Insights From Bench's Business Model

The Fallout of Bench's Closure: Lessons for the Accounting and Finance Industry LinkedIn is flooded right now with takes on Bench, their business model, their handling of customer communication, and – most notably – the timing of their shutdown. And let me say this: SMBs deserve better. I've seen the customer impact numbers floating between 11,000 and 35,000. I've seen perspectives that this proves the "productization" of accounting and finance can't work. I've seen arguments for hiring credible CPAs or fractional CFOs instead. I've seen calls to own your data. I've seen critiques of their pricing strategy being unsustainable. Here's the reality: Bench took a swing at solving a very real problem in a corner of the market that's chronically underserved: SMBs. CPAs? They haven't been able to serve SMBs at scale – nor do regional and national firms want to. Fractional CFOs? Not the right fit for a business that simply isn't big or complex enough to justify that kind of expense. The SMB market is different: 💡Budgets are tighter 💡Owners wear every hat imaginable, juggling cash flow, operations, sales, and more 💡Pain points are about cashflow, not GAAP compliance or financial statements And here's the hard truth: SMBs aren't buying financial statements. Stop selling them. SMBs need real-time insights, data capture, and decision support. They need a solution that empowers them to make better cash flow decisions – and yes, that includes financial statements as an output, not the product. This requires a scalable, tech-enabled offering that is productized enough to deliver consistently, yet flexible enough to meet unique needs. It's not about replacing people with tech; it's about combining automation with human expertise to deliver real value. Where Bench Fell Short: I think Bench understood a lot of this. Their focus on automation and tech was admirable, but they leaned too hard on automation-first. They raised $100MM+ on software-type valuations but were ultimately a tech-enabled managed service. Growing into that kind of valuation was always going to be a challenge. Low pricing may have driven growth, but sustaining that growth while managing the operational demands of a managed service is tough – especially with VC expectations for moonshots. Bench's downfall should serve as a lesson: VC isn't the right capital for this category. What This Means for the Industry: Bench is likely the beginning. More companies will face these same hard truths over time. But for the rest of us in the industry, here's the challenge: This isn't validation that you don't need to evolve. It's proof that you must. SMBs will continue to demand services that solve their real pain points, leverage automation, and keep costs reasonable. So let's keep innovating. Let's keep improving. And let's build solutions that truly serve the needs of SMBs – not just at year-end, but every single day.

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 are 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, likely offshore. But labor costs significantly compress margins. A typical Bench 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… 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 prioritize profitability over top line growth. But that’s a boring VC story.

Well, Bench.co just hit us with a plot twist we weren’t expecting. For a company that raised millions and practically became a household name in bookkeeping, they’ve officially bowed out. Let’s talk about it. Now, before we start side-eyeing 👀Bench-like companies, let’s unpack what went wrong and what we, as firm owners, can learn from this. 🚀 Big Growth is Fun, but Sustainable Growth is the Goal Bench grew fast. Like “look at us, we’re the future” fast. But here’s the kicker, scale without solid financial footing is like building a mansion on quicksand. As firm owners, let’s remember, if the math doesn’t work, the vision won’t either. 🤖 Clients Don’t Want Robots (At Least Not Completely) Automation? Great. Streamlined processes? Yes, please. But clients still want someone who gets them. Someone who knows their quirks, their goals, and maybe their favorite drink (in case you’re ever at a hotel lobby bar at a conference talking shop). Bench missed the mark on the human touch, and it cost them. Don’t let tech replace what makes us, us. 💸 Low Prices, Big Problems Sure, “affordable” sounds appealing, but Bench’s pricing model backed them into a corner. When margins are razor-thin, there’s no room for error or growth. Let this be a reminder to not race to the bottom on pricing. Your inventory is your time and expertise. Charge well for it! 🥸 Don’t Lose Sight of What Made You, You Bench kicked things off with a clear mission: affordable, simplified bookkeeping for small businesses. (Though let’s be real, they really meant micro-businesses.) They built their whole brand around that promise. But somewhere along the way, they veered off course. Whether it was trying to do too much or chasing after a bigger audience, they drifted away from what made them Bench and in doing so, they lost the people who loved them for it. The lesson here? It’s not just about sticking to your lane; it’s about knowing when to refine it and when to expand it without losing your essence. Growth is exciting, but it needs to be intentional. If you’ve built trust and loyalty around a specific promise, every pivot or new offering should strengthen that promise, not overshadow it. The key isn’t just staying in your lane; it’s making sure your lane still leads where your clients want to go. What’s your take? Is Bench a cautionary tale, or just an inevitable chapter in the industry?

Everything Hidden Becomes Clear Recently, news broke about the collapse of Bench 💥 — an accounting startup that raised $100M. For many, raising a big investment round still seems like a market signal: a growing industry, a promising idea, or venture capital focus. But in reality, none of these guarantee success. I’ve seen founders pivot every 3-4 years, chasing trends, only to end up running in circles 🔄. So, what led to Bench’s downfall? Here’s what stood out: 1️⃣ Despite raising $100M+, Bench prioritized rapid growth and diversification (e.g., Bench Banking) without achieving profitability. A VC once told me: “Why are you spending so little? Why should we give you money?” 🤔 2️⃣ Scaling too fast and maintaining a large team (~650 employees) led to disproportionate expenses. Takeaway: Don’t rush hiring — delay it as long as possible. 3️⃣ The fintech market is ultra-competitive 🏦, making it hard to defend market share. Key lessons for all founders: ✔️ Product first, scaling second. ✔️ Stay focused 🎯. ✔️ Watch your unit economics — bad numbers kill more companies than OpenAI ever could. ✔️ Cash on your account > promises from VCs or clients. 💰 What do you think? Let’s discuss! 👇

I’m a former Bench customer. Their shutdown came as both a shock and… not a shock. When I onboarded onto Bench Accounting, I immediately ran into issues that, in retrospect, pointed to deeper problems: 1. My bookkeeper wanted to onboard me over the phone, no video or screen sharing — surprising for a tech-forward company. 2. During onboarding, the bookkeeper didn’t ask important questions about how my business operates, our model, or transaction categorization - I had to proactively share these details. When I offered to connect them to our old bookkeeper for knowledge transfer, they said it wasn’t necessary. 3. They kept sending me new transactions to categorize, many of which seemed trivial or straightforward. Every time I finished, they would give me another set of “missed” items followed, creating a lot of back-and-forth. 4. All communication was done via Bench’s internal messaging platform—not Slack or email, which made communication very slow. 2 months later by the time I left… our books still weren’t done. Bench overestimated AI’s ability to do accounting — a field where AI cannot replace humans for several reasons: 1. Every business is different in the way they organize their transactions, expenses, and reports to fit their needs. There’s no “one size fits all” way to do it. 2. There are millions of merchants, each with their own way of labeling transactions and often using vague / inconsistent descriptors. Again, no industry standards. On top of that, Bench hired too many new grads with no accounting background, who couldn’t effectively audit or correct AI’s errors. At Credal.ai, we take a different approach. Our platform connects to a company’s internal data and we collaborate with our customers to configure and fine-tune the AI so that it actually works. While I know a lot of the discourse is around the classic VC fallacy of replacing the founder/CEO, it’s also important to examine how exactly Bench failed. Many startups are making similar bets on AI as a one-size-fits-all solution, and finding out that far more human expertise and customization are actually needed in the loop.