20,000

Another good milestone over the weekend as we ticked over 20,000 businesses on Xero. You can read our market announcement here.

Last year we could see that we were making good progress with our accountants channel so we made a strategic decision to really focus on the recruitment of accounting firms. While there are a lot of accounting products out there, in reality there are only a small number of products that accountants recommend and support. Some early research we did with Ernst and Young showed that if a small business used an accountant, in 80% of cases the accountant chose the software. We had to be one of those.It’s expensive to develop a channel. We have people on the road and largely use an event based model for recruitment to make it scalable. We are very pleased that the strategy is working and we’ve been able to maintain great growth rates as we build relationships with accounting firms. We now have over 1000 firms with Xero customers. This gives us a substantial base of potential customers to sell into.

We are also starting to see some nice disruption occurring with cloud based solutions. The first disruption was having a single ledger that reduces the cost of sending data between accountant and customer. The $200-500 in fees just to get the data has trained small businesses not to use their accountant for management advice. It’s fantastic to see accountants taking advantage of being connected and really becoming the trusted advisor that small businesses want.

The second disruption we’re starting to see is client-side and accountant-side products coming together. Under the desktop model a small business buys its own software, and the accounting firm buys some very expensive final accounts and practice management software to reprocess the books. With a single ledger that goes away. As the ledger has already been paid for, turning off accountant-side software cost is compelling, especially as these are set to increase for the desktop software model. Some of the established software products for accountants will require upgrades to server hardware, including running their own SQL databases which accounting firms need to pay for and maintain. Right now we haven’t totally replaced the accountant-side features but we’re getting there and are committed to ensuring our partners continue to benefit from joining the SaaS movement. So we see 2011/12 as a big period of change for practices.

Our strategy has been to build out both sides. Client and Accountant. We’ve never thought that online accounting was just desktop accounting moving to the web. Accounting has a broad minimum feature set. It takes a big team and time, and that’s expensive. This is why we went down the route of raising money as a public company to have the resources and time to pull these two sides together concurrently.

We are also seeing new industry groups evolving in the ecosystem. Bookkeepers and Virtual Assistants are able to provide new services to small businesses at a price point that makes it compelling. Business owners can focus on what they do best, and get a hand with the admin. Because they’re on the same ledger we’re seeing Accountants and Bookkeepers working together productively.

Thank you to our customers and partners for your support. We have a lot to do, but we have no doubt that it’s working. Let us know your thoughts.

12 Comments

Harry Sims
June 14, 2010 at 1:05 pm

http://blog.xero.com/2008/08/2000-customers/

Liking the progression from 2,000 “Still lots to do but it feels like it’s working.” to 20,000 “We have a lot to do, but we have no doubt that it’s working”

Paul Lattimore
June 14, 2010 at 2:30 pm

Great stuff guys. Stacks of positive anecdotes out there so viral growth should mushroom.

Paula S
June 14, 2010 at 3:22 pm

Impressive growth Rod. That is the Innovators and the early adopters on board, bring on the early majority!

Jai Ivarsson
June 14, 2010 at 6:39 pm

Congratulations on a fantastic milestone.

As one of the first 500 businesses we are so happy that we made the right decision. In fact we were so happy with Xero we changed accountants to one that could support it.

Keep up the great work.

Shawn Smith
June 14, 2010 at 11:59 pm

And I can say that I’m a very happy customer as well!!

Brett Foss
June 15, 2010 at 9:53 am

What a great milestone! Well done to the entire Xero team!

Richard Francis
June 15, 2010 at 9:22 pm

Congrats Rod, Hamish and team. I have little doubt that a 0 will be added to that number within 3 years :) Keep on striving to be ahead of the pack!!

tanner
June 18, 2010 at 10:21 am

It will be a great milestone once the company starts generating a serious amount of net positive cashflow – enough to justify the valuation that has been hocked to the public. At times it feels like a ponzi scheme – yes you get customers, but show me the money.

Rod Drury
June 18, 2010 at 2:43 pm

@Tanner

Sigh.

We’re very open about what we are doing. We correctly identified a huge market opportunity. We then raised enough capital to build a strong team and build our business quickly to exploit the opportunity.

Customers and revenue are growing nicely. We have signaled that we plan to reach break even next year with good cash reserves remaining.

I don’t think there is any doubt we are executing well and therefore we see growing confidence from others that Xero will be successful. It does take time, which is what we have always said.

Our brand is building, our channel recruitment is successful and working, we have been able to establish marketing relationships with many leading global companies, our software is winning awards, we have fans all over the world, we have other businesses building off the back of Xero and our team is still learning a lot.

We are very aware that it’s easy to throw stones at people like us that do bold things. Keep watching and we’re confident that in the future we will generate good cashflow. No one wants that more than our team – but we’re prepared to do the investment and hard work up front first. We believe this is what you have to do to build a business in our space and create shareholder value.

It’s not our first rodeo, we’re very confident of our plan, and the market is playing out as expected. And that market is huge.

What if we’re right?

Rod

Carl
June 18, 2010 at 3:07 pm

I have no doubt Xero is on the right track, now that Xero has done the hard(est) yards, they now have 20,000 vocal businesses out there, spreading the word about how Xero has been a game changer for their business.

The Next 20,000 customer acquisitions are only going to cost a FRACTION of what the last 20,000 did.

The scalability of Xero is scary.

A Xero day update
June 22, 2010 at 5:00 am

[…] blog they have, the emphasis on driving functionality, onboarding of new accounting partners and hitting the 20,000 user milestone are contributing to the perception that Xero is leading the way. It hasn’t all been plain […]

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