There’s a revolution underway. Deep within the Auckland Viaduct lurks the beginnings of our own tiny Silicon Valley. At GridAKL, more than 50 startups, in industries as diverse as medicine, robotics and augmented reality, are running the entrepreneurial gauntlet looking to build a high-growth business – or at least a get a second funding round.
In On the Grid, a sponsored series with Auckland Tourism, Events and Economic Development (ATEED), we tell their stories. In this, the fourth instalment, hospo wizards Posboss.
There’s a certain cognitive dissonance in your every day cafe transaction. After telecommuting through space to a freelance gig in our most distant antipode, you close your laptop and approach the counter only to find a caffeine-fried barista simultaneously stabbing at some archaic typewriter, wrangling a tiny printer and frothing gluten free soy skim almond milk to a silky microfoam.
It seems strange that we can beam information directly from a satellite into your average cafe and yet every purchase remains a Gringott’s level interaction. Is there not some way the process can be streamlined? Can the power of the internet not be harnessed like a beast and ridden into a new era of pain-free hospitality transactions? Posboss CEO Jonny McKenzie believes it can.
The Spinoff: I had this idea in a 5th form enterprise competition – assuming you didn’t copy me, where did your inspiration come from?
Jonny McKenzie: I had a few businesses in Wellington, three bars and a cinema, and at the time I had pretty archaic tools. The main challenge was not knowing how the businesses were going while I was at the cinema running that. I was looking for a better point-of-sale system, and Vend was one option I considered. I was looking at using Vend for the bars, but after a bit of research I realised that it wasn’t going to work for us. So I flew up to meet Vend, and asked if I could build an add-on for them to make their product a more suitable for hospo. After about six months of trying to make it work together, we found that actually, Vend is built around and worked really well for retail businesses – it was essentially crafted for the retail mentality. What we needed was something made with a hospo way of thinking behind the scenes.
Realising that the differences between ways of thinking were so marked started our journey of being able to use mobile technology to make a tailored, useful tool for hospo. Thankfully we were very lucky to have the support of Vend who helped us as we started on our PoS building journey.
It’s interesting that you bring up Vend, because that was something I wanted to ask. What’s your point of difference? Are you even competitors?
I normally draw a little picture, but fundamentally if you imagine there are two circles and they cross over, the area in which we cross over is what I’d call retail-hospo: the places where it’s a ‘counter mentality’ where you pre-pick what you want to buy, head to the counter and pay for it. There’s some crossover there, espresso bars can sometimes work that way, but it doesn’t work when you get an extra layer: where you’ve got a kitchen running, or you’ve got a barista who isn’t standing right next to the till, and you’ve got dockets printing and you’ve got people asking for modifications to their dish, ‘more bacon with my bacon and eggs, remove the sauce,’ that sort of thing. In the retail world that doesn’t exist. You never buy a pair of shoes and ask if they can change the laces to blue, whereas in our world that happens with nearly every order.
Retail PoS systems are great and work well for that single transaction sort of situation, and in essence our core difference is that we are designed for the more fluid, frenetic world that comes with hospo operations. We know it well, and we love it, and now we create the perfect tool to make that world work easier.
How did the actual build of the platform go? Did you have sufficient experience in coding?
Not a chance. I did an IT degree, but I put that aside and did hospo. The only bonus was that I had a little bit of understanding of what I was getting into, without really knowing what I was getting into. At the time I teamed up with a company called TouchTech, they still exist, who were an app development company. They brought on the capability to program and a designer came on board and helped us with that, and we formed this little company with our different skill sets. I was just the driving force who kind of took it and went forward.
What advantages did you have coming into this knowing exactly what was required? Because in a sense you were custom-building it for your own purposes.
Actually one of the hardest things was to stop just building it for myself. I guess the bonus was being able to clarify when a customer said something, how that would be interpreted by a developer. You know, facilitating communication between a hospitality person and a developer, being able to translate that so we actually got something that was useful.
But what about being a business owner as well? Having experience in managing people, and payroll, and all that sort of thing?
I probably take a lot of that for granted now. Every day I have to remember that there are a lot of skill sets that after eight years of running businesses you kind of forget you possess. Things like making sure you’ve got a good team, for example.
I guess one of the key things for us at PosBoss was never to be a tech company, but to be a hospitality company. We call our sections the ‘Front of House’ and the ‘Kitchen’ team. The devs are our kitchen, and anyone doing support is front of house, dealing with the customers. Everything we do we try and treat it as if we’re a hospitality system. I guess basically what I did was rather than trying to learn how to run a tech company, I just made a tech company run like a hospitality company. And it kinda works.
