Middle-Market Leader Interview: A Talk With BlackLine CEO Therese Tucker

As CEO of a $25 million financial solutions firm, Therese Tucker built BlackLine Systems by understanding the needs and demands of Fortune 1000 accounts when it comes to such thorny automation feats as the financial close. Yet, as a middle-market firm, BlackLine itself has needs that are more closely aligned with that sector, which, thanks to SaaS, is now counted as one of BlackLine’s fastest-growing client constituencies. Middle-Market Executive recently caught up with BlackLine’s leader and asked her about the thorny needs of the middle-market customers.

MME: Can you help us better understand how the customer needs and demands of large and midsize customers compare?

Tucker: Well, we find that the financial close suite appeals differently to different-size customers. We find that big companies have concerns around their multiple general ledgers and all their different locations, while smaller companies might not have as big a concern there. Interestingly, the global aspect is more and more a factor. For instance, think about a company BlackLine’s size. We’re still small compared to the greater middle market, yet we have operations in London and Australia, and we’re billing customers in multiple currencies, so in the increasingly complex process of the close, our offerings in this area are increasingly appealing to smaller companies in light of globalization. Where we see lower-middle-market companies struggling, perhaps, a little more is when they may have all their accountants sitting in one room. In this case, using spreadsheets to do their account reconciliations — to be perfectly honest — is not that bad, but where they struggle is with things like bank reconciliations, especially if they are more on the retail side.

MME: Can you give us a specific example where bank reconciliations became a more sizable challenge for middle market firms?

Tucker: Well, we just dealt with one company — a retail-oriented service — that had roughly $100 million in revenue, with locations in Australia and the U.S. They had two full-time people to do their bank reconciliations — so, multiple geographies, multiple offices, lots of credit cards, and just a lot more complexity. They had to reconcile their point-of-sale system with all the credit card issuers, with the banks, with the general ledger. So there are all these different data sources, and this might link to this in here, but that also links to this as well. And they had two full-time people who have done nothing but that. The ability to automate that is a clear ROI win — but three things stand in the way. First, in some middle-market companies, they don’t even do them. Because it’s so complex, they say, Our bank balance is X, our general ledger balance is Y, let’s just book the different between the two. Companies are not happy with this approach, but they do not have a good alternative, so they write off the difference. Second, if someone doesn’t understand their process, it can be pretty hard to implement software. Number three, middle-market companies have a much lower appetite for consulting fees. So it’s this conundrum where you have a highly complex process which, if you automated it, could probably save a lot of money over time, but there is a barrier to entry because they may not understand all of what they should be doing and they don’t want to pay someone to figure it out for them.

MME: It seems that it’s the high-tech firms like yours that often move offshore at an early age …

Tucker: Yes, but any business $100 million and up could be in any number of different sectors. When you’re a company our size — I would say “yes,” very often it’s a technology company. And here’s why: There are no goods to ship. But at the same time, I will tell you that much of the lower middle market today has some flavor of international. It is often surprising. The barriers have really been lowered. Retailers, of course, are already selling internationally over the Web. So if you end up getting a little toehold within a geography, you validate your market, and that makes it very appealing.

MME: What led BlackLine to open its Australian office?

Tucker: Our New York sales person was a native Australian and he wanted to move home, so we said, “Great, go sell there,” and he said, “Okay, great!”

MME: What is it that has surprised you the most about middle-market customers?

Tucker: What’s been most surprising is how fast they are willing to make a decision and move. Inside big companies, the sales cycle can take a year or more, and we find that we’ll do a demo, and then we have to do another demo for the office in the Far East, and eventually you get to speak to the IT people, and then there may be another 6 months with the procurement department and legal. With the middle market, a common path might be where the presales analyst does a demo, and the comptroller goes, “I love it, give us an order form.” Now, SaaS also means that the initial outlay is pretty low, so it may have lower approval thresholds, and then, as it eventually grows to something bigger, there is already this general acceptance because they have already bought it.