XU: Tony, I just wondered if you could start by telling me a little more about yourself and how you came to be in the role of President of the Americas at Xero?
TW: I started in May 2019, so it’s been just over a year!
I’ve been in technology for 25 years in one way, shape or form. I started tech life in a small New Zealand firm - actually the firm that bought one of Rod’s first companies. We were called Advantage, which bought ‘Glazier Systems’, which I think was Rod’s first start up in about ‘99. The internet was really just starting to kick off and I thought, ‘This is the future’. So I went to work at New Zealand’s internet service provider called ‘Xtra’. I did that for a couple of years and then I thought I’ll go and do a start-up because it was kind of a dot com, it was really happening. There was an opportunity at Microsoft New Zealand, and I thought ‘Oh, here’s a real opportunity to learn from a marketing machine. I’ll go to Microsoft for a couple of years, and then I’ll go and work in a start-up’... 10 years and two countries later, I was still at Microsoft.
I did a few different things at Microsoft - moved to Sydney, and effectively ended up as their CMO and COO. That’s where I met Steve Vamos, who was running Microsoft Australia and he became a mentor of mine, so we stayed in touch.
I tried to do my own start-up in 2010. The plan was to effectively bundle Office 365, something like either Salesforce, SugarCRM and Xero, for small businesses. I was a Xero customer, that’s what I was using. I could see that small business was really underserved by everybody, and they had 3 main problems:
- They were never up to date on the latest software, obviously, SaaS fixes that.
- They couldn’t afford big unplanned expenses, such as the need to go and buy a mail server or a bunch of laptops. Obviously, SaaS fixes that too.
- They didn’t know who to call when something went wrong.
I basically whitelabelled support through a New Zealand company called DataCom out in New Zealand to do my support. Great idea... but then Google and Optis came out with virtually the same idea for cheaper and I thought I’m never going to compete with them, so I decided that wasn’t going to work long term.
I thought SaaS and Social was really the future and looked at Facebook and LinkedIn. I went to work at LinkedIn and did that for a couple years. I ran the third biggest business at LinkedIn Talent Solutions, and then went to SurveyMonkey and Dropbox. I kept in touch with Steve, and had lunch with him once or twice a year. We’d catch up and I heard about the amazing opportunity at Xero to run the Americas. I had many conversations with different people and got really excited about the difference we could make for North American small businesses and their accountants and bookkeepers.
I never intended to live in the US, I was really happy in the southern hemisphere, but I’d known about Xero for a long time, known Rod for a long time and really trusted Steve as a leader. I loved the idea of being a challenger brand and we’re definitely a challenger brand in North America. Next thing you know, I’m working for Xero and moving my family to the US!
XU: I think when I saw you at Xerocon you were in the process of moving your family over.
TW: Yes, I was basically commuting from May last year and then we moved over in January. It was 7 months of just 3 weeks here, 10 days home, 2 weeks here, 1 week home. So that was really, really tough.
XU: The first time we (at XU) heard you speak was at Xerocon San Diego (2019). How have the first 12 months in the job been for you? Do you have any highlights you could share?
TW: The business is in such better shape. We’re doing many more deals with many more partners. Partners who had started with maybe 10 subscriptions, then went to 100 and are now looking at 300-500. If you look at our FY20 results, in North America we have 241K subscribers, and we estimate we now have just under 1.5 million small businesses connected with our accounting and bookkeeping partners.
There is a lot of opportunity to grow our subscribers in that base. We’re really focused on getting a lot of new partners and we’re building a lot of momentum. We’re building up to Xerocon in May ‘21, which is in New Orleans. We’re going to plant the flag - ‘Hey, we’ve arrived’ in North America’. Everything we’re doing in terms of recruiting partners, training the people that we have, the product marketing… everything is geared towards May ‘21. We’re building towards that.
XU: It was great to see the latest Xero annual report for FY20. The growth in Xero subscriptions worldwide was so impressive. To see the growth up to 241K (+24%) in North America was awesome. What was the game plan to achieve this and have you done anything particularly different from other years?
TW: I think our strategy hasn’t changed. If you’ve been through the investor deck and you listened to Steve’s recording, he talks around the 3 main strategic priorities in terms of driving cloud accounting, growing the small biz platform and then building for global scale and innovation. Those things are going to be persistent for the next 3 to 10 years. As things unfold we’ll see what we started to buy, build and partner on. It will become clear that’s what we’re really focused on.
