Xero is an online cloud-based accounting software that functions as an as-a-Service (aaS) model. This means that the Xero business model revolves around helping small and medium-sized enterprises (SMEs) manage their finances through a wide range of services aimed at analyzing, integrating, and supporting their various financial processes.
In this guide, we’ll take a look at the history, strengths, weaknesses, opportunities, and threats to the Xero business model.
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The company, known as Xero, was founded in 2006 by New Zealand tech entrepreneur Rod Drury and his accountant Hamish Edwards under the name Accounting 2.0. Drury felt that the traditional accounting software and data systems were outdated and the market was long overdue for significant disruption.
Though cloud computing technology and aaS services were still in their infancy and many businesses skeptical about the idea of storing their vital financial information on the public internet, the duo strongly believed that this would change in the near future.
Leveraging on this, they attempted to build a unique accounting system that did not draw inspiration from existing competitors. While there was initial resistance to this idea, Xero quickly grew to own a significant share of the local market. However, the company began to achieve more global recognition after several key moves, such as public IPOs, which listed the company on the New Zealand Exchange in 2007 and the Australian Securities Exchange in 2012.
Coupled with several rounds of investment from key figures in the world of venture capital, the brand quickly grew, achieving one million users in 2017 and about 2.74 million users in 2021. The company is currently valued at about $6.78 billion and has over 4,700 employees.
Xero is a publicly traded company listed as XRO on the Australians Securities Exchange. Therefore, the company is owned by the public shareholders who own its stock.
Xero exists to make life better for people in small businesses, their advisors, and communities around the world by rewriting the world of small business by making it seamless, simpler, and smarter.
Let’s take a look at how Xero generates revenue.
The Xero business model and revenue stream are quite simple. Users are charged a subscription fee in exchange for access to their cloud-computing software and services. These subscriptions involve a three-tier pricing plan, depending on the size of your business and the extent of the services you require. The basic package is priced at $22, while the Growing and Established packages cost $34 and $65 respectively.
The brand also offers a range of other services besides its primary accounting software. This includes:
The Xero Business Model can be explained in the following business model canvas:
Xero customer segments consist of:
Xero value propositions consist of:
Xero channels consist of:
Xero customer relationships consist of:
Xero revenue streams consist of:
Xero key resources consist of:
Xero key activities consist of:
Xero key partners consist of:
Xero cost structure consists of:
Below, there is a detailed swot analysis of Xero. Let’s take a look at the strengths, weaknesses, opportunities, and threats to the platform.
Xero might not yet be considered a giant within the world of financial services, but it has the potential to cause significant disruption in the industry. Its innovative platform, strong free cash flows, and host of successful acquisitions suggest that the brand is certainly one to look out for in the coming years.
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