Has that been tried before?
Well that way I could relate to it, and I could easily talk to it. It meant that I was using my own buzzwords rather than trying to read every latest book about what the keywords I should be using are.
I tried reading The Lean Startup before I began these interviews, and it was all pivot-this and segment-that, there’s a whole language you have to learn.
Exactly, and you learn them anyway when you start having lots of coffees and everyone keeps using them at you. You’re just sitting there going ‘You mean, like a change in the menu?’ and they say ‘Yea, that’s a pivot,’ and I go ‘Well ok, I guess so’.
The other key thing was to make sure that the team didn’t feel that there was a huge distance between the devs and our customers, so they became one. What helps there is building a product where they get to interact with it everyday. So they go to cafes and burger joints where they have to see their till, the till they’re building, being used, and they see the facial expressions which they can relate to. That helps a lot.
As opposed to many of the startups here at the Grid, you actually generate revenue. How does that effect the way that you conduct yourself?
We’ve gone through that raising process, but naturally I think my natural instinct is to not take much money, which means that we’re always feeling like we’re bootstrapping to a degree. It’s good to know that we’ve actually got some money coming in because the best thing about it is that you know that your product is wanted, and we’ve got super happy customers. That’s been good.
But I guess what it means is that it gives us a bit of confidence in the direction we’re heading, which has made it easier for us to make bigger decisions on how to go. The biggest thing is that we’ve got the confidence where we can tell customers that the way we’re building this thing is potentially a better way to operate their business than how they keep trying to tell us to. The danger there is obviously you don’t want to tell them that they’re wrong, you just want to open their way of thinking around how technology can help them to have a smarter operation.
You’ve got an advantage in that you’ve been in that industry so you know how to talk to these people, right?
It helps a lot when they start talking about their years of experience, because while I fully respect that, I’ve got some experience of my own. And that does help especially with how we do sales and support. We always try and talk as if we’re running their cafe with them. It is awesome having revenue being generated, I think it’s about that next phase of challenges that coming along which is how do you get from this amount of revenue, to this amount of revenue. And then how do you control that growth, and not get too excited and spend money in the wrong places.
And as a subscription and service model, it’s not like we’re making a ton of money with every sale. We’re $55 a month per person. Well, developers and the rest of the team cost a little bit more than $55 a month, so it takes a bit of scale.
I noticed on your site a lot of the marketing emphasis is around reducing space and clutter, a lot of focus on the aesthetics of the product. Why is that so important?
Because software is difficult to explain to a market who are very tangible, who touches and sees the things they work with, to sell them software it’s often hard for them to understand what it would look like. One of the big questions we get is ‘how does it look?’, or ‘what does it work on?’ So we realised that during that initial step, when you’re trying to get them to understand the product, giving them those photos or images about how it reduces that space and it will give you some more clarity and clear the environment becomes a stepping stone to them going ‘Well how does it work?’
Was that an effort to target towards more stylish, boutique businesses like an upscale food truck?
Well we built it to work on iPads, which are already seen as being simple and clean and clear. And after researching so many different stands, the Heckler stands are the ones you’ll see on our websites – it just comes as part of the package and mentality. It was then about trying to track our growth in the market, which at the beginning was with new businesses. Our product was designed for new owner-operators. The new guys were espresso bars, they’re opening up faster than anyone, probably the highest growth right now, and so the aesthetics was a real key element there as well. Knowing that they like minimalism, nothing on the counter, that really helped. It sort of went from not really being a key part through to us realising that’s such a key feature. People like the look and the feel, and therefore we should promote it.
It’s interesting that your business is in selling software, and the presentation of the package still remains important.
Tills have always looked really ugly. We also know with payment, where it’s going, you’ll be turning the screen around pretty soon for a digital signature, and other things that we’re looking to build in the future will have you interacting digitally with the till. I guess it’s become part of the journey, making sure we always look at design as key to it, understanding that our customers care about what they look like, and therefore we should care about how we look inside their premise.
What about, on a slightly different side, Xero integration. How did that come about? Did you originally intend to have such comprehensive analytics?
