Another unfortunate example of outsiders thinking you can fully automate accounting. Bench, and those similar, have an unscalable model. Why? To have a large enough TAM and attract VC investments, they must charge rock bottom prices. Otherwise they become unaffordable to many small businesses and TAM shrinks. To make money charging rock bottom prices you have to automate your way to profitability. But outsiders seemingly don’t understand it’s nearly impossible to automate accounting to the degree they need to (at least as of now). Accounting is heavily reliant on the inputs from the client. Garbage in = garbage out. Automations don’t fix this. So to ensure quality, you hire accountants. To do this cheaply, you outsource to PH and India. But labor costs significantly compress margins. A typical engagement might yield $250/mo in revenue but cost, in direct labor, $80 to prepare and $40 to quality check. You then need someone to own the account and deliver the work… if you include that in your $40 quality check you’ll see significantly less quality output. So roughly 50% gross margin which is okay… but if you are Bench you also have a ton of embedded costs that most accounting firms don’t have (sales, marketing, technology dev, account managers, legal (quality issues), refunds (quality/service issues), internal finance, etc. You just can’t make money in this model… at least not until AI can truly automate most of the accounting work. Interestingly I think a well staffed and solidly built CPA firm could figure out how to move down market and crush it. Why? Because unlike tech companies, the CPA firm’s goal is to be profitable from day 1. If a CPA firm goes down market, they’d optimize to drive profitability instead of top line growth. But it’s a very hard business model to operate and you have to be scrappy to protect every % of margin. So if you are a VC looking to disrupt SMB accounting, my advice is to find a CPA firm that has a proven track record and partner with them.