Local Startup Spotlight #13: ProfitSee



ProfitSee is a financial insight tool that allows small and mid-size business owners to understand what multinational CFO’s do for their businesses: it helps them recognize what their real assets of the company are, how to better leverage them, and some key elements in creating financial stability, valuation and increasing profitability.

Decades in the making, ProfitSee is built over a data modeling system which (at times) applies up to 12 levels of Boolean logic sequencing to provide high level forward looking scenarios in a method that’s easy for business owners and decision makers to understand and act on. The technology was originally designed as a desktop software package but has recently been re-designed as a SAAS solution and will be launching next week.  Peter Vessenes, Creator of ProfitSee, has a lifetime of experience in financial consulting with multiple fortune 70 clients and many small to mid-size businesses as well.  Currently, he is Co-owner of Vestment Advisors, a financial coaching / turnaround company and Vestment Financial.  He created ProfitSee based on his “inability to effectively clone himself.”  When asked what the value proposition of ProfitSee is, Peter  said:

“We have a subscription rate, depending on how big you are, of either $45/month or $95/month that let’s you see and understand what a $400,000/yr CFO does.”

Powerful stuff!

Podcast Transcript with Jeff Pesek, Lief Larson and Peter Vessenes:

Jeff: Welcome to the TECHdotMN local startup spotlight.  Today we’re chatting with Peter Vessenes from ProfitSee; we’re also joined with Lief Larson(http://www.linkedin.com/in/lieflarson) from Business card 2 (http://www.vestmentfinancial.com/).  Peter, what is ProfitSee?

Peter: Well, in a very short specific way of explaining it, a tool that allows small and mid-size business owners to understand what multinational CFO’s do for their businesses. Helps them recognize what their real assets of the company are, how to better leverage them, and some key elements in creating financial stability, valuation and increasing profitability.

Jeff: That sounds good, so what’s your background and how did ProfitSee come to fruition in the first place?

Peter:  Oh my background.  I’ve been doing, basically, transitions and strategic planning all the way back since 1981/82.  I spent mostly 80’s working in multinationals where I’d be brought in by the President or the CEO of a fortune 70 company to help them through a transition.  For a variety of reasons I got a little tired of the large corporate scene and I started to work with small businesses and I loved it – you know, working with entrepreneurs in a diversity of industry sectors.  Part of what was fun for me was I got to take the variety of disciplines it takes to built a world class corporation and relate them to small businesses.  One of the disciplines – I believe there’s 8 of them- but one of the core disciplines is the fiscal and asset management of business and what I found is that entrepreneurs were generally very good at sales, processes, manufacturing, etc., very very good – but they get busy being busy. And how to really understand whats going on in the business was not clear to them through their P & L statements and their balance sheets that their accountants would provide .  So, I started to take these kinds of numbers and do multi variable analysis like I would do in multi-national corporations.  And it was fun to watch because the business owners would wake up and go “oh my goodness I didn’t know that was my break even, I didn’t know that’s what I needed to set a side and reinvest. You mean if I do this then these things will happen!?”

And so I started to build these very complex spreadsheets to do these things and my clients loved them.  In 1992, I trademarked the name “FlexBudget” because it was a very powerful flexible budgeting tool. We worked with clients from 25m in annual revenue to $300k, smaller service organizations, but each year p if they wanted to do something or modify something it was “call up Peter” and  Peter is there crunching equations -don’t get me wrong I love Boolean algebra, but it’s tiring.  So I was catching a lot of flack – why don’t you just build a software product?  So it was from that that My ProfitSee would up being developed.

Jeff: So this sounds almost like Quickbooks on steroids – Is that an accurate assessment?

Peter: Quickbooks is an accounting package; there’s one primary difference.  Whether your using Peach Tree, Great Plains, or Quickbooks – those things are telling you what has happened in the past.  Because your CPA’s number one objective is to make sure you pay as few taxes as possible and stay out of jail. Tends to be setup to make it easier for your CPA to do the books…that’s not universal but generally that’s what we’ve found it makes it easier to do your task work. What ProfitSee does is lets you really look at whats happening in real time and also what the future looks like. So its helping you see into the future and effectively leverage your resources, your capital, your people, your R&D to create the future of the company that your looking for.

Jeff: And this is a software as a service model at this point – right?

Peter: That’s correct, yes.

Jeff: Lief, did you have any questions right now?

Lief: Yeah…how much does it cost to kick this off?

Peter: You mean what did I invest to get it into the state it’s in now?