I think it was always intended. One of the reasons I wanted this system when I was hunting for one was knowing what was going on. There was always going to be an element of reporting. I’d actually just recently moved my businesses over to Xero, and it was the first time I could see my account without waiting for my accountant to drop them off. It was a real moment of realisation. And then I guess to hear the sort of concept of integration, and being able to do this with a flow of data… at the time, by 2pm on Tuesday my managers had to have gone down to the bookkeeper to drop everything off, and now they don’t have to go anywhere. The integration just made sense in that way. And I guess it was also, going back to how we look, Xero’s got a way of looking, we were sort of tying into that, and our customers start to feel that this is the way they see themselves. It was a great partnership, not to mention they’re an awesome company to work with, super supportive and helped to guide us in the right direction. Now that we’re seeing accountants becoming more like business advisors, it’s been fascinating.
Have you had client feedback around reporting and analytics?
The one report that made the biggest difference was the sales-by-hour report. It made people realise that, for example, in an average month at their cafe they were doing about $3 sales between 3 and 4. Even opening hours themselves, if they’re opening at 7 but they don’t do any business until 8, why are they bothering? If you shave an hour and a half off operating times, multiply that across staff hours over a whole year, PosBoss has paid for it’s subscription. That’s one of the key elements – if we can pay for ourselves then we’re doing our job, and that’s where they reports come in. If we can do anything to support our customers to make smarter decisions, then we see instant gratification come back.
A lot of client relationships can feel a little predatory – you know, squeeze the client for all they’re worth – but it seems with your model that shared goals and a successful symbiosis delivers far greater returns.
Yes, and it’s our sales strategy too. From all of my experience, the way I knew about a new product was through word-of-mouth. It was very rare that a sales rep would walk through my door and successfully sell me something.
Did your experience in costing things out and managing a cash flow help you to avoid any pitfalls that trapped other startups?
I think knowing that you’ve got to hit payroll, and you’ve got continuous costs coming out, you’re always fundamentally thinking about what’s coming out of your bank account and thinking ahead. Then the other side of it is that some people are so used to being paid, the fund just gets topped up every week, if you’re used to never having a fund topped up then you start to realise where you need to cut. It’s definitely been an interesting journey with money.
Traditional experience definitely helps. I wish I had more of the dev side, it’d be helpful to understand what the guys are going through, just help that sort of element, but at the same time I guess they wish they had a little more hospo experience in order to understand client problems more quickly. So trying to make the perfect team is the challenge. To find complementary skills.
What about more intangible things, like grit or will?
It’s funny you say that, we’ve actually got a small outage going on at the moment, and I just told the team ‘It’ll be alright, you’ll get it fixed,’ and came down here. But you can definitely see the team freaks out a little more than I would, because back in the day in the cinema a movie inevitably wouldn’t start, and you’d have 180 people shouting at you, or you have a fire alarm go off and you have to evacuate a 3000 person party – you’re better off taking a deep breath and figuring out the best way to handle it, rather than panicking. One of the big things is to make sure the team takes a breath before they react. The quick reaction is often the wrong one. I always believe in gut feelings, but they can get you into a lot of trouble.
That’s why we call our support staff front of house, because we understand the problems our clients go through, and we have the empathy to understand what it’s like to lose a till system or eftpos integration or the printer stops working in the kitchen, or whatever it may be. In the three years since our first paying customer came on board, we’ve lost four customers. Two of them closed their doors because the businesses went under, and when businesses have sold, owners have taken over the system. So it’s been awesome as far as sticky customers go, and I think that comes back to our sales concept – get customers to support us, rather than funneling money at it.
Because one of our challenges is that traditionally till systems are not well loved. I mean, they’re point of sale systems, they’re not meant to be loved, but they’re very unloved. They used to be very clunky, very expensive, and all it reminds people of is negative experiences. So one of the biggest hurdles is getting people to even consider changing, because their previous experience is so bad. But we’re slowly getting stronger now, and we can actually start pushing the message that it’s ok.
It’s incredible how long people will tolerate a bad setup rather than trying change.
It is incredible. Even at my flat, we’ve just changed the gate so it opens the opposite way, and now we can our rubbish out. That took four years. Life can be so much easier with simple changes, and hopefully we can get the message across that it’s not that daunting and the investment you make now will save you a lot of personal time – and that’s something people working in hospo never seem to have a lot of.
GridAKL is Auckland’s innovation precinct, located in Wynyard Quarter – powered by ATEED and run by BizDojo. New spaces are leasing soon – click here to find out more.
The Spinoff’s science content is made possible thanks to the support of The MacDiarmid Institute for Advanced Materials and Nanotechnology, a national institute devoted to scientific research.