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B2B apps: product doesn’t win, distribution does?

There are more and more great B2B SaaS apps being developed every day. From CRM systems, to point of sale, to inventory, the list goes on and on. Many of these B2B apps are vying for the same customer – small business. And the small business segment is arguably the largest untapped market on the planet when it comes to cloud software. That’s why we are seeing an increasing number of apps and an increasing investor sentiment. So why is it so hard for these apps to achieve real scale?

Xero apps

I recently caught up with Bjoern Herrmann, the Founder & CEO of Compass. His company aggregates and tracks startup and small business data from a number of sources online sources. He calls it “Moneyball for the business world”. The service provides benchmark data on key metrics like new customer adds per month, average revenue per user, and customer life cycle data. All these things are important to any company, but Bjoern has found a niche in an underserved startup market. We like it. If his company can help startups uncover issues or capitalize on opportunities earlier, then these startups have a better chance of winning. Compass’ goal is to accelerate the global pace of innovation and reduce the failure rate of businesses. We at Xero, as many of our customers know, feel the same way about helping small businesses by providing clear insight into their finances to make sound business decisions.

Below are some recent stats that Bjoern shared at the 2014 Small Business Web Summit in February.

  • SaaS is less than 6% of overall software market

  • Almost half of SaaS businesses choose growth over profitability

  • Less than 7% SaaS companies achieve 10,000 customers

  • Distribution is the #1 challenge for these companies

    • 23% rely on direct sales

    • 13% use partnerships

    • 9% use viral tactics

    • 8% use other lead gen activities

    • 7% rely on customer word-of-mouth

Why aren’t we seeing more of these apps break the 10,000 customer mark? The research conducted by Compass uncovers several possible reasons, but the one that stands out is access to a distribution channel.

Many small business B2B apps are up against a large incumbent. David vs Goliath stories tend to exist across all verticals, and the data shows that some incumbents are hard to disrupt because of the ecosystem they have built over decades. Legacy channel partners, consultants, trainers, resellers, and system integrators work against the shift to a new cloud operating model, as the change in model also impacts their businesses. Leveraging these existing channels is challenging so it is up to many B2B apps to develop new channels to market in to. As the data suggests, most of these companies are using inside sales teams to sell directly to small businesses. This is not for everyone as it can be costly. Some are using partnerships which can prove to be effective in a cloud world of open APIs. Others have found a way to use viral methods, but we haven’t seen the rapid adoption like we see in the consumer space. Small businesses don’t sign up for business apps on a whim.

The bottom line is that Compass’ research shows that startups that can capitalize on the best distribution will likely be the winners.

 

Talking entrepreneurship

Rod spoke last week at the launch of Spark – the University of Auckland Entrepreneurship Programme, and the team from 90 seconds TV captured an interview afterwards.

During the chat, Rod covers off topics including focus and planning, building teams, investment, exporting, risk, how business can be fun and about “going for it”.

Check it out:

 

Files on the run

Xero Touch for iOS has now been updated to give you access to your files from your mobile device.

Xero Files using Xero Touch for iOS

Files for Xero was released back in October and was a game changer, allowing you to attach source documents to transactions. This gives you a full picture of your financial data and supporting materials all in one place.

Now you can upload images to your Xero Files inbox from your iOS mobile device, whenever and wherever you are. You can upload photos of receipts, assets, locations and people to Xero, and they’re just the more obvious uses; we have no doubt you’ll be able to think of numerous other ways to take advantage of this capability!

Not only can images be captured and uploaded to your files inbox for later, you can also use your iOS device to review any files that are in your inbox, too.

The latest version of Xero Touch for iOS including files is available in the App Store. A brand-new version of Xero Touch for Android was released last month and Android support for files is already in development.

 

Is the future of work standing desks?

Standing while you’re working may seem rather odd to most people, but it is a practice with a long tradition. Winston Churchill wrote while working at a special standing desk, as did Ernest Hemingway and Benjamin Franklin.

 Why standing desks and why now?

Standing desk at Xero

Numerous scientific studies have demonstrated that sitting is killing us. A recent survey found that many of us spend up to 12 hours sitting on our bottoms – at work, at home, in the car, in the movies, and even in the gym! Add that to seven hours of sleep and we spend nearly 19 hours every day being sedentary. That is incredibly excessive. Human beings are not designed to sit down so much.

