4 Strategy Lessons From a Startup That Collects Tax Refunds

To stay in business, companies must create and sustain a competitive advantage. Without that, a company will struggle to win customers and keep them buying over time — ultimately bankrupting the company as it burns through investors’ cash.

To create a sustainable competitive advantage, business leaders must do four things well:

• Find a problem that causes customer pain
• Understand why that pain matters to customers and what a solution would look like
• Build a product that customers are eager to buy
• Design, deliver, and support it with skills rivals can’t replicate 

Blue dot, an Amstelveen, Netherlands-based startup that helps companies handle their tax accounting, has done these four things. In a May 2 interview, co-founder and CEO Isaac Saft told me the company — founded in 2013 as VatBox — changed its name to Blue dot. In April 2021, Blue dot raised $32 million in funding, noted TechCrunch.

Blue dot — with 161 employees, according to Pitchbook — says it has grown rapidly. “Blue dot has hundreds of customers, many of which are Fortune 1000. Our company continues to rapidly grow year over year, and in 2022 alone we doubled our performance,” Saft said.

Here are four lessons from Blue dot’s success that business leaders should apply to help them create and sustain a competitive advantage.

1. Aim to solve a painful customer problem.

Companies do not want to take the risk of buying from a startup unless the benefits of doing so exceed the risks — the biggest of which is the chance that the startup will burn through its cash, leaving the customer stranded.

The most significant way a startup can offset that risk is to offer a solution to a problem that causes even more customer pain.

Blue dot has focused on helping companies collect significant tax refunds. More specifically, Blue dot help companies claim refunds on value added tax (VAT) — which governments levy on products at each stage of production, distribution, and sale. 

The process of complying with regulations for employee-expense-related VAT is highly error prone. “Roughly 42 percent of employee expense transactions are incorrect or missing data for tax purposes, leaving about 54 percent of eligible VAT unclaimed by businesses,” Saft said.

Blue dot has picked the right problem to solve. The tax compliance problem it aimed to solve is time-consuming, expensive, and prone to error — costing companies significant tax refunds. 

2. Aim your product at a large market opportunity.

Leaders who find such a problem should build a business around a solution only if the market opportunity is large.

Blue dot’s market clearly passes this test. In 2023, the global market for tax management reached $27 billion and will grow 9.3 percent annually to $55.2 billion by 2030, according to ReportLinker.

During the pandemic, people working from home created another large opportunity. Blue dot is now working to tap the opportunity for compliance related to “over $2.4 trillion in enterprise consumer-style purchasing,” Saft said. 

3. Use difficult-to-copy skills to build an industry-leading solution.

To win customers and keep them from the jaws of ravenous rivals, business leaders must build solutions that are difficult to copy.

Blue dot says its skills enable it to solve the tax compliance problem in a way that helps customers while withstanding competition. “Our differentiator is our tech-first approach to tax compliance: Unlike other providers, our technology allows companies to maintain full control and visibility of their data. The synergy between our data processing capabilities and updated tax rules” enables business to comply with tax regulations and boost their bottom lines, he said.

4. Keep learning and innovating.

Business leaders should not rest on their laurels. Rivals will eventually catch up unless a company stays ahead of the changing needs of its customers.

Blue dot says that such responsiveness comes from its DNA. As Saft said, “It is all about continually increasing value. We make sure we look at the customer first and rapidly add value through innovation, new features, and modules. The success comes from our DNA — we listen to our customers and come with deep tech tools to support digital transformation.”

To win and keep customers, these four strategies will give your business a sustainable competitive advantage.