Articles and White Papers | W Squared

Reprinted with corrections.

October 31, 2008

From left, Tammy Howell, Mark Farrington and Shannon Farrington launched
W Squared in 2005 to help venture-backed firms.

Firm handles accounting, HR, payroll, technology for start-ups.

BY CYNTHIA YELDELL
NASHVILLE BUSINESS JOURNAL

Companies that want to hit the ground running without worrying about performing payroll, processing bills or invoices, hiring a human resource manager or managing their computer systems are looking to the team at W Squared.

The company started in 2005 with the idea of providing back-office functions to venture-backed start-ups.

But CEO Shannon Farrington says in the current economy, more traditional businesses may look to outsource these functions as a way to cut costs.

"People will have a need to look at every penny they spend," Farrington says. "If they can find cost effective ways to meet their needs, they will, and that plays well for us."

The founders of W Squared had been in the business of growing ventured-backed start-ups, selling them and starting over again, which gave them the idea for W Squared.

But this time, however, there are no plans to sell.

Shannon and Mark Farrington, along with Tammy Howell, started W Squared with an eye toward start-up venture companies.

But since starting the business, they have found a broader market. Only about 45 percent of their clients are venture backed companies.

W Squared offers its clients a fixed price for back-office services and considers itself an extension of the companies it serves. For example, when Howell sits in on meetings with her clients, she is introduced as that company's chief financial officer.

Farrington says W Squared wanted to target companies funded by venture groups that sell in three to five years.

"Venture guys can plug in and when the company is sold, they can unplug," Shannon Farrington says.

When these companies are sold, she says, the acquiring company usually takes over the back-office functions and people in those positions lose their jobs.

It's a scenario the group had seen over and over again.

All three worked for CHD Meridian Healthcare, a health care provider that sold in 2003 to I-trax, Inc. in a deal valued at $80 million.

W Squared has 25 employees, but the company has expansion plans for its offices at 5500 Maryland Way in Brentwood. The company is adding 2,500 square feet to its 8,500-square-foot office. It will hire five new employees.

Shannon Farrington says the company plans to take the business model to other cities in the coming years.

It projects revenues will be $3.2 million in 2008.

Jerry Bostelman, founding partner of VACO, a company that provides accounting and technology professionals to other companies on a contract basis, uses W Squared for some of his accounting and financial needs.

He also uses W Squared to increase his company's technology capabilities by updating computer systems.

"Their expertise helped us with our operational vision," Bostelman says. "We grew so fast we had holes in our infrastructure. They helped strengthen us so we can grow."

Lessons Learned

Toughest Business Decision: We spend a lot of time contemplating when and how to invest prospectively in our growing business. Making investments in people and technology that are not supported by current revenue can catapult the business forward, but we constantly weigh the risks against the rewards.

Best Business Decision: The people we have chosen to make up W Squared have been our best decisions. We have a great group of experienced, client-focused professionals who really enjoy working together.

Greatest Business Challenge: Our greatest challenge is trying to keep a full pipeline of exceptional prospective team members available for new opportunities.

Biggest Surprise: While we knew the concept behind W Squared was sound, we have been genuinely surprised at the success and growth we have experienced in our first three years.

What Someone Else Can Learn From You: We believe our example of methodical planning and patient, skilled execution - that we have fostered, not only for ourselves, but also for our clients - is a model from which all growing businesses can learn.

Business Philosophy: At W Squared, we always strive to do what is right for our clients and our employees, regardless of whether it furthers our business or not.

Five-Year Vision: We envision happy employees, happy clients and a multi-state business that continues to thrive.

Best Way To Compete: If you successfully listen to your clients, concentrate on their needs and deliver on your commitments, you will be a tough competitor.