Lief: Yeah, what have you put behind this?  It’s my understanding that you’ve been thinking about this now for a couple decades now?

Peter: (laugh) I think it was the pain of being unable to clone myself effectively that made the difference. You know, let me go back to where this came from.  Small and mid-size businesses, typically when they need this kind of help have to hire it, you know, you have to get a hire able CPA – some of them would be getting business or legal attorney’s/consultants – and that’s expensive, I know, I was one of the people that was billing at those big rates, so when I started to build this, I thought, you know, I’m going to self-capitalize this. Three and a half years ago, I began to put some capital into doing it and then my first developer wasn’t particularly good so I hired a second one, and the second one wasn’t particularly good, so I hired a third. And the third one was a successful developer and had won awards on his design & development;  he assured me that he could build this so that it would work both on a Mac platform and on a PC platform. And through some other associations, Cupertino was very very interested in the product (at that time it was called FlexBudget) and was willing to put it on all the shelves at all the Apple stores, so we were very excited, and because of the industries that I work in – coaching and consulting – and when the product was finally ready for release it worked perfectly on a Mac…but didn’t work on a PC. So, at this point, I thought, you know what I really need is  CTO so I found a CTO and he found a developer to finish the desktop model which we began to sell last March, and persuaded me that we could have a much more powerful product, a product that was easier to understand, and that we’ve have a product that would be easier to continue to enhance if we did a subscription online basis.  And so from that, we found a fifth developer and that was how ProfitSee was birthed.  I’ve personally put in, probably over $350,000 into the company.

Jeff: Sounds like a very robust service.  A question I have then is: who is the target audience for this with respect to the fact of your background? You mentioned Fortune 70 clients – is this targeted for that size of business and that type or is this more for somebody who is looking beyond the QuickBooks, beyond the basic fundamental accounting packages?

Peter: Well, the prodcut obviously would work very well for a large corporation, and we have some development going on that would allow you to do multiple profit centers and my own ways of doing burden allocation, which I found large companies don’t do a good job of allocating on burden, but in fact, no, it’s not built for large companies. It’s built for small and mid-size businesses; basically if you have 3 or more employees, you need this product. It will work seamlessly to 100-150m dollar companies. But it’s primarily targeted towards businesses that have hit ceilings – whether that be ceilings in revenue or ceilings in operations – and shows them how to build scenario’s, what to do, how much they need to set aside in order to really make it work.  Now who is it targeted through is a different story than who is it targeted to.

Jeff: OK

Peter: What we found is, like I said we sold the desktop model from March and we cut it off in November, the reason being my CTO said “You know Peter, you love looking at numbers and you really understand them.” I said “Yes, I know, aren’t they beautiful?” And he said “Yes but your clients don’t…we have to package this in a way that non-numbers people can understand this a little better.”  So what came out of that was a dashboard that was very graphical in design and had some key elements on snapshots, we even built a general ledger that lets you track, through color coding, whether you’re above budget, below budget, how much, the density of it, you can overlay it and actually see the number differentiations and you can actually track trends.  Did that marketing program really result in later revenue? What are the dynamics? Are you burning money down in your fixed expenses? We have a 25m a year business that’s a client that last year, decided that they really wanted to move ahead in their sales effort internationally, and so they pushed on that, and just as the markets were in their worst place in March, they went out on a sales process.  By July, the sales occured and they finished the year phenomenal.  And so the Chairman of the Board, who had been using some of the spreadsheet models of FlexBudget for 11 years, brought in ProfitSee and said “Well this is really good, but what I want to know is: “Why we had over $350,000 in excessive expenses and administrative costs?” That’s the kind of stuff that this does in a way that you normally – bigger companies – you know, they have CFO’s, they have analysts, they have people that are tracking the modeling of these things and they pay a lot of money for it. We have a subscription rate, depending on how big you are, of either $45/month or $95/month that let’s you see and understand what a $400,000/yr CFO does.

Lief: Peter, I have a question.  I can understand how this can be really really additive to businesses – you’re looking out into the future.  As your running these scenario’s, I’m sure you can take a look at some of those tangible things. How do you help a business owner, or a corporate directory, or a CPA deal with some of those intangibles that could affect future performance?

Peter: That’s an excellent question. Part of what we do is we try to educate on some of the core basics of fiscal management that many people don’t either understand or that they cannot get our of their accounting/bookkeeping packages. So for example, most business owners don’t realize it cognitively, they just have to live by it – there’s only 5 ways that a business can use profits- only 5:

1-You can either set some aside for cash reserves, because most businesses do not positively cash flow 12 out of 12 months.

