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How Gusto Built “Gus” – Their AI Assistant Serving 400K+ Small Businesses: Lessons from the Trenches

"Don’t Assume Conversational is Always Better – While conversational interfaces are powerful, not every task is better handled conversationally."

Gusto co-founders Josh Reeves (CEO) and Eddie Kim (CTO) came to SaaStr AI Summit to share their journey building “Gus,” an AI assistant now used by hundreds of thousands of small businesses.

Rather than chasing AI trends, they focused on solving real compliance pain points for small business owners navigating complex regulatory requirements across 50+ different state and local jurisdictions.

Their approach involved two key tracks: conversational interfaces that make software more intuitive, and automation that eliminates time-consuming tasks entirely. The result is an AI system that generates reports, executes actions like approving time-off requests, navigates complex compliance requirements, and creates optimal shift schedules. Gusto’s “startup within a startup” methodology, 90-day roadmap horizons, and hybrid interface philosophy offer practical lessons for any SaaS company serious about AI implementation.

Top 3 Takeaways from Gusto Co-Founders Josh Reeves & Eddie Kim:

  1. Create a “Startup Within a Startup” for AI Projects – Gusto built Gus by creating an independent team that operated outside normal engineering processes, shipped weekly, and didn’t even use project tracking tools initially. This allowed for the rapid experimentation needed in the fast-moving AI landscape.

  2. Focus on Problems Only You Can Solve – Be disciplined about which AI problems to tackle versus which ones the broader AI ecosystem will solve naturally. Gusto focused on Gusto-specific challenges while betting that general AI capabilities would improve on their own.

  3. The Future is Hybrid Interfaces, Not Just Conversational – While conversational AI is powerful for many tasks, the best user experience combines conversational and graphical interfaces at the right moments. Not everything is better done conversationally.


The Mission: Making Small Business Compliance Suck Less

Before diving into the technical details, Reeves made something crystal clear: “Companies don’t exist for the sake of it. We exist to go fix something, to go serve our customer and solve a pain point in their life.” For Gusto, that pain point is compliance hell.

Small business owners navigate a maze of local, state, and federal regulations. “The US in particular is more like 50 countries than one when it comes to all the different rules and requirements a business owner has to navigate,” Reeves explained. This isn’t about using AI because it’s trendy – it’s about using AI to solve a very real, very expensive problem.

Two Tracks: Conversational Interface + Automation

Gusto approached their AI strategy along two clear tracks that every SaaS company should consider:

Track 1: The Conversational Interface Revolution

“We are navigating a pretty massive paradigm shift in how software gets used,” Reeves noted. The conversational interface paradigm shift means customers can simply talk to software instead of figuring out which buttons to click or pages to navigate.

But here’s the key insight: this doesn’t replace traditional interfaces entirely. “We’re investing a lot of time in the Gusto web app, in our mobile app,” Reeves clarified. “We think they work in conjunction with each other.”

Track 2: Pure Automation

The second track focuses on literally automating tasks – both for internal team members (“Gusties”) and customers. “Think about something you spend 5, 10 minutes on. If it could just be done automatically for you, time savings is cost savings for a business owner.”

What Gus Actually Does (Beyond Just Answering Questions)

Kim broke down Gus’s capabilities, and they go far beyond typical chatbot functionality:

Advanced Reporting & Analysis: Gus generates reports and provides critical business insights, not just raw data dumps.

Action Execution: Tell Gus “I’d like to approve Sally’s time off request” and it will look up the request, show you details, and execute the approval upon confirmation.

Compliance Navigation: With tens of thousands of compliance rules affecting small businesses, Gus tells you exactly which ones apply to your specific business based on Gusto’s deep knowledge of your company.

Complex Scheduling: Gus can set up ideal shift schedules that automatically comply with break requirements, maximum daily hours, weekly limits, and other labor regulations.

The result? Gus is “generally available to every single one of our customers on Gusto’s platform” as of last week, actively being used by hundreds of thousands of small businesses.

