Xero: Giving 800,000 Business Owners Their Lives Back

Gary Turner is Co-Founder and Managing Director of Xero, which Forbes described as the “World’s Most Innovative Growth Company.” Xero provides small- to medium-sized businesses (SMBs or SMEs) with ‘beautiful’ online accounting software. Gary helped take Xero from a 3-person startup to a company that will have £150 million in revenue this year.

What’s the story behind your company, and why did you get involved?

“Rod Drury, our CEO, was the principal vision behind Xero as a business. Rod…was consistently disappointed with his experience of using accounting software…. So it was one of those classic ‘there has to be a better way’ moments…. I was at Microsoft at the time, so my background was in…big, corporate software businesses.

“Xero got going in New Zealand. Got the first couple of thousand customers on the platform down there. But New Zealand’s a really small country…and the view was: this has to be a global business. So we very quickly moved into ‘how do we extend beyond New Zealand and look at other English-speaking markets?’ So when I got the call to say ‘we want to get going in the UK’…it was one of those ‘I didn’t read the rest of the email’ moments, where I said ‘I absolutely need to be involved with that!’…. Because the UK, at that point, had not really seen much innovation in that space…and it was obvious to me that the cloud was just going to completely transform software…. So I got on board….

“We now employ 1600 people globally. We’re in the US; we’ve got two offices in the UK…. So we’ve gone, in 10 years, from that idea…to, in the next few months, we’ll pass by a million customers, And this year we’ll do…about £150 million revenue.”

Who is the customer here, and what are they getting from Xero?

“The world’s biggest market opportunity is consumers—but consumers don’t like paying for things. The second biggest community thereafter is small businesses…In the UK, there are over 5 million small businesses…Half of our GDP comes from small businesses; two-thirds of all employment comes from small businesses. So small businesses profile really high in terms of availability as a market.

“What’s also interesting about small businesses is that they’re generally quite impoverished when it comes to systems [and] technology. The most popular accounting software is a spreadsheet, because traditional desktop accounting software has been either too expensive or too big for what you require. And the old distribution methods of software meant that it was really hard to service small businesses effectively. And the cloud changed all of that. It means we can deliver a really great experience to small businesses…Our strapline as a business is ‘Beautiful accounting software,’ which is deliberately provocative….We saw an opportunity to provide that huge market, for the first time, with something that they enjoy using and helps them be more successful as businesses.

“We have some really cool customers as well…. In City AM a couple of weeks ago, there was a Top 50 list of the most interesting technology startups in the UK…and something like 32 of them were using Xero.”

Do you guys see yourselves as having a big role to play in PSD2 and open banking…?

“So we’ve spent the last few years building those discrete, one-to-one connections with all the banks in the UK…PSD2 is going to be like an overlay that will probably display some of those existing, technical relationships that we have…But however it gets there…it finally gives the small business a sense of knowing what their numbers are and where their numbers are. Many, many small businesses run for days, if not weeks, not actually reconciling their bank accounts…So we’re not as excited about PSD2 as, perhaps, other people are, because we’ve already built all that discreetly. And if anything, PSD2 just enables us to do that more efficiently.”

HM Revenue & Customs plans to make tax digital, with quarterly reporting. Would this bring challenges to businesses? How are you thinking about how Xero might help in that?

“Everything is going digital, therefore government has to go digital…. And you have to buy into the principle, because, do we think that, in 2025, it’s still appropriate for the UK’s tax system to be based on paper? Probably not. Where it’s controversial is that the government and HMRC would like to mandate that you have to use software and digital tools to do that. Now, you’d think as a software company, that would be amazing for us…but it’s not going to be as simple as that. Because, actually, a lot of small businesses work with an accountant…and they’re big stakeholders in the whole self-assessment process.

“We see our job as ‘how can we use technology…to mitigate the burden that that brings?’ If you’re on Xero, if you’re a company director and you’re working with your accountant, and all of a sudden you’re going to have to be doing all this kind of digital tax return – how can we make that just happen automatically? And if that means more people adopt software and go off spreadsheets, that has to be a good thing. But I think some of the concern that people are voicing about that is the timelines are really sharp, so, like, April 2018…ultimately a good thing, but a really compressed timeframe.”

In the UK, two-thirds of all employment comes from small businesses. So small businesses profile really high in terms of availability as a market.

Talk about some trends you’re seeing in fintech generally. What’s exciting you?

“Machine learning and AI…If you wipe the hype away…we think that there’s an opportunity of saving small businesses time by applying, judiciously, automation, machine learning, and AI to specific tasks like accounting, to make it go away, make it happen automatically….”

What’s your favourite podcast? What are your favourite productivity hacks?

“I love podcasts: every single day I’m listening to podcasts…. Most of them are tech-flavoured, I have to say. So I love The Talk Show [with] John Gruber – a huge Mac pundit and writer…Accidental Tech podcast, another awesome weekly update podcast…I’ve just started listening to one that’s decoding Westworld.

Productivity hacks: I’m a huge fan of Google Inbox…And my biggest tip on email would be: just completely unsubscribe to everything that doesn’t help you…Be really brutal with email….”

And any advice for somebody who’s just getting into fintech for the first time…?

“It moves really fast. I think fintech’s in a really interesting space and time right now, where the big guys are beginning to recognise that maybe they should be doing something for the first time.

“We have a saying at Xero: ‘it’s not the big that eat the small, it’s the fast that eat the slow’…Focus on what it is you need to do, and do it really, really quickly. Don’t debate it, and don’t analyse it for three weeks, and don’t write a white paper on it, and don’t commission a survey…. That’s what Barclays and HSBC are going to do…and the reality is, if you’re small, if you’re a startup, you can move at light speed, much quicker than anyone else can – use that advantage while you have it. So – just do it tomorrow!”

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