How Does HoneyBook Make Money? Business Model of HoneyBook


How Does HoneyBook Make Money

HoneyBook, a highly advanced all-in-one business client management software, is quite popular among small and mid-size businesses these days. The software combines various useful tools such as contracts, invoices, and project management to streamline your business efficiently and make you look professional. The best part about HoneyBook is that everything is saved in one place, keeping your work organized and making it really easy to find what you need when you need it.

But what is their business model, and how do they make money? Let’s dig into HoneyBook’s revenue model and take a closer look at how the company earns its revenue.

HoneyBook operates on a SaaS business model selling its cloud-based client management software on a tiered pricing model. HoneyBook makes money through paid subscriptions and transaction fees charged for online payments.

About HoneyBook

HoneyBook is a cloud-based CRM solution that helps SMBs streamline their business processes from inquiry to invoicing.

What makes HoneyBook special is the current timing. The COVID-19 pandemic and the ensuing lockdowns have been very hard on small businesses and HoneyBook caters to small businesses by giving them just what they need to survive full digitalization.

 

Business Model of HoneyBook

The business model of HoneyBook is tiered pricing subscriptions for cloud-based CRM solutions specifically designed for SMBs.

Product

HoneyBooks CRM (Customer Relationship Management) solutions help SMBs (small to medium-sized businesses) manage business processes online with secure cloud storage.

HoneyBook’s top competitors include:

  • HubSpot CRM
  • Quickbooks Advanced Online
  • Quickbooks Desktop Enterprise
  • Trello

In the past, many businesses were reluctant to install CRM software because they felt that it would be difficult for many of their employees to install and implement it.

Even worse, if some of the company employees install and implement some new CRM software while the rest do not, then you have the worst of both worlds because the old system is getting in the way of the new system and vice versa.

Today, however, cloud-based CRM is available and cloud-based is much easier to install. The company is set up on the cloud and individual employees are given logins and passwords. No individual installation is necessary. HoneyBook, in particular, prides itself on being easy to install and easy to use.

The thing for people new to CRM to understand is that a CRM solution is a very complete system. A lot of people see CRM as just a glorified form of customer service, and that is definitely an important part of CRM, Strategic CRM, but that is only the tip of the iceberg.

CRM can actually be divided into five types:

  • Strategic
  • Operational
  • Analytical
  • Collaborative
  • Customer Data Platform

As stated before, Strategic CRM fits people’s traditional idea of CRM in that it is focused on CX and CS (customer experience and customer service respectively.

Operational CRM is basically the full sales pipeline, from creating and organizing lead lists to closing those leads into clients. This CRM can also be divided into three subcategories:

  • Sales force automation
  • Marketing automation
  • Service automation

Analytical CRM involves collecting and aggregating and analyzing data that can be used to acquire and serve customers. It can also be used to predict the buying behavior of a particular demographic.

Collaborative CRM involves not so much the customers, but external stakeholders that operate in cooperation with a business:

  • Suppliers
  • Vendors
  • Distributors

Customer Data Platform CRM is the use of databases to store customer information that can be useful for a business. This is often where data that has been purchased from social media platforms are used.

The point is that running a digitalized business can be very complicated because there are so many working parts. It does not have to be, however, if you can find a reliable, cheap, and effective way to outsource those working parts.

As one satisfied HoneyBook customer put it, “HoneyBook made it easier to do the things I love by automating the things I hate.”

 

Marketing

First and foremost, HoneyBook has Citi Ventures as one of its investors. That means that the investment arm of the banking titan known as Citigroup Inc., the owner of Citibank, has a financial interest in HoneyBook’s success. That should be all of the marketing that HoneyBook needs.

Regardless, HoneyBook has an international marketing team, a community team, and a blog, Rising Tide.

 

Expenses

Just because the company is not a brick-and-mortar business or manufacturing business,

HoneyBook still has offices all over the world and still has the expenses that you would expect of any billion-dollar e-business:

  • Staff
  • Offices
  • Materials
  • Utilities
  • Security
  • Compliance

Furthermore, HoneyBook has to continuously build and maintain its cloud infrastructure and security. HoneyBook also has to pay all expenses related to online payment processing.

 

Plan for Profit

HoneyBook intends to make a profit through its revenue streams:

  • Subscriptions
  • Transaction fees

As stated earlier, this is the right time for HoneyBook, due to the COVID-19 pandemic. So many of the business processes that would normally be obstructed by social distancing efforts can be made safe by putting them on the cloud.

For a lot of mom-and-pop small business owners, the cloud is that fluffy, white thing you see when you look up at the sky. They do not have the technical skill to automate their business processes on their own and, while running a small business, they do not have time to learn.

HoneyBook allows these SMBs to quickly outsource their business processes while they can focus on saving their businesses from going under in the middle of an unprecedented, worldwide crisis of indefinite duration.