The “Startup Within a Startup” Playbook

Here’s where Kim shared the tactical gold. Building AI products requires a fundamentally different approach than traditional SaaS development:

Start Fresh: “We started with a brand new codebase from scratch” and “politely excused ourselves from many of our engineering team’s rituals and processes.”

Move Fast, Track Later: “It wasn’t even until recently that we actually started to track our work in things like Jira and Asana.” Instead, they’d sit together, decide on priorities, and ship by week’s end.

Embrace Uncertainty: “We would just sort of sit all together in a room, talk about what are the most important things for us to work on. And by the end of the week, we would ship it.”

Three Hard-Won Lessons from Building Gus

Lesson 1: Vision Clear, Roadmap Fluid

“Although our vision for what problems we want to solve for the next few years is very, very clear… the roadmap of what we’re building cannot be more than 90 days out because we’re learning so much right now.”

Every three months, they learn something completely new that changes what they need to build. Traditional annual roadmapping doesn’t work in AI.

Lesson 2: Watch What Customers DON’T Do

While traditional SaaS metrics matter, Kim emphasized something more valuable: “It’s even more important to observe what customers are not doing on your product… what they’re doing right before they actually start using your product.”

He calls this “the work before the work” – the preparation customers do before using your product. “That is a gold mine of problems that you can be solving for your customers.”

Lesson 3: No Single Interface Rules Them All

“There is no single interface to rule them all. With the advent of AI, there’s so many things that are done better conversationally now, but not everything is done better conversationally.”

The future is hybrid – conversational at the right moment for the right task, graphical when that makes more sense.

The Internal Productivity Multiplier

Beyond customer-facing features, Gusto uses AI internally for massive productivity gains:

Customer Support Superpowers: Their support team uses internal AI tools to access information more quickly, reduce copy-pasting between documents, and pre-populate responses.

24/7 Self-Service: AI has made their help center “dramatically more efficient, more effective, better at getting you the information you need.”

Document Processing Automation: For tax filings, insurance enrollment, and other complex processes involving third-party documents, AI handles categorization and resolution. “Today, over half the tax notices that come in to the team get automatically flagged, organized, categorized, and then resolved without a human being involved whatsoever.”

The Business Impact: More Than Just Cool Technology

Reeves tied everything back to business fundamentals:

Increased Operating Margin: Better customer experience and internal productivity improvements create more operating margin to reinvest in new products and improvements.

Sustainable Growth: “Gusto’s been free cash flow positive for several years. We think if you’re at the scale we’re at, running a good business means you generate revenue, you generate free cash flow, you reinvest that, you build better product, you serve the customer better, and this technology basically adds to that flywheel.”

The Technology Tailwind Philosophy

Reeves closed with a broader perspective that every SaaS founder should internalize: “The building blocks constantly are changing.” When Gusto started 14 years ago, their technology tailwinds were cloud, paperless, and mobile. Their go-to-market tailwinds were social and search.

“AI is now a part of that and there’s going to be more in the future. And so the mindset here as a company builder is how do you not predict the future because no one has a crystal ball. But how do you stay on top of obsessively what the trends are, what the different technologies are.”

The key is matching technology capabilities with real customer problems: “It’s not using technology for the sake of it. It’s you’re looking at a customer problem, a customer pain point… And then if you think that technology can be a way for you to go make that pain go away to improve the quality of your experience, that’s a fantastic reason to dive in.”


Top 3 Mistakes to Avoid (Based on Gusto’s Experience):

  1. Don’t Try to Plan Too Far Ahead – Gusto learned that AI roadmaps can’t extend beyond 90 days because the technology and learnings evolve so rapidly. Traditional annual planning will leave you building the wrong things.

  2. Don’t Assume Conversational is Always Better – While conversational interfaces are powerful, not every task is better handled conversationally. Many things are still more effective with traditional graphical interfaces.

  3. Don’t Apply Traditional SaaS Development Processes to AI Projects – Heavy project tracking, rigid engineering processes, and traditional development rituals can kill the rapid experimentation needed for successful AI product development.

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