Several studies have also shown that stand-up desks do really offer better health benefits. Fewer medical issues, less back problems, increased productivity, increased energy, higher calorie burn, living longer and healthier are just some of the numerous benefits that have been documented scientifically and anecdotally by stand-up adopters. However, as in everything in life, there needs to be a balance. As it turns out, standing all day is not very good either – it can lead to enlarged veins, or the hardening of arteries.

Change your posture constantly and move around, whether you sit or stand at work – because standing all day can be as bad as prolonged sitting.

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Digital innovation in action on the Sunshine Coast

I was recently invited by the Caloundra Chamber of Commerce & Industry in Queensland to speak on ‘Digital Innovation in Action’.

Digital innovation in action

The Sunshine Coast is a great example of a regional community seeking ways to encourage local business owners to improve productivity by embracing the latest technologies. In opening the breakfast, Michael Shadforth, President of the Caloundra Chamber of Commerce, spoke about the need for businesses to understand and embrace opportunities offered by cloud technologies like Xero in order to improve business efficiencies and lower the costs of running IT.

A local businessmen himself, Michael is clearly passionate about seeing business flourish in the area and sees local innovation as a great way of preventing the “brain drain” of young talent moving to the cities to pursue job opportunities. As a result he was particularly taken with my story of an Adelaide Bookkeeper who made the move to the Sunshine Coast for lifestyle reasons and was able to keep all her clients as a result of using Xero.

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Provoke Solutions goes global with Xero

Guest post by Catherine Fitzgerald, Project Manager, Provoke Solutions

New Zealand software development and online experience consultancy, Provoke Solutions, began in 2001 as a start-up with one office in Wellington, a vision for greatness and a clunky accounting package. Now with five offices on three continents, Xero have helped us go global.

Provoke Solutions

Out with the old, in with the Xero

Following the opening of our Auckland office in 2007, we came to realize that our bulky accounting product, designed for large organizations and multi-nationals of 500+ employees, proved more a hindrance than a help. It was neither easy to administer nor simple to customize. We needed an accounting solution that would better meet our needs.

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What the Official Cash Rate (OCR) rise means to New Zealand small businesses

As many economists predicted, the New Zealand Reserve Bank has raised the Official Cash Rate (OCR) by 0.25% today. The OCR was originally 2.5% and is now 2.75%. By the end of 2016, economists expect the OCR to be between 4% and 5%, as the Reserve Bank tries to limit inflation by lifting interest rates.

Rising house prices, increasing immigration and booming construction activity are all creating a lot of the inflation pressures. This pressure is being slightly eased by the high exchange rate on the kiwi dollar.

What does this mean for owners of small to medium enterprises (SMEs)?

We talked to Lisa Martin, Managing Director of GoFi8ure and Vice President of NZBAI (also winner of Bookkeeper of the Year at the Xero Partner Awards 2014) about what the Official Cash Rate means to New Zealand small businesses.

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Farming in the cloud – New Zealand

Farming in the cloud presented at Xerocon

At Xerocon, Auckland we were excited to unveil Farming in the Cloud, which will be ready later this year in New Zealand. This connection with our farming partners will deliver real-time, single ledger reporting to farms for the first time – and it’ll be great for our accounting partners with farming clients.

The solution allows farmers and their accountants, banks and rural service companies to work together from the same set of online, real-time data, and will provide one centralised home for accounting and farm management tools.

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US Payroll – what we’re working on

US Payroll team at Xero

The launch of US Payroll in December was a huge milestone for Xero, but the launch was just the first of many steps to deliver the ultimate payroll feature – it’s a marathon, not a sprint. There are always bumps in the road, but our team is focused on developing the most important features and delivering the best possible customer experience.

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Marketing your practice – how-to guide

Tarryn Brent and I were thrilled to share tips for marketing your practice with bookkeepers and accountants at Xerocon New Zealand 2014. We talked about what businesses can do to retain clients, win new clients and convert existing clients to Xero. You don’t have to do everything we recommend, but a little goes a long way to ensure your practice is moving and changing with the times.

Read on, for a summary of what we discussed.

Marketing staff members from Xero

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