Building the Flywheel
What turns satisfied customers into advocates?
In early 2003, Mike McDerment was running a four-person web design agency in Toronto. He was using Microsoft Word and Excel to create invoices. Both were slow, clumsy tools that weren’t built for the job. One day, he accidentally saved over an old invoice, losing hours of work.
That frustrating moment changed everything.
McDerment spent the next two weeks coding his own invoicing solution. At first, it was just an internal tool to bill his own clients. But freelancers who saw it asked if they could use it too. Then their colleagues wanted access. What started as a side project solving one designer’s problem was becoming something bigger.
McDerment faced a choice. His design agency was profitable, especially after he restructured it around value-based pricing instead of hourly billing. But he recognized a fundamental ceiling: no matter how smart his pricing, his income was still tied to his time and his team’s capacity. Building websites, even at premium rates, couldn’t scale beyond those constraints.
FreshBooks offered something different: the potential for recurring revenue from a product he could build once and sell many times. Even when FreshBooks was only generating $100 per month after two years — a fraction of what the agency made — McDerment saw the path forward. He loved building products. He was passionate about serving customers who used his software. And he understood that recurring revenue, however modest initially, could compound in ways project-based work never would.
McDerment made a decision that would define the next decade: he would bootstrap FreshBooks without outside capital. He moved into his parents’ basement for three and a half years to save money. In 2004, he worked just 19 days on design work while generating over $200,000 in revenue from the restructured agency. That income became the bootstrap capital for FreshBooks, allowing him to focus most of his time building the product while keeping the lights on.
The early wins felt modest. A few freelancers found the invoicing tool helpful. Some recommended it to colleagues. Word-of-mouth referrals started trickling in. Revenue in 2007 was $255,000. Respectable, but hardly a rocket ship.
But here’s what was happening beneath the surface: a flywheel was building.
Satisfied freelancers told other freelancers. Each user who saved time on invoicing became an advocate. Small service businesses that hated traditional accounting software found precisely what they needed. McDerment and his co-founders, Levi Cooperman and Joe Sawada, kept refining the product based on direct customer feedback, continuously improving core functionalities like expense and time tracking.
By 2010, revenue hit $15.6 million. Still bootstrapped. Still profitable. Still entirely controlled by the founders.
McDerment didn’t take outside investment until 2014, after building FreshBooks to more than 10 million users across 160 countries. By then, he wasn’t raising money to prove the concept or survive. He was raising $30 million to accelerate a business model he’d already validated through a decade of customer revenue and organic growth.
Today, FreshBooks has served more than 30 million people and achieved unicorn status with a valuation exceeding $1 billion.
The flywheel gains momentum gradually at first. Early wins feel hard-fought and uncertain. But as you progress, the compounding effects become undeniable. Each satisfied customer introduces you to new prospects. Each small improvement strengthens your market position. Your growing track record makes the next sale progressively easier to secure.
McDerment built real capabilities, genuine relationships, and earned trust. These advantages compounded over time and became nearly impossible for competitors to replicate by simply spending more money.
Trust the process. Keep delivering value. Your momentum is already starting.
Davender’s passion is to guide innovative entrepreneurs in developing the clarity, commitment, confidence and courage to enter, engage and lead their markets in an unpredictable world by thinking strategically and acting tactically.
Find out more at https://www.davender.com and https://linkedin.com/in/coachdavender .