Xero
Careers at Xero
Mission
Xero’s mission is to change the game for small business.
Business segments
Xero is a provider of accounting-based software. The firm operates two reportable business segments based on geography: 1) Australia and New Zealand (ANZ) and 2) International.
Founding story
Rod Drury and his personal accountant believed that standard desktop accounting software products had become outdated. So they decided to develop a modern, cloud-based offering. In 2006 they founded the company Xero in New Zealand to market their software-as-a-service accounting platform. It allowed customers to subscribe on a monthly basis for access to basic features.
In 2007 Xero filed an initial public offering and became listed on the New Zealand Stock Exchange (NZE). The company did so as an alternative to seeking investments from Silicon Valley in an effort to avoid pressure to sell to a larger firm. Xero entered the Australian and United Kingdom markets in 2008 and focused its marketing efforts on those two areas and New Zealand its first few years.
The late 2000s/early 2010s saw a number of milestones. Xero raised $23 million in a round of funding in 2009, followed by $4 million in 2010. It entered the U.S. market in 2011, and joined the Australian Securities Exchange in 2012. In 2013 it was reported that it had a valuation of $1.4 billion on the NZE. It then proceeded to acquire several firms, diversifying its portfolio and expanding its capabilities.
Benefits at Xero
Business model of Xero
Customer Segments
Xero has a niche market business model, with a specialized customer segment. The company targets its offerings at small and medium-sized businesses across industries.
Value Proposition
Xero offers three primary value propositions: convenience, accessibility, and brand/status.
The company offers convenience by making life simpler for customers. It enables potential users to participate in a 30-day free trial. It provides updates to its SaaS platform every three to six weeks, and made 1,200 updates in 2016 alone. It allows users to instantly see their bank transactions when their bank accounts are connected. Lastly, it enables clients to cancel their plans at any time.
The company creates accessibility by providing a wide variety of options. Its platform supports numerous currencies and tax rates. It is also capable of integration with over 500 business apps, including solutions for eCommerce and time tracking. Xero has been able to provide many features (accounts payable, purchase orders, invoicing, management reporting, etc.) because it has acquired numerous competitors since its founding.
The company has established a strong brand due to its success. It claims to be the leader of the cloud accounting markets in New Zealand, Australia, and the United Kingdom. It has more than 862,000 subscribers in over 180 countries. In 2016 it achieved operating revenue growth of 67% and subscriber growth of 51%, and recorded NZ$1 trillion in transactions. It has over 1,400 employees working out of 20 offices globally. Lastly, it has won a number of honors, including the following:
- Recognition as the “World’s Most Innovative Growth Company“ by Forbes in 2014 and 2015
- The“Best Accounting Software“award from the Cloudswave Awards in 2015
- Recognition as one of the “Top 50 Places to Work in Australia“ in 2014
- A Fast Company Innovation by Design Award in 2012
- Two Webby Awards, including the People's Choice Award for Banking/Bill Pay, in 2009
Channels
Xero’s main channel is its direct sales team. The company promotes its offerings through its website, social media pages, advertising, and participation in road shows and conferences.
Customer Relationships
Xero’s customer relationship is primarily of a self-service, automated nature. Customers utilize the service through the main platform while having limited interaction with employees.
The company’s website features a “Business Help Center” section that offers useful resources and provides answers to frequently asked questions.
That said, there is a personal assistance component. The company makes customer service available 24/7. There is also a community element in the form of a forum where clients can interact.
Key Activities
Xero’s business model entails designing and developing its software and maintaining a robust SaaS platform for its customers.
Key Partners
Xero maintains a partner program through which it works with accounting and bookkeeping firms to help them promote and sell its offerings. These partners earn points with every new client they obtain that can be accrued towards various rewards.
On average, they refer around 10,000 new customers per month. The company has over 16,000 partners. Program benefits include:
- Access to training courses at Xero University
- The opportunity to become certified in the use of Xero’s software
- Invitation to exclusive Xero events such as Xerocon, an annual conference
- Qualification for annual awards based on sales performance
Key Resources
Xero’s main resource is its proprietary software platform, which serves over 862,000 subscribers.
It depends on human resources in the form of engineers that develop its software and maintain and update its platform, and customer service personnel that provide support. Lastly, as a startup it has relied heavily on funding from investors, raising $355 million from six investors as of February 2015.
Cost Structure
Xero has a cost-driven structure, aiming to minimize expenses through significant automation. Its biggest cost driver is sales/marketing, a fixed cost.
Other major drivers are in the areas of product design/development and administration, both fixed costs, and cost of revenues, a variable cost.
Revenue Streams
Xero has two revenue streams: revenues it generates from the fees it charges for monthly subscriptions to its platform and other revenues.