During one of my first times in the US, I said I don’t have a magic wand. I can’t all of a sudden turn where we are into where we want to be. Ben Richmond runs the US and Will Buckley runs Canada. They’ve been here for 7 odd years. We’ve stuck to the playbook - the playbook works, right? You get partners, you make them successful, and then they grow. I think before my time, they recruited quite small partners that had maybe 10 - 40 small businesses. That’s a high cost to acquisition, without a lot of ability to scale. So they stopped and really focused on going direct to small business and spent a pile of money on marketing and all the rest of it.
But the problem was that Xero is designed to work with your accountant or bookkeeper to set it up. If you go direct and they don’t have an accountant or bookkeeper, they struggle. So you spend a lot to acquire customers, and it would be challenging. You have to do both. You have to recruit partners, train them and help them to be successful, and you have to create demand on the small business side. So I think all we’ve done is had the fortitude to stick with the plan and just execute it.
The UK has been an overnight success after 10 years. Gary Turner’s been around 10 years and it takes a long time to really get it to work, but it’s magic when it does. It just becomes this machine that throws off new customers, and you get the whole virtuous cycle of accountants talking to accountants, small businesses talking to accountants. There is a point where it really starts to get momentum. That hasn’t changed.
I think one of the things that has become clear to me over the past 6 months or so is that we have a two sales motion - one of them is the small business side of the house with small accounts, and then there’s an enterprise sales motion, which are verticals and large accounting firms, so say the global 30. And then strategic partnerships, so the large tech companies that are reaching out to us on a regular basis saying “Hey, we want to figure out how to work together to go after a small business with you”. That is definitely an area where we’ve seen growth. If you look at our results, K-Coe is a new partner, one of the largest food and agriculture consulting and accounting firms in the United States. And MNP, one of Canada’s largest national accounting, tax and business consulting firms that serves 150,000 small business customers.
XU: How important are the Xero team for achieving this growth?
TW: I think that is the magic ingredient to be completely honest. I think at the end of the day, people buy from people they like. Like is about trust and trust is about having your back.
We met Shayne Dueck, a partner from MNP at Xerocon San Diego. We don’t bill in Candian dollars at the moment, we were missing things like GST and PST and HST, missing some real core functionality. Yet they signed the deal with us. Shaynewas really clear that it was the people component at Xero that got us over the line. Even though Shayne knew our product wasn’t as feature complete, he bought from us because he fundamentally believes we will get there and take care of him and help his business to grow, and we will! Tanner Hoffman, who is in Nebraska, looks after the farming vertical and is a farmer. He lives and runs a farm in Nebraska, which has been in his family for about 75 years. He went up to Winnipeg Manitoba in Canada and met with the partners to talk about his experience of running a farm, how Xero figured in and worked in the farming world. I think the difference is having somebody that really understands what they are trying to do for their clients versus somebody who is just selling software. It’s that nuance, but it’s important.
Even in the COVID-19 world, we made it really clear to Ben & Will that April was not to be a selling moment. This is a caring moment, this is a human moment. Every single one of our partners in the Americas was either spoken to directly, or emailed in April to make sure they’re okay. Are you okay as a person, is your family okay? And then we’ll talk about the business and all the rest of it. That is not a sales opportunity and I was really, really adamant that it was most important to see if they’re okay. You imagine they’re hearing all these really difficult stories people losing their family business or potentially their house, they can’t afford to send their kids to school or to do sports. They’re hearing these terrible, terrible stories and just seeing if they’re okay was obviously super important for us.
Almost everybody at Xero, if they haven’t been an accountant or bookkeeper, then they’ve actually run a small business, or their family has been in small business in one shape or form. Everybody has empathy for small business and is passionate about small business, which is super important. We went really hard, really early with education around how you access some of the government programmes available. Because let’s face it, governments generally don’t make information easy to consume.
My mom was a hairdresser, and she owned her own business for 25 years. I just imagine my mom trying to consume the information around the PPP (Paycheck Protection Program) here or the programmes in the UK, or Canada - wherever. So how can we make this simple? How do we help these people get access to these programmes? We worked with all of our partners. You would have seen all of the webinars from Xero around the world, not just us. Our partners were doing it as well and we were supporting them.
I was saying earlier today, we were looking at our customer experience helpdesk tickets and thinking ‘Oh my gosh, people are going to be writing in about how they want subscription relief ’. We were really clear about it - people can suspend their subscription and when they come back, all their data is still there. All the money we basically bring in, which you can see in our results, goes back into building these things. But you know, we have 241,000 customers in the US, and in the past 2 months we’ve had about 10 negative support tickets… out of 241,000! I was nervous when we had our weekly leadership team meeting here in the US as to what the numbers were going to say... what’s going on out there? I was blown away by the fact there were only 10 that were negative... 10 is obviously 10 too many! But 10 over 241,000 is pretty close to nil.