2-You can reinvest some of that money for growth – we know what we do, where know where we’re going – we’re going to need to invest in more computers, invest in marketing, expand our sales team, you re-invest for growth.

3-The third way you can use the profits is re-invest for risk and opportunity.  It’s something new, it’s additional R&D, we want to expand into Milwaukee, we’ve never done an out of city expansion. Risk and opportunity.

4-The fourth way profits are used is profit sharing and bonuses for your staff and team.

5-The last way, which is what most business owners think of first, is dividends. Right?

There’s only 5

Our contention is that three of those: cash reserves, growth, and risk are actually an expense to the business. And if you do not account for them as an expense, then when it comes times to need those resources, you wind up managing the company reactively instead of proactively. So we have an algorithm that shows you what your real reserves should be.  We trademarked those things and call them “Targeted Profit.” And what ProfitSee as a package does is it allows you to build, through the wizard, your targeted profit, and then when you run scenario’s because the targeted profit is considered an expense, it shows your real break even, then the “what if” games make more sense because you can tell whether you can afford them, whether you cant…the projections – let’s say you’re running a marketing program – it not only says what does a marketing program cost on a one time, what will it cost to run per month, how many months do you want to run it, what is your expected rate of return – but it also let’s you calculate how many months before it hooks up and has traction. And from that, it builds a projection, and once you build a projection, you see whether you can afford it on a calculated cash flow basis from what you have in targeted profit and then it tracks it in real time as each month goes by – so that you know whether it’s working and (more importantly) if it isn’t, when to get out of it.  These are things that take place in multi-nationals…they do not take place in small and mid-size businesses.

Lief: Not yet anyway

Peter: Not yet!

Jeff: This sounds fantastic, I’m curious to know, are there any other comparable solutions on the market right now?

Peter: You know, there are a lot of little dashboard calculators that some people think is what we do, which is not true. This is a fully integrated package – we literally download your monthly P&L statement from your accounting package – it’s just a cut and paste.  From that there’s these models in it that really let’s you know where you’re going…and so the dashboard stuff is not the same. There is one software package that is strictly a cash flow modeling analysis that is sold to very very large banks – TARP banks  – for helping them assess cash flow in their key large business partners.  But the starting price of that, at a single user level, is $10,000. So as of yet, we don’t think there’s really a competitor. To show you the magnitude of the statement, I was introduced to a guy named Mike through a mutual friend, and I didn’t know who Mike was, but our friend said “This guy has a background in the software industry, you really need to talk to him.” So last August, I talked with Mike on the phone and at the end of the conversation, Mike says, “I really like what you’re doing and I think you ought to put me on your board of directors and give me some equity.” I said, “Really, and why is that?” He says, “Because I was Co founder of ACT Software and you guys have created an entirely new sector in the software industry.  So far I think we’re it.

Jeff: Seriously.  So when did you make the…

Peter: Mike is on our board now by the way.

Jeff: When did you make the transition from FlexBudget to ProfitSee and are you fully functional, live at this moment, as we speak?

Peter: We are fully functional with our beta testers, which were basically our desktop model versions which we’re converting over along with some of our other key partners that we’re working with…but, actually one week from today, the real live, My ProfitSee, goes live in the general marketplace. So yeah, we’re right at launch.

Jeff: Excellent

Lief: Have you tried to align your product with a larger provider, like someone as large as maybe a Great Plains Software which I think is part of Microsoft Dynamics now, or maybe a smaller business product like Freshbooks which I know has been wildly popular in the small business community?

Peter:  That’s a great question.  Amazingly, in September, I got a letter from Intuit, having heard about what we’re doing and inviting us to be one of their beta developers for their apps group. So we’re one of forty apps companies with Intuit, and we’re building a more simplified version because Intuit can’t sell a $95/month product.  That should be released in their cloud program in January of 2011. We are about to be introduced to some people at Microsoft as part of a coordinated value added into the financial services industry through a CMS software and we have also been approached by Larson Allen, the accounting firm, who wants to become an anchor business partner with us where either a co-branded or privately branded version of this would be used through their CPA firms Nationally – just rolled into their monthly retainers with their business clients.  One of the senior partners with Larson Allen said, “That graph that’s on the dashboard…what do you charge per year for this?” I said, “Well, it depends on the size of the company because it’s $95/month for two users, a larger company might need more than two users –  a larger company might want more because you don’t want the same person doing data entry to also be doing scenario building or modeling analysis.  So he said, “I’m going to get this for about $1,200/month with extra users? I couldn’t build that graph for $1,000.” So it’s been an interesting ride.  My ProfitSee went into development in June, we had a working beta model in November, and we basically have been working through some of the bug fixes and the visual interfaces since then…but we’re ready to launch the new product literally in one week.  I stopped selling the desktop model in October because the beta/online was 10 times what the desktop was doing.