HoneyBook’s cloud-based solution is fully digitized and, therefore, immune to lockdowns and the riots that may occur from social unrest.

This crisis is providing HoneyBook the opportunity to build its brand as a “hero company” for the Mom-and-Pop shops.

 

How Does HoneyBook Make Money?

HoneyBook makes its money through two revenue streams:

  • subscriptions for its CRM solutions that help SMBs streamline their business processes
  • transaction fees charged to the clients of SMBs that use HoneyBook.

It is the quality and features of these revenue streams, however, that has allowed HoneyBook to grow into the billion-dollar unicorn that it is today.

Subscriptions

Like any CRM solution, subscriptions are the heart of revenue, at least as far as the general public is concerned. Their tiered pricing model has three tiers:

  • Starter Plan
  • Unlimited Monthly
  • Unlimited Annual

The Starter Plan is $9 per month and has a free trial. It has the following features:

  • Access to all features
  • Limited to $10k in total transactions
  • Up to 6 months of concierge support

The Unlimited Monthly is $39 per month and has a free trial. It has the following features:

  • Access to all features, plus
  • No limit on transactions
  • Unlimited concierge support
  • Add unlimited team members

The Unlimited Annual is $390 per year and has a free trial. It has the following features:

  • Access to all features, plus
  • No limit on transactions
  • Unlimited concierge support
  • Add unlimited team members
  • 17% savings

HoneyBook subscriptions have all of the features about to be mentioned in the transaction fees revenue stream. In addition to transaction fees features, all subscriptions, regardless of tier, have the following features for users:

  • Client portal software
  • Free account migration

A client portal is a client-facing space. Clients can access:

  • Past and present communications
  • Payments
  • Signatures
  • Meetings
  • Exchanged documents
  • Due dates

Free account migration is very convenient for users that want to switch their SBM to HoneyBook from some other platform or CRM solution. They simply need to send their old documents to HoneyBook for onboarding. The old files are then converted into templates which the users receive via email, usually within 72 hours or less.

 

Transaction Fees

HoneyBook currently receives processing fees of 3% for credit card payments and 1.5% for ACH transfer payments. Their fees are certainly not outrageous when compared to other digital and mobile payment solutions such as PayPal and Square.

What makes their fees palatable to their users is that they provide a host of other services and options in conjunction with these online payments:

  • Invoice, contract, and payment in one step
  • Credit cards, debit cards, and bank transfers accepted
  • Clients can auto-pay
  • Mobile friendly
  • Client management and payments in one place
  • Automatic payment reminders
  • Payment tracking
  • Direct deposit funds to the bank account
  • Cash received within minutes vs 2-3 business days
  • Available 24/7, including weekends
  • Choice of which payments are transferred
  • Low 1% transfer fee (depending on the type of payment and whether or not that payment is scheduled and/or recurring)

According to a PayPal study done in Canada during 2017, small businesses that accept online payments make twice as much as those that do not.

The advantage of having an online payment system for your SMB includes the following:

  • More convenient for your clients
  • You get paid fast
  • You get your finds without having to coordinate face-to-face
  • You get your finds without having to wait for a paper check

 

HoneyBook Funding, Valuation, and Revenue

Funding is not a problem for HoneyBook, especially during their series A-D rounds. Over the course of five years, total funding for HoneyBook has increased over 22x.

Notable investors have included Citi Ventures, Norwest Venture Partners, Battery Ventures, Tiger Global Management, Hillsven Capital, and Tribeca Venture Partners.

DateTotal Funding (Rounds A-D)
Sept 2014$10 M
May 2015$32 M
Jun 2016$44 M
Mar 2019$72 M
May 2021$227 M

HoneyBook’s valuation has increased over 6x in two years. According to TheFintechTimes.com, this is largely due to two consequences of the pandemic:

  • The growth of the independent workforce
  • The digitization of small businesses
YearValuation
2019$170 M
2021$1.1 B

HoneyBook’s revenue has tripled over a 12-month period to $35 million. According to TheFintechTimes.com, this is also due to the two consequences of the pandemic mentioned above.

YearRevenue
2020$12M
2021$35 M

 

Is HoneyBook Profitable?

HoneyBook is a revolutionary software company with a proven profitable business model. HoneyBook helps small businesses and professionals get paid faster, provide better client service, and increase their income while improving efficiency.

HoneyBook’s funding, valuation, and revenues have all been growing exponentially and there is no reason to believe that HoneyBook has been spending enough of its revenue to put it at a loss.

 

Conclusion: How Does HoneyBook Make Money?

To sum up, HoneyBook is an online platform for managing client relationships. This includes things like scheduling meetings, sending invoices, automation, insights analytics, and more. The company makes money through monthly/annual subscription fees and the transaction fees for each payment received through its platform.

This article may have been too long, but we really hope it helped you learn about HoneyBook’s business model in detail. We discussed what they offer and their pricing model. If you want to learn more, please visit their official website.

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