XU: Well, you’d definitely take that.
TW: I gather it’ll grow, but 10 is pretty negligible as the numerator, for sure.
XU: Definitely. One of the things we have observed Xero in America do is a pivot from their original game plan, which now seems to be paying off. What would your advice be to other businesses where the old way of doing things isn’t working now or they need to pivot their service/approach to ensure continuity and growth? Especially as the first step to do this can seem so scary.
TW: The first thing I would do if I didn’t have an accountant or a bookkeeper, would be to get one.
Number two, if I had an accountant or bookkeeper, I would be calling them and asking them for advice and being willing to pay for it.
Number three, I would be really focused on cash flow. We recently released a new short term cash flow feature. We’re going to push that out globally so people can get access to cash flow forecasting. I would be looking at my accounts receivable every single day and focusing on how I can get as much revenue in the door as possible.
Then, obviously I’d be looking at the cost side of the equation. How do I reduce my costs and potentially apply some of those savings to marketing to get more business in the door? If I’m bricks and mortar, I’d be working out how to get an online shop ASAP. I’d be working out whether I can sell through Amazon or another marketplace. I would be figuring out how to sell on one of those marketplaces, because they’re going like crazy.
XU: That’s some great advice. Xero is a global brand with exciting differences between countries and regions. Are you able to explain in more detail your route to market in the Americas? Has this been plain sailing and how has the plan had to adapt and evolve since you jumped on board?
TW: Our route to market is exactly the same - accountants and bookkeepers. We sell direct as well, the same as all our other markets. I think the nuances are that we didn’t do both at the same time, we’ve only done that the past two years. If you think about it, Xero Americas in its actual proper form is really only 2 - 2 1/2 years old, even though we’ve been here for 7 years.
I’ve lived in Australia, New Zealand, Canada and the US now, and my Dad was British. All 5 of those countries are largely 99% the same. There’s local nuance for sure, but business is business in those 5 countries, so what works in Australia and New Zealand, works in the UK and it will work in Canada and it works in America well. I think stick with what’s worked, then look to accelerate that as we start to scale.
XU: Following on from that, what differences does Xero Americas face trying to help accountants, bookkeepers and SMEs compared with other parts of the world?
TW: Obviously the US is different with 8,000 banks and a much more complicated tax filing system. There is something like 16,000 different sales tax rates. It’s no different than the commonwealth markets, it just has more complexity. One of the pieces of information from some research we just commissioned is how America is very much a DIY market. People think they can do it themselves. What that means from a small business perspective is there are a lot who don’t have a bookkeeper or accountant, something like 60-70% who just do it themselves with their shoebox and Excel.
I think what COVID-19 has done is highlighted that. My comment before was that if you don’t have an accountant or bookkeeper, get one. We’re trying to have a conversation about how we move American small business from DIY to DIT - ‘Do It Together’, with an accountant or bookkeeper. Remember, if you’re a small business, it’s not just Xero you need for accounting. You’re going to need someone for Point of Sale and a line of business application, whether you’re an architect or something else entirely.
A lot of it sits on our ecosystem. If you’re going to go onto Shopify and you’re going to use Xero, you’re probably going to need something like A2X in the middle, right? If you’re a small business sitting in London and you’re a bricks and mortar business, but you have something you can sell online, what are you going to do? You’re going to google ‘How do I sell on Shopify’. And then you’re going to say, ‘Okay. I’ve got Xero and I’ve got Shopify. But I need A2X’. You’ll end up on our marketplace, and hopefully you’ll find that and stick those things together. You’ll do it on Amazon, same sort of thing. So I think COVID-19 is going to drive the DIY mentality of America, to DIT - ‘Do It Together’ with an accountant or bookkeeper. That’s what our experts tell us. They said the inbound leads they’re getting from small businesses is blowing them away because they can’t do it themselves, they’re lost.
XU: Can you tell me a little bit about why you feel small businesses should modernise and move to the cloud and how you are dealing with this challenge?
TW: I’ve told you the story about my start-up. If I’m starting a business, where do I get advice about technology? If you go to your bank and tell them you’re thinking about setting up your own business being an electrician, and ask what you should do, the bank’s going to say, ‘ We can set you up with a current account and you’re on your way.’ Nothing about what you should do in terms of your IT.
So the next step, you need some hardware, so you’ll go to the Apple shop. You’ll go to the Genius Bar, and they’ll sell you a laptop or a phone, and then you ask, ‘what should I use for software?’ and they’ll answer, ‘well, you could use Mac Office...’ and they’ll send you away. No one has told you what you need to do to run your business, to create invoices, to get payment. There isn’t anywhere for those people to go for advice, so the accountants and bookkeepers are more and more becoming the ones providing that advisor role, as a service provider. IT consultants will say, well you’re a sparky, you need Xero, you need this and you need that. There isn’t anyone in small business actually doing that.
