How Xero Added 120,000 Customers in Three Years

On 1 October, 2009 cloud accounting program Xero was celebrating 12,000 customers. “Just 12 months ago we had 2,200 customers,” CEO Rod Drury wrote that day on the company blog. In three years it shot up to 135,000 customers, 65,000 in New Zealand alone.

How?

The secret behind this stratospheric rise was a bold go-to-market strategy that aimed to turn accountants and bookkeepers into an endorsement channel for the software. The plan was a huge success – as much as 60 percent of Xero licences are sold through accountants and bookkeepers.

BoxFreeIT interviewed Leanne Graham, the sales and marketing guru Xero hired to create this strategy. This is the first post in a series profiling Graham’s story, how she created and carried out Xero’s high-growth strategy and her insights on the development of the cloud software industry.

Read Add-on Market "a Massive Opportunity", says Ex-Xero Exec for Graham's plans to invest in cloud software.

The Xero Mission

Graham has had a long involvement with accounting software, with nearly three decades in the IT industry. She bought the Exonet direct-sales division in New Zealand from Solution 6 when it was selling off its businesses. By the time she sold it off four years ago, Graham and business partner Mark Loveys had turned it into a $10 million business with 50 staff and MYOB's biggest EXO partner.

Soon after she took a call from Xero’s Drury. “He said, ‘We’ve built Xero, listed it on the NZX and we’ve got some customers, but we’re not yet making a profit – nowhere near it. We need to majorly accelerate our customer growth’,” Graham says.

Drury asked for help to design a go-to-market strategy to create that growth.

Graham initially wasn’t interested in becoming an employee. She wanted to build more companies of her own (she had created and sold two other tech companies). But she loved the team and the “ballsiness” of Drury’s vision, so she agreed to come on as general manager of sales for New Zealand.

In April 2009 the company had a handful of staff, mostly developers, and 3,000 customers when Graham joined. By its 30 September market update Xero announced 12,000 customers. Graham finessed the strategy.

“We needed to find a scalable way to market. I remember some of the discussions that accountants and bookkeepers were the way we needed to go to market, and Rod rightly said to me, ‘But nobody before has been able to make accountants great resellers of software. They don’t know how to sell.’”

Graham agreed. Instead she created a strategy that aimed to turn accountants and bookkeepers into Xero endorsers rather than resellers by showing them how cloud accounting could benefit them and their clients.

Graham called the strategy “Recruit, Educate and Grow”, a one-to-many approach based on education and events.

It relied on a non-traditional method of account management. The initial stage was to recruit accountants and bookkeepers to events every quarter where they could be engaged and educated.

Xero hired telemarketers to call each of the 2,000 firms in New Zealand with a very clear script that introduced the program and the company. “Back then it was to explain security, explain what cloud means. That was enough to get an accountant to agree to come to a breakfast or a small introductory event,” Graham says.

Physical and online events were offered but the in-person events were far more successful, she adds.

At the breakfast events an account manager would present Xero but instead of talking about software they spoke about how it could transform the way an accountant could do business.

The emphasis was on selling more packaged services and adding more value once a client was on Xero.

Once the accounting firms and bookkeepers had attended an event, Xero’s strategy lead them through a lifeline of education, with account managers helping the new partners increase their numbers of Xero clients.

“Within the first year we had engaged nearly 100 percent of the 2,000 accounting firms in New Zealand,” Graham says. Xero’s education program pushed out more knowledge about running a cloud-based practice (themes such as fixed-price billing, advisory services) which partners took out to their clients.

“I was key to the design of ‘own the whole practice’; the decision to buy a job-costing and practice management product (WorkflowMax) and the single ledger strategy,” Graham says.

After the early success in New Zealand Graham travelled to Australia with the goal of replicating the strategy. She took part in several of the first roadshows until national sales manager Wayne Schmidt joined from MYOB. Australian MD Chris Ridd (ex-Microsoft) joined soon after.

“We went over the strategy and what they needed to do. I think the hardest thing, as each (country) branch opened, is that they always have a tendency to do a more traditional way of account management,” Graham says. “But when they replicated the model in Australia, and I did the UK and the US, we started to see that volume traction as well.”

Graham walked out of Xero for the last time the day before Christmas. Xero had hit 135,000 customers, an elevenfold increase in three years.

People ask Graham why she would leave when Xero was enjoying such success?

Two reasons. Graham desired to remain an entrepreneur, and because she had spotted an opportunity too good to miss.

Next week: “I’m determined to replicate Xero”: Graham

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