Tech slump spreads to practice softwareby
This week saw Ignition announce a round of layoffs equivalent to 10% of its workforce. The move follows job cuts at fellow practice tool Karbon and many other tech firms operating in the accounting and business arena.
In a LinkedIn post earlier this week, company co-founder Guy Pearson said Ignition had opted to reduce the size of its workforce by approximately 10%.
“This decision, while difficult, has been made to best set Ignition up for the years ahead,” said Pearson. “Considering the broader global economic climate, our updated geostrategy and our roles as leaders of the company, we must ensure we align our future growth with sustainable unit economics.”
The decision is thought to affect around 20 employees, but no details were given on which regions the losses will hit.
“Our business is fundamentally well-positioned,” added Pearson, “and we are still on a strong growth trajectory.”
Launched in 2013 as Practice Ignition, the tool allows accountants and bookkeepers to streamline client sign-ups with templated proposals and engagement letters, and offers automated client billing, price proposals, client dashboards and a CRM system.
Through partnerships and integrations with Xero, QuickBooks Online and others, Ignition expanded rapidly and currently serves more than 6,000 customers across territories including Australia, New Zealand, the UK and North America.
In November 2021 it raised $50m at a $330m valuation in a Series C funding round to, in its own words, “supercharge growth for category-defining client engagement and commerce platform,” and In March 2022 dropped the ‘Practice’ in its name to rebrand as simply ‘Ignition’ to target new markets and industries such as digital agencies, legal firms and financial advisers.
However, part of Pearson’s LinkedIn statement on the layoffs headed ‘How did we get here?’ admitted that a number of customer growth assumptions and associated revenue predictions for 2022 hadn’t been realised, leading to the decision to cut company headcount.
Tech firms use 2023 to ‘right-size’
The move follows a similar pattern to practice management software Karbon, which raised $66m in funding in February 2022, before announcing a 23% cut in the size of its team in September to, in the words of co-founder Stuart McLeod, “provide the runway necessary to reach profitability”.
“The economic conditions this year have forced many SaaS companies to pivot from high-growth strategies to more conservative financial plans,” continued McLeod. “The truth is we started accelerating growth in different circumstances and didn’t adjust our approach in time.”
The broader technology landscape has seen significant job losses with the likes of Microsoft, Amazon and Salesforce all announcing layoffs in 2023, citing deflated expectations for the year ahead, a potential recession caused by inflation and interest rate hikes, over-ambitious hiring, and revenue growth targets missed.
RBC Capital Markets analyst Rishi Jaluria cited a high likelihood of software firms using 2023 to ‘right-size’ their operations. Unlike its sister term ‘downsizing’, the object of rightsizing is to reorganise a company to meet new objectives, and rather than being a one-time event is a continuous process that might take months or years.
In a technology firm context, companies that experienced high growth during the pandemic and its associated lockdowns overextended themselves and put hiring and investment ahead of revenue growth. The resultant downturn in global economic fortunes has forced a widespread industry rethink, with profit returning to prominence when it comes to company priorities.
So far the major platform players in the accounting platform scene have proved resilient in the face of economic headwinds, posting largely positive results. Whether this will continue to play out over the rest of 2023 remains to be seen.