This husband and wife-led startup is the answer to your payroll needs
By Judith Balea for TechinAsia
The perks of being your own boss are alluring – you have the freedom to make your own decisions and control your time. But the naked truth is – and this is especially true for first-time entrepreneurs – half your time is spent on administrative crap. By that I mean high volume and boring tasks like managing payroll, which you end up doing yourself if you don’t have staff.
Many small and medium businesses in emerging markets are still doing payroll the century-old way: on paper. Think of the countless calculations involved there. You have to track each employee’s working hours, make all the adjustments for leaves, holidays, overtime, government filings such as taxes and social securities, and recompute for any payroll errors – oh, the errors! Some companies are a bit ahead and now use spreadsheets, which still require manual work.
Sprout automates the mundane tasks, giving you more time for stuff that matters.
Patrick Gentry, an American entrepreneur who’s based in Manila, experienced the horror himself. So he and his wife Alex, a Filipina, went on and built cloud-based software-as-a-service (SaaS) startup Sprout.
The company is all about automating the repetitive HR and payroll tasks that eat into your workday, giving you and your team more time to do your real work, which is, well, building your business.
Patrick recalls how one client found out they were overspending by at least US$1,700 per payroll run because they weren’t prorating new hires, which means they were paying the employees their salary for the whole pay period instead of only the days worked.
“We go to clients and they have all sorts of errors in their calculations and payroll disputes. For every employee that’s disputing and underpaid, you have one that’s happily taking home an overpay,” he says. “So with our software, we can come in and completely eliminate those disputes and process the payroll literally 90 percent faster.”
Sprout counts PayrollHero and Salarium as two of its competitors in Manila, but Alex claims Sprout was the first one to fully automate timekeeping or what she calls “the real beast” behind payroll. She says employee clock-ins/outs are recorded directly into Sprout, leaving “very limited intervention” from staff. “At the end of your payroll period, you have to check your logs in our system and if you have missing logs, it tells you and asks you what you want to do about them.”
Sprout handles widely varied employee schedules, processes pay, and generates whatever report you need in minutes. It complies with tax codes and general payroll practices, which include monthly employee deductions for health and other benefits. It also stores all your data in the cloud, making it easier for you to maintain and access it. That means you can log into your account from any device anywhere you are as long as there’s internet connection.
How it all started
Like many startups, Sprout was born out of its founder’s own need. It was 2009 and Patrick had just co-founded KMC Solutions, a firm that leases staff to business process outsourcing (BPO) companies in Manila, while remotely working a day job for a Silicon Valley-based startup that develops elearning solutions for large companies like Microsoft and Cisco.
“Our BPO company had around 500 people and we were looking for a payroll software and there was really nothing in the market that was cloud-based… so we decided we would just build it.”
Patrick spearheaded that project and called it Payroll Pie. That same year he put up a website offering a free two-month trial of the software, with the aim of eventually selling it to clients.
Payroll Pie remained as a side project from KMC Solutions until early 2015, when Patrick and Alex decided to spin it off and run it by themselves. At the time, Alex had been helping a former Microsoft guy set up a software company in the Philippines, and she and Patrick were expecting their second child. As classic husband-and-wife startup stories go, Alex was the only free labor Patrick could get.
“She was helping me periodically and it started when I needed help with UX,” Patrick shares. Alex interrupts him, “I started sketching, doing all the wireframes, pro-bono!”
“I was getting a lot of free work from her so we knew it was really time,” Patrick continues.
The thought of being business partners held them back for a bit. “It was scary. We were thinking, ‘no, husbands and wives should never work together.’ But they do, and we heard success stories,” Alex says.
“It works for us because I know he’s the boss,” she adds. Patrick agrees. “Establishing that early on makes everything else flow smoothly.”
Hence, they quit their jobs to run the business, now known as Sprout, full time.
The initial challenge was how to turn free trial signups on the site into paying clients. “We had gotten a lot of signups and zero traction. We would get three to four signups a day and not a single paying client,” Patrick recalls.
We thought we don’t need customer support. We were very naive.
He says it was hard to introduce software to a market that was so used to doing things manually. “We built the software and put up a website thinking that people would sign up and start using the software and start paying us. We were thinking like Americans, ‘oh we don’t need customer support, yada yada.’ We were very naive.”
“Our conclusion was that the Philippines wasn’t really ready for straight-up SaaS. When we say straight-up SaaS, it means you go there and sign up, watch tutorial videos, and start using it. You don’t ask for any kind of support, maybe email some feedback once in a while,” Alex explains.
In 2013, Patrick took a different approach. “I started meeting with clients, going to their offices, demoing the software. We started working directly with HR and payroll people who weren’t as tech-centric.”
Apart from doing all the dog and pony shows about how to use it, the couple now also customizes the software a little for clients.
Being aware of the limitations of the market helped them shape their business model, notes Patrick. “We’re a software-as-a-service, with emphasis on service. Our average response time is two hours. We get back to clients right away, that’s something that’s a little new with companies here also. Most of them call back a week later.”
Since last year, clients paying monthly subscription fees for the software have grown from half a dozen to nearly a hundred. Sprout’s core market consists of BPO and food and beverage firms with a headcount of between 100 and 5,000. “We’re going upstream now. We’re targeting 500 and above headcount companies, or 1,000 and above even,” Patrick reveals.
Alex says they’re offering the payroll component of the software for free to companies with 40 or fewer employees. It’s some sort of corporate social responsibility program and also a good way to get small firms hooked to the service as they grow.
The only piece of the puzzle that’s missing is the ability to integrate the software with the systems of the government tax and social security agencies. That will allow businesses using Sprout to automatically pay these agencies the employee deductions for taxes and health, pension, and other benefits.
“Our software lets you generate the government reports with a click. The problem is you still have to go online, log in to your bank account and pay, then submit the reports – and that’s the best-case scenario. The worst-case is you’re literally lining up at a bank to pay, printing the report, and going to the agencies to submit it,” Patrick laments.
Alex shares she spent the whole of last year knocking on the doors of all these agencies to figure out how to get it done, but to no avail. “The bureaucracy is hard […] they told us it’s gonna take so long.”
The integration will surely give Sprout the boost to take off, but the better goal is to eliminate businesses’ pain. “The Philippines is number 88 in the world in terms of ease of doing business and we can simply make that better if we’re able to do this,” says Patrick.
It will probably take years for it to happen, he forecasts, but Sprout will keep trying.
For now, the startup has set its focus on growing its sales since it’s starting to build a regional footprint, landing clients in other markets such as Singapore and Indonesia.
To help do this, Sprout will undergo the four-month accelerator program of Silicon Valley VC firm Acceleprise in San Francisco, beginning July.
“We’ve been interviewed by other accelerators but we chose Acceleprise because that’s its thing – how to scale sales in enterprise. They also have a ton of VC connections in case we want to go that route. It’ll make additional rounds easier.”
Sprout has raised funding from overseas angel investors this year, which brought its valuation to US$5 million.
It’s spending the money mostly to grow its team. “At the start of 2015 we had three employees and at the end, we had 15. We want to be at over 30 this year,” Alex says.
First appeared at TechinAsia