Bench Accounting was once hailed as a disruptive force in SMB bookkeeping. It raised large sums of venture capital, leading to sky-high valuations. However, with a business model built on low-price offerings and high staffing requirements, Bench struggled to generate consistent profits at scale.

From reported estimates, Bench may have had annual revenues around $50 million, but its valuation in 2021 reached upwards of $500 million...mplying a 10x multiple on top-line revenue. 

For most investors, the only acceptable returns would come from selling for $1 billion or more. 

Key lesson: If your path to growth isn’t scaling at the pace investors expect (especially when they’re aiming for a 10x to 20x multiple), you may be forced into strategic pivots...such as unforunate cutting headcount, slashing service, or pushing risky product innovations. 

Customer Acquisition Cost (CAC): The total expense incurred to convince a potential customer to buy your product or service (e.g., marketing spend, sales salaries, overhead).

Customer Lifetime Value (LTV): The projected total net profit from a customer over the entire duration of their relationship with your company.

Companies that neglect the CAC and LTV analysis risk burning through large budgets to onboard customers who don’t stay long enough or spend enough to 3-5X their CAC.

For Bench, competing at rock-bottom prices meant that each new account came with thin margins. If churn was high or upsell opportunities were minimal, recouping CAC became difficult...and yes, even $100M runs out!

Key lesson: Validate that your LTV is high enough to justify your CAC. If it isn’t, you need to either reduce acquisition costs or raise lifetime value (through up-selling, increasing prices, cross-selling, or retaining customers longer).

Many small businesses try to sell things that are:

1. Cheap: Low cost or the “best deal”
2. Fast: Quick turnaround times
3. High Quality: Accurate results, proactive 
   
   

The adage “pick two of the three” exists for a reason. Attempting to deliver all three at scale typically means corners get cut somewhere and that is often in quality. In Bench’s model, the attempt to provide “cheap” bookkeeping through heavy automation clashed with the reality that serviced based businesses requires consistent human review and customer input.

Key lesson: Decide which two of the three you will deliver with excellence, and be clear about which trade-off you’re making (e.g., if you offer a premium service, you probably can’t also be the cheapest in the market).

Bench’s ultimate downfall appears tied to the mismatch between the business’s real-world margins and the lofty valuations demanded by investors. When growth flattened, it became nearly impossible to raise more money or find a buyer at a high enough price to make all investors whole. 

Referring to the formula above, they had to continue spending a significant amount to attract new customers while their "churn" was very high as customers expected more...but Bench could not provide more at their basement price point. 

In contrast, a sustainable model must:

1. Aim for Profitability from Day 1: Or at least have a clear, near-term path to it.  You can only scale on VC $$ for so long (in a B2B service based business). 
2. Maintain Realistic Growth Projections: Not every SMB service can scale 2x–5x annually. If you plan on an unrealistic growth plan, you'll eventually hit that wall. 
3. Match Product Offering with Willingness to Pay: Ensure that you can cover costs and earn a solid margin rather than chase the largest total addressable market (TAM) at the lowest price.  The latter is possible, but more often a better path with a product business.
   
   

B2B service based businesses can be empowered by technology but we are not yet at the point of true productization, which Bench learned after 10 years. 

No matter how big your market opportunity may appear, at Anomaly we often refer our clients back to the fundamental business metrics (CAC vs. LTV, margins, and churn) which will ultimately dictate your viability.
 
Trying to position your service as “cheap, fast, and high quality” is alluring but usually untenable in the long run. 

In short, pick a pricing strategy that aligns with a realistic (and profitable) service model. Focus on tracking the metrics that matter (CAC, LTV, churn), and remember that strong, sustainable growth nearly always beats overinflated valuations!