The chief executive of FreeAgent has said the online accounting software company is considering flotation as it looks to finance further growth.
Ed Molyneux, a former RAF pilot who co-founded the Edinburgh firm in 2007, said a public listing is one of “a bunch of different options” that will be examined when FreeAgent seeks to raise additional cash towards the end of this year. Money raised will be used to expand its growing network of partnerships with accountancy firms, as well as to further enhance its technology.
“One of the great things about the software as a service model that we use is that it generates recurring revenues, and we have a very low churn rate – about 1.4 per cent,” Molyneux said.
“That’s around the level of the general business churn rate, and in fact most of our customers who leave us do so because they are either winding up their business or returning to employment.
“So when we get a new customer we tend to have them for the long haul, which means we are pretty reliable in forecasting our growth, and if there is one thing that public markets really like, it’s predictability.”
His comments followed the announcement that FreeAgent, which targets small businesses and the self-employed, has signed one of its biggest partnerships to date.
The agreement with London-based K&B Accountancy will bring 1,200 freelancers and contractors onto the FreeAgent platform, which automates the collection of information such as income and expenses while also keeping track of tax liabilities.
This relieves accountants from chasing up clients for data, allowing them to provide more useful advice. About one-third of FreeAgent’s 45,000 subscribers are now through accountancy practices, and this has become the fastest-growing part of the business during the past year.
Molyneux says demand will increase further as proposals for quarterly tax reporting by the self-employed and SMEs come into force during the next few years.
“We expect growth to accelerate significantly because with quarterly updates, if you are using a paper-based system or even a spreadsheet, that will be all but impossible to manage,” he said.
FreeAgent’s biggest partnership to date is with JSA, which provides accountancy services to contractors and micro-businesses. About 3,000 of its clients are now through JSA, up from 2,000 when the deal was first signed in September 2014.