The idea for Sageworks was born when our founders came to the realization that, while many business owners are masters of their craft, only a portion of them truly understand the finances of running a business. Business owners often don’t have the background or training to know how to use financial statements to their advantage. This leaves owners frustrated and vulnerable, and it is one reason why only about half of businesses survive their first five years.
We set out to develop technology that would help business owners improve their chances of succeeding. Upon our founding in 1998, we began the development of an artificial intelligence program that could convert financial numbers into an easy-to-understand description of the fundamental health of a business — a report that showed how the business was performing historically and compared to industry peers.
The company got its start in 100-square feet of a technology incubator (the First Flight Venture Center) in the Research Triangle Park near Raleigh, N.C. In that small office, the company’s founders set to work coding the proprietary financial analysis technology (what became the patented FIND engine) and writing more than 10,000 pages of single-spaced text to spell out the multitude of operational scenarios that financial statements can divulge. The first version of the Sageworks report included cheesy George Washington cartoons, dollar sign graphics and some serious formatting concerns. However, after refinements, the patented FIND engine began turning financial statements into a completely customized, plain-language report summarizing the company’s financial performance and providing tips for improvement. The FIND engine is capable of producing more than 32 trillion different reports so the business owner receives a meaningful and intelligible assessment of their unique business.
By 2001, accounting firms across the US were using the Sageworks technology and its reports with their business clients. Accountants used the software to expand their consulting practices and showed customers how they compared to peers in their industry, what areas they could improve and how the business could expect to grow through projections.
The Sageworks team at this point was small but dedicated. Aggressive product development goals and long hours were balanced by an informal office and a tight-knit team. Superficial appearances and business-school presentations were and are discouraged so that everyone could keep the focus on customer satisfaction, product innovation and getting things done.
The Sageworks reports made their way into the hands of small business bankers, as well as institutions like Citibank, which leveraged Sageworks’ executive summaries and industry benchmarks to coach their commercial and SMB borrowers. As Sageworks continued to grow its product suite, the company launched Credit Analysis, a commercial credit spreading and global cash flow analysis application that bankers use to measure the creditworthiness of prospective borrowers.
Less than 10 years after the company’s first days in an incubator, thousands of accounting firms as well as financial institutions were using Sageworks to help their business customers manage their finances to be more successful. By 2010, Sageworks had aggregated more than 1 million financial statements as part of its cooperative data model, making the Sageworks database the largest source of real-time financial statement information for private companies in the U.S.
Clients are at the heart of product innovation at Sageworks, and the company’s management and product teams meet with more than 400 clients each year to solicit direct feedback and ideas for improvements. As a result, the company has continued to expand its solutions to include applications for financial-statement audits, business valuations, private-company research, lending, credit risk and portfolio risk.
The Sageworks team and its customer base are growing consistently and significantly. However, our focus remains on helping our clients so that they and their customers can make better financial decisions that improve their chances of succeeding.