance fee payments.
Part III, below, is about the market and why this is a compelling opportunity that was worth pursuing.
Part III: Market Analysis
I had a solo tax law practice in San Francisco for many years. Engagement letters were a persistent problem in my tax practice, involving word processing, converting to pdfs, emails back and forth and so on. Thinking there must be a better way, I roughed out a system to automate new agreements with an integrated advance fee option.
I ran the idea past a handful of people, and it seemed like a great idea. Like many entrepreneurs, however, I assumed that if I had this idea, then surely someone else had thought of it already. I did an informal search online without any results. I also hired someone to do a professional market analysis to make sure I hadn’t missed anything.
The closest thing I could find were templates and sample letters. Many of these were published online by malpractice insurance carriers. It’s in the company’s interest: these templates encourage policy holders to use engagement letters and this, in turn, indirectly reduces claims against the company’s policies.
These letters are also an effective marketing strategy for the insurance companies: anyone searching online for a template will find the insurance company’s website. After entering their email, the template can be downloaded and the email address is added to the top of the insurance sales funnel.
Aside from promotional resources, there are also commercial templates and sample contracts available from Nolo Press and Rocket Lawyer, among others. These were the closest direct competitors. Even so, these services are basically template libraries, without the automation, compliance or workflow integration of Engage.
In brief, there wasn’t a similar product on the market – until shortly after we launched our limited feature beta.
Practice Ignition is a Australian company founded in 2011 and was just starting to move into the North American market. Practice Ignition is a practice management app and a direct competitor: it creates ‘smart’ proposals and sends them clients for execution and payment.
Finding a direct competitor was thrilling. First, it validated the concept and validated the market potential. It meant that yes, someone else had thought of the idea and, moreover, others had decided that it was worth pursuing. Practice Ignition has raised a total of $24.4M from early stage investors.
Second, having a direct competitor meant that we had a touchstone from which to iterate and differentiate our product. In our case, Engage is designed for accountants practicing in tax and attestation, both heavily regulated practice areas, while Practice Ignition is marketed to bookkeepers and non-regulated accountants.
This was an important benchmark: here was a problem that arose from my personal experience; other accountants had the same problem; and we had a solution.
Furthermore, the concept had been validated and apparently had commercial value. The next task was to determine the size of the market.
Next – Why I Started Engage, Part IV: Valuing the Market