Jeff: Wow.  In terms of some of these relationships that you’ve established, in the acquisition of some of these beta users that you’ve got, how have you, is it just based on your connections that you’ve just been able to spread the message and get the word out there?  Or have you had a proactive marketing campaign, have you needed to?

Peter: Again, I’m the CEO of Vestment Advisors, which is this kind of coaching/consulting turnaround company, and I’m very well known in the financial services industry – I’ve published books, I’m quoted in investment news publications, Wall Street Online, I write for the Register, I was a featured writer in Financial Planning Magazine, I’m a regular contributor to Horsesmouth and we have our own email subscription to about 4,000 financial advisors. So from that, we’ve had a network of relationships with people like ING Financial Partners, Financial Planning Network, HD Vest, First Global…I’ve had a first name relationship with Cherry Bekaert Accounting and Moss Adams and the Northwest.  And so a lot of the ability to launch this is because I’m fairly well known in the industry and they know I do this.  I literally gave a lecture at the first Financial Planning Association meeting when two different national organizations merged to become FPA.  I wasn’t the keynote, but I was given the entire afternoon to teach on fiscal and asset management with the opportunity to offer a spreadsheet version of FlexBudget at that time.  There were about 1,000 people in attendance at this, it was in Chicago, 470 of them came to an all afternoon presentation by me and 462 left with a version of the product. So again, some of this is running on my rep but the product prettymuch speaks for itself right now so…

Jeff: Sure.  Any patented technology here?

Peter: Um, we’re using some petty high level cloud based stuff, wouldn’t say it patented but you’d have to be an extreme math whiz to replicate what we do. I think the thing that’s really unique about what we do is this is really a data management system that we’re applying extremely high levels of Boolean algebra to with maybe 8-10-12 levels of logic sequencing in it.

Jeff: Wow. Lief?

Lief: Yeah, I guess financing a business is always a challenge for owners, no matter what size, I see many businesses  that wait too long to ask for money or go to lender out there trying to raise their next round and building a successful business almost always costs more and takes longer than what a business owner or manager would expect. Are you putting some tools in there than can be help be proactive and kind of pre-empt the necessity to ask for additional resources in building some of these scenario’s so that they know when to get out there and pound the pavement for more resources?

Peter:  That’s a great question.  You know the scenario’s absolutely are designed to do that .  We’ve actually been approached by a number of people who want to use it as an acquisition and merger tool where they would take someone that they want to acquire, plug their couple years of historical P&L’s into the program and see how the might revise and modify what the capital needs were. Same thing is true if you need capitalization because if you lay out what your tactical strategies need to be in the scenarios, then it will show you what kind of capital is necessary in order to bring about the difference, and what kind of rate of return you can expect.  This is way, way past how people build these static models that investors look at and laugh. It’s a whole different type of sequencing.

Jeff: Sure

Lief: Yeah, they’ve all got those exponential growth curves in the future but nothing to actually support that.

Peter: Exactly. You know, one of the things we’ve found fascinating is that we’re capable of building unique scenarios by business sector. One of our consulting clients was a wonderful Minnesota lady who was a high level stylist at one of the big name beauty shops in town here (I know they don’t call them that anymore) and she was very very successful  in her 20’s, a gorgeous woman – she flies to New York and comes back to show us what we’re supposed to be looking like. And she was generating a quarter of a million dollars a year for one of these salons and they were only paying her $65,000. So she came to us and said, “You know, I don’t like this, I want to build my own salon, and can we do this and so on and so forth…” So what did we do? So we built a custom model, we showed her what she needed to do in terms of her capital assessment, how much cash she should keep in reserve, we helped her get an SBA loan, we even told her where to shop for it, she went and got it, and she’s launching next week. What did I get out of it?  I got a perfect vertical niche in the salon industry for My ProfitSee.  So by working with industry sectors who might have slightly different or unique needs, we’re literally capable of building scenario’s that you can pull down which  you can relate specifically to things you have to face within your industry.

