On May 7, 2020, the online intelligent tax service provider Huisuanzhang announced the completion of a US$60 million Series C+ financing. Sunshine Life was the lead investor and Gaocheng Capital, Xiaomi Group and Swift Hover were co-investors. The fundraising was done amid difficult market conditions. The financing was aimed at continuously consolidating the basic tax services and accelerating the development of value-added business, as well as increasing the investment in research and development to automate the whole life cycle tax services and enhance the efficiency of the industry.
Although the outbreak of the coronavirus pandemic at the beginning of 2020 hit the industry to a certain extent, Huisuanzhang maintained steady growth based on its strong system advantages and operational capabilities. According to Zhang Shugang, founder and CEO of Huisuanzhang, “Customer acquisition cost and renewal rate are key factors to measure a company’s growth. To overcome this bottleneck, a company needs to have a high enough barrier to competition. On the one hand, it must focus on enterprises with a longer life cycle and a higher value to enhance retention rate, while enhancing the LTV (lifetime value) of end users through value-added services. On the other hand, it must readjust the front and back-end business processes to build an efficient barrier to competition, i.e. lower cost of customer acquisition and service delivery.”
Technological innovation helps Huisuanzhang create intelligent delivery services and build an efficient barrier to competition
For a long time, bookkeeping agencies have relied on the ability of individual accountants, which makes achieving economies of scale very difficult. In order to solve this problem, individual ability must be transferred to the company or platform. Huisuanzhang has always put technology first in order to provide intelligent tax delivery services and continuously empower the industry.
Since its inception five years ago, Huisuanzhang has continued to increase its investment in research and development and improve the automation of tax service products through technological innovation. Based on the actual needs of customers, offline operation characteristics and deep understanding of the tax service industry, Huisuanzhang has reshaped the standard operation process and relied on the powerful system functions of a SaaS cloud service platform, such as OCR technology for invoices, automated business type matching, automated intelligent accounting, RPA filing, and AI knowledge mapping to gradually enable automated data collection for all scenarios, intelligent accounting for a large number of business scenarios, and intelligent automated tax filing. The company has also established a customer service system, using AI to interact with end-users by means of deep machine learning, and realized full automation of machine operations. According to Zhang Shugang, founder and CEO of Huisuanzhang, “Only by freeing accountants from simple and highly repetitive work can we bring more value to the industry.”
Huisuanzhang sets up a national growth center and upgrades its ecosystem service
In the past few years, the tax service industry has rapidly ramped up its marketing from targeted promotion and acquaintance referral to large-scale telemarketing. But the introduction of new policies has turned it into an obstacle for the industry’s development. In order to break the customer acquisition bottleneck, Huisuanzhang has continued to explore new growth opportunities and has set up a national growth center for customer acquisition and ecosystem services. Building on customer profiles and sales capability mapping, the company has shifted from simple telemarketing and brand exposure to a marketing approach based on content curation, covering all channels where end users are active throughout their life cycle. By establishing 360-degree end-user profiles, the company has identified new growth opportunities, created a new engine for customer acquisition, explored a growth model unique to the tax service industry, and built skills, methodologies and systems for growing users. With these best practices, the company has significantly reduced front-end customer acquisition costs.
In order to build an efficient cost barrier to competition, launching value-added derivative businesses is an important way for the company to enhance the LTV of high-quality customers. Leveraging data intelligence gleaned from basic tax services, Huisuanzhang gains customer insights, accumulates customer data and profiles, and digs deep into the needs of customers that are potentially worth trillions. A large-scale customer base and a massive amount of valuable data will help Huisuanzhang build a competitive advantage in value-added services. As early as 2018, Huisuanzhang conducted a study on how to evaluate the business operation of SMEs based on tax services and built an evaluation system composed of an industry taxonomy model, a business stability rating model, and a revenue generation model. The system is based on long time series and granular data of customers to reflect the real conditions of enterprises so that relatively reasonable predictions can be made for the future. So far, this evaluation system has been applied to value-added financing services for SMEs. It has gradually achieved the standardization, digitization and automation of the financing process, making it very convenient. At the same time, the excellent performance of the existing assets has proven that the evaluation system can truly reflect the operating conditions of SMEs. In addition, Huisuanzhang’s ecosystem services including payroll, social security, finance, and online promotion offer clear competitive advantages. Compared with tax-only service providers, Huisuanzhang has reduced customer acquisition costs by more than 60% through its ecosystem services.
“Continuously exploring new growth opportunities and promoting efficient value-added derivative business is necessary for high quality growth of the industry. We have invested a lot of capital and energy in this area. From the perspective of the long-term development of the whole tax service industry and SMEs, improving quality, speed and efficiency is trending at the moment,” said Zhang Shugang.
“SMEs are the most dynamic part of China’s economy. Outsourcing services targeted at SMEs can be a big business. Huisuanzhang started with the most needed tax and bookkeeping services for SMEs, and by relying on refined operations and pragmatic and efficient technology applications, the company has rapidly accumulated customers in this relatively traditional market and has now become the preferred tax service provider for SMEs with the largest customer base in China. It has established extensive and long-lasting relationships with the companies it serves. We believe that Huisuanzhang can provide more comprehensive value-added solutions to SMEs and continuously enrich its business portfolio. We also believe that with this foundation, the company can continue to create good and stable returns for shareholders and achieve win-win outcomes for all stakeholders,” said Mr. Song Wenlei, general manager of the strategic investment department of Sunshine Insurance, the lead investor of this round.
Gaocheng Capital was the lead investor in the Series C financing and again made an outsize investment in this round. “Huisuanzhang’s management team has always maintained rapid iteration and optimized operational efficiency to achieve high quality growth. We are optimistic about the company’s growth prospects. As an investment fund focused on China’s corporate services sector, Gaocheng Capital will adhere to the concept of long-term value investing and fully support the company to further consolidate and expand its leading position in the industry and become the taxation ‘new infrastructure’ platform for China’s SMEs,” said Jing Hong, founding partner of Gaocheng Capital.