XU: Yeah. That’s why the accountant role is so crucial, to have that advisory service. It’s what you need, and you need to have trust in them too.
TW: I think about my mum as a hairdresser, she wouldn’t have a clue what software she should be using to run her business. She’s retired now, but in the old days, it was a book and a cash drawer. I’d actually do her banking deposit for her. I’d fill out the deposit form, take the canvas bag and throw it in the old school hole-in-the-wall they would have for deposits. But someone starting today, there will be a specific Point of Sale application for hairdressers that most of them use. How do you find that out? You ask a friend, you ask somebody in the business… but hopefully you’ll ask your accountant or bookkeeper and they can tell you ‘I managed some other hairdressers, and this is what they use, they’re really happy with it, so why don’t you give that a try.’
XU: A massive part of Xero is the ecosystem that surrounds and supports it. How has this developed over the last year in the Americas and are there any exciting apps you have seen integrate recently?
TW: That’s a good question. Xero’s app marketplace features 800+ third party apps that help small businesses and their advisors seamlessly run their business. With apps that support everything from inventory and logistics to point of sale and project management, businesses have an array of options to build a customised experience. We are working closely with apps such as Shopify, Pipedrive, Jirav, TriNet and Locate.
XU: There is no hiding that currently worldwide we are going through unprecedented times. I would love to get your view on how Xero and the community surrounding Xero can help accountants, bookkeepers and SMEs at these times?
TW: Cash flow, cash flow, cash flow. In any business, cash flow is king. Really understanding your financial position now and going forward is incredibly important. Everyone is going to be calling in their debt as quickly as they can. Ben was quoted recently saying ‘the squeaky wheel gets the oil’. You literally have to be on people who owe you money, to pay you money. Potentially, they’re going to run out of money, and if you’re number 20 on the list and waiting for your cheque to come in the mail, which still happens in America, you need to get onto them. In terms of your accounts payable, there are a lot of people negotiating rent holidays and just generally trying to reduce your outgoings. Just core business principles. So, money in and money out. Trying to grow your business, or at least sustain that level of business.
XU: This question is so important right now. What do you see as some of the vital challenges that Xero and its users will face over the next 12 months? Also, how important is it that we have the Xero ecosystem at times like this to help?
TW: There are certain verticals and subverticals that are going to do better than others in the next 6 - 24 months. I would say applications that are in the hospitality space are really going to suffer, so things that do front of house for restaurants and things like that. Even things like time attendance and scheduling applications. It’s definitely hard in that space, but we see farming, construction and e-commerce as growth verticals. In the US, they’re actually quite strong verticals for us. So any applications that serve e-commerce, like A2X or farming like ‘Figured’, and there are lots of different apps that are made for electricians, plumbers, builders, etc. We definitely see there is growth in those areas, and anything that helps you with cashflow certainly will be useful.
XU: I’ve seen an increase in people in the UK talking about finance integrations that are out there, and debt collection, or invoice tracking. There’s been a real interest in people wanting to learn more about it.
TW: Yes, I think you’ll see financial services in general as a broad category becoming far more core to cloud accounting. That’s definitely an area we’re working hard at.
XU: I’ve seen people are interested in neo-banks as well. If people are changing the way they’re banking, how can we help out?
TW: I think you’re right. They interviewed Bill Gates a week or so ago on CNN and he said something that has really stuck with me. He said COVID-19 is accelerating trends that were already happening. He talks about digitisation as one of those trends which is accelerating. The banks have been talking about disrupting themselves for quite some time, but basically it’s here now and it’s here at speed. All sorts of interesting things are going to happen with the neo-banks and players in that space.
I definitely think that all apps are going to accelerate. We were talking about a deal with one of the neobanks here in the US where they want to basically bundle Xero with every new business and customer that they get. So I think you’ll start to see more of that. We’re certainly investing a lot of time, effort and energy into those types of partnerships.
XU: Exactly. It would be great if we could finish with some words of wisdom from you. What advice/support would you give right now to Xero users?
TW: I love the Ghandi quote “Be the change you want to see in the world”. Sometimes we think we can’t change things as individuals, because we’re one person. But look at what’s happening. One of the positives of everyone not having to drive their cars is that pollution has dropped. That’s just because everybody is not driving, right? So we all can do something to make the world better. Rather than complain about it, what are you going to do about it? That quote has always stuck with me.