Jeff: This sounds amazing, I don’t really think I can even appreciate the value of it right now just sitting here.  So many different people and businesses comes to mind, it’s easy to see where this fills that need. Question I have is: how has developing this technology in Minnesota impacted you one way or the other?

Peter: Part of the phase we’ve been at, you know I do own Vestment Advisors and am Co owner of Vestment Financial, I’ve been able to tap on some of my other talent internally, not on the development side, but the marketing and the administrative, accounting and bookkeeping. So for us, the issue has not so much been Minnesota, although my attempts to find developers that were operating effectively in cloud technology was not good in Minnesota and so we’ve actually wound up working with a development team in Austria.  My challenge there is that they like taking off about 14 weeks a year…that’s the European experience. But you know except for prettymuch everything on the development side, Minnesota has been a great avenue for us.

Jeff: Great, glad to hear that.

Lief: Hey Peter, I have a question:  So you have this great product out there, are you actually getting high on your own supply? Are you using your own product as your building your business?

Peter: Oh yes, as a matter of fact.  Well first of all, I was sitting down with a community and they had someone from the state because this community is interested in us placing the administrative and back office.  And this person from the state was there, working with the Secretary of Commerce, right, and they were talking about the programs available to capitalize us because if the markets hadn’t gone down a year ago we could have self capitalized the launch, now we are indeed in capital formation for stage two, but in the course of this, one of the things this very sweet lady said to me was “We have consultants available that can help you understand and do your cash flow projections so you know where you’re going in the future” and across the desk from her at a different table was a banker who says, “Margaret, he’s the people others hire for doing this.” It was kind of cute.  So, yes we do. My CTO was out for the Christmas Holiday and he said “I have a Christmas present for us” I said “Oh that’s kind, what is it?” He said, “Just open it up”.  So I opened it up and it was a web site and I asked, “What is that?” He said, “Well, you have to do it on your iPhone…just do it on your iPhone.” He had built an iApp, an iPhone application for ProfitSee on the Apple iPhone.

Jeff: So this is now available on the iPhone too?

Peter: It’s not available but it’s going to be part of the release. Yeah. So for example, we do run Vestment Advisors on My ProfitSee.  Sure do.

Jeff: In terms of this specific technology, is your interest to keep and retain this, do you have an interest in selling this down the road – what’s kind of your vision ProfitSee?

Peter: That’s a great question. To be really Frank, I’m compulsively addicted to complex problem solving. If I went through the eight disciplines that we assess in a business, you’d go “God, this guy is anal.” But what really is driving me is that I’ve worked enough, literally ,either through lecture or workshops or being a guest platform speaker, or literally hands on with small business owners, probably several thousand small and mid-size businesses since 1991. Small business makes up 70% of the GDP and they’re the financial health of our Country.  The reason I have a passion for this product is that I believe it literally transforms how small and mid-size businesses view and run their companies.  It will make them more financially healthy. So my passion for this is: how do I let people get the fever?  How do I let them get so infected with this that it transforms their businesses? Now if we are groundbreaking, if we really are the first in this, I’m sure there will be competitors – we’ve got some things up out sleeve to help hold the rolls off – but you know, my objective is: what is the best way to take this national? Certainly if we’re going to be a partner with Intuit, Intuit is a potential succession plan for us, getting acquired there.  Our conversations with Microsoft are about four weeks away, lord only knows what can happen there, my biggest concern is making sure that my IP is protected completely – but, whether we do an IPO, whether we grow this privately, I don’t think is much of a concern to us as: how do we make this effective at the grassroots level? How do we take business owners who are going to have to learn some things and make sure they have a partner? Whether its through a tax provider, or an accounting/bookkeeping company, or through workshops and educational seminars, online training tools, CPA firms, or though their distribution channels.  Currently, we have five different distribution strategies in what we’re doing and all of them revolve around: how do we educate the business owner in a simple, compelling way, to take advantage of what their own numbers can tell them?

Jeff: That sounds great Peter.

Peter: I think the big piece for us is that we’re looking forward to taking this to market.  I want to do it in a controlled fashion but if any of this sounds of interest to any of your guests that listen to this, please feel free to visit our website, it’s http://myprofitsee.com.

Jeff: Thanks so much Peter, and thanks Lief for joining us on this call as well, we appreciate it very much.

Lief: Thanks Peter.

Jeff: Thanks for listening to the TECHdotMN Local Startup Spotlight, today we’ve been chatting with Peter Vessenes from ProfitSee and we were joined with Lief Larson from Business Card 2. Until next time, take care!