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The Small Business Interview: Bringing Old School 'Envelope' Budgeting Into the Mobile Age

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A Q&A with the founder of Mvelopes, a money management application that puts your online cash into virtual envelopes for "groceries" or "the mortgage" and whatever else is on your list.

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MINYANVILLE ORIGINAL In the days before Excel spreadsheets, Google (GOOG) calendars, and email alerts, the responsible citizen had to rely on paper media to keep track of his or her finances. One personal accounting technique popular since the mid 20th century was the "envelope method": outline your expenses at the beginning of each month, divide them by category, and sequester the required cash for a mortgage, groceries, entertainment, etc., in a marked envelope. It was a straightforward, if crude, method of keeping oneself honest that served many Americans for decades, but it has become increasingly impractical as online banking makes paper transactions obsolete.

Enter Mvelopes, a money management application that aims to bring the envelope method into the modern age, helping users realize their budgeting goals while eliminating the encumbrance of storing large bundles of cash around the house.
Steve Smith, CEO of Mvelopes
The first version of the tool, a downloadable PC utility, became the flagship release of parent company In2m, now known as Finicity, way back in 2002, when Apple (AAPL) was still hovering around $10/share and Facebook (FB) was only a twinkle in a high-schooler's eye. The program connected to around 1,200 banks from which it could retrieve a user's financial records. By 2004 Mvelopes had shifted to a Flash-based Web application, and it was named among "The 100 Best Products of the Year" by PC World in 2006. Mvelopes completed its first iOS version in the first quarter of 2011 and released an app in the Android store earlier this year. The browser and app versions are all free to use and free of ads, but will only track four bank accounts and 25 envelopes at a time and relies mostly on the community for customer support. To remove these limits, Finicity offers a subscription plan, with the cheapest rate of $7.90/month requiring a two-year contract.

According to Steve Smith, President and CEO of Finicity and the brains behind the original Mvelopes, the application is the "largest subscription-based personal finance offering" on the market, supported by over 120 employees across offices in Salt Lake City, Atlanta, and Mumbai.

Smith had already established a record of success when he began developing Mvelopes in 2000. He had worked with multiple successful start-ups, and served as senior executive at Megahertz Corporation, a modem manufacturer, for nine years, until Megahertz was acquired by rival USRobotics in 1994. Smith sat down with Minyanville recently to discuss his experiences breaking into a new digital market, fostering creativity, and making the tough decisions

Christopher Graf: Tell us about your business and what you do.

Steve Smith: Our objective was to develop something that would allow someone to use the principles of envelope budgeting, but do that in a way that moves in the direction of technology and do it online and in mobile solutions, so that in a cashless world you can continue to enjoy the benefits of living by those principles. We started the company with early development in 2000. We developed the code and worked with some partners in the back-end side for aggregation and connecting with the banks. We've always had mobile apps, and they've moved from palm-based applications to Web-based applications and Android and iOS applications.

From an employee perspective, we're 10x the size we were from the time we went live with our Web-based application.


The browser, iOS, and Android version of Mvelopes. Click to enlarge.

CG: You've worked with several large tech manufacturers. How did you transition from big business hardware to start-up software?

SS: We had seven or 10 employees when I started [at Megahertz]. Nine years later we've taken the company public, we're doing a quarter of a billion dollars in revenue. We just finished a sale to US Robotics, we have 1,200-plus employees. That was nine years from less than $1 million in revenue to over $200 million in revenue. That was a great experience for me, because it was all about lots of creativity, lots of hard work, lots of pushing things forward, and getting into hyper growth, and moving from that to a successful conclusion on the sale to a much larger technology company.

My experience has really been starting as a small start-up, a small midsize, and working hard over five to 10 years to create something that is quite a bit larger. Just on the creative side, as related to this particular business, these are concepts I've had for a long time, so the vision of the business is something that was percolating for a long time for me. I went about putting together a team that could help execute that vision. I've been fortunate that I've been able to maintain that role as kind of a visionary, and help provide strategic direction for the business.

CG: Would you say you place business first or life first?

SS: I've been an entrepreneur and involved in small to medium sized businesses for the last 25 years, and I'm not sure I can answer that question definitively. Business is very integrated with my life. But, family is very important, and striking a balance on an ongoing basis is something I always try to do. My wife may tell you that sometimes I don't do that as successfully as I should. The nature of getting involved in start-ups and watching that company grow and provide great products and services -- it obviously takes a lot of time from the founders and the executive team, and we've been fortunate to have a great team that's been very dedicated. But as an individual, I'm very dedicated to making sure my team focuses on their personal life and we don't get too sideways on that.

CG: Where do you get your best ideas?

SS: The morning hours are very important, the drive time.

We also have within the organization what we call an "enterprise architecture group" that is all about bringing the best and sharpest minds together to take a look at the best technology, new opportunities, new trends and to allow our senior technical people to really contribute at that level, and do a lot of brainstorming which is very helpful.

And we do quarterly offsite strategy meetings, where we try to set the day-to-day aside and take a real hard look at prioritizing the kinds of things that are important. We generate assignments for executive members to research certain things and come to the table with different ideas. They usually take up the better part of the day, and there are a lot of concepts and ideas that flow from it.

CG: What is your chief characteristic as a leader?

SS: One of the most important things to me is something I would call consensus-style management. I don't want to fill my executive team with people that think the same way I do, or that feel like they have to agree with every opinion or every idea that I have. That's a very dangerous place for an executive team. It's dangerous to assume that I know everything that needs to be known to create success in a business.

CG: Is there anything you don't tolerate in your employees, anything that is particularly unforgivable?

SS: Dishonesty is something that I don't tolerate. I also don't tolerate politics. When people are putting personal agendas ahead of the organization, the success of the organization, I work very hard to root it out. It wastes a lot of time and doesn't allow us to achieve our objectives.

We're going to make some mistakes and I'm going to make some mistakes. If I've got people who are going to own their mistakes, and are going to work hard to create resolutions where we've made a few missteps, we're very supporting of them. I'm very loyal to them, and I'm very dedicated to their personal success.

CG: Are there any specifically difficult decisions you've had to make yourself, and how did they turn out?

SS: Some of the more difficult decisions are those that impact individuals negatively. At time, you need to make adjustments at the expense line to make sure the company remains strong and is able to meet the market changes. Those decisions -- to let someone go -- are always difficult; they're decisions that I take very personally, but I have learned that if you're going to be involved as an entrepreneur, as an executive, as a CEO, you have to be prepared to step up and make those tough decisions. I do it with as much dignity as I can. I'm open and I'm honest, and I think very transparent communication is important.

CG: If you weren't running your own business, what do you think you would be doing?

SS: Probably, if I weren't running my own business, at this point in my life I would still be involved on an executive team, a senior executive with [a] business that is trying to grow. And that would likely be in the technology space.

CG: What books would you recommend to new small business owners?

SS: Crossing the Chasm (HarperBusiness, 2002) is one. We're going back a little ways to get to that. There was a Harvard Business Review done at one point that talks about the deadly business sins, and one of those was the slaughtering of tomorrow's opportunity on the altar of yesterday. Crossing the Chasm is one of the books that I think does a great job of talking about those issues and being able to move beyond where you are today to where you need to get to in the future. The World Is Flat (Picador, 2007) was another very good read. It talked a lot about where things are transitioning to, and the kind of world that we find ourselves in today.

(See also: What You Need to Know in Order to Retire Before Age 60 and The Small Business Interview: Start-Up Will Make it Easy to Spend Miles and Points Anytime, Anywhere.)
No positions in stocks mentioned.
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