Tips on how to access new markets
Business models for geographic growth
How homegrown firms achieve global success
It’s often said that technology has levelled the playing field for small businesses. If you can reach customers anywhere there’s a Wi-Fi signal, geographic borders and physical presence become less relevant to your growth strategy and business model.
But what does it really take to open your doors to the world – or even across state borders? We ask two very different businesses about their experience and how they’ve adapted their business models. Xero– now the world’s leading global online accounting platform – and Sunshine Coast-based accounting firm CTB Advisory, share their top tips.
Trent Innes, Xero
Start with a clearly defined purpose
When Xero was launched in New Zealand in 2006, it already tapped into a universal need and had a vision to go global.
“At a high level, we’ve always focused on helping small businesses thrive, to create jobs and growth in the economy,” explains Trent Innes, Xero’s Managing Director for Australia and New Zealand.
“There are two things small business owners don’t enjoy: accounting and technology. But the number one reason small businesses fail is because they don’t understand their financial position – and technology can solve that problem.”
For Rick Hipwood, CEO at CTB Advisory, the idea for Contractor Toolbox, their ‘virtual’ advisory service, stemmed from a business challenge.
“We had five offices in south-east Queensland but we weren’t sure where we were going. So we decided to bring it all back to one office and start with a clean slate: if we could design the ideal accounting and advisory firm and the ideal client base, what would it look like?”
With their high touch, in person model, it wasn’t easy to acquire clients in Sydney, Perth or Melbourne. So CTB decided to focus on a niche market whose needs were not being met – but who had similar needs to provide scale for growth.
“Contractors are not easy by nature – they don’t like paperwork. But they really need to understand some relatively simple things: how much to pay themselves, how to finance equipment, what they need to do for compliance,” says Hipwood.
Both CTB and Xero deliberately chose a unique market segment with commonly shared problems that had previously been under serviced or ignored. They then developed a solution that made it easy for their clients – without the need for a physical presence.
“We believe accounting can be fun, and we knew if we built a beautiful, easy to use system, then more people would come on board,” says Innes.
Hipwood says they also recognised that true advisory means listening to the client, as well as challenging and supporting their ideas. “For us, it’s about helping our clients achieve the outcomes they want, it all starts with them. That can be done from anywhere.”
Tap into the partnership economy
One of the first things Xero did differently was open up its API to encourage development around the outside of its platform.
“This really changed the landscape of how people plug capabilities into an accounting system,” explains Innes. “Our goal was not to do everything ourselves, but to create an ecosystem that would connect small businesses digitally to everything they needed – cash flow, payments, POS, inventory management and more. Xero is designed for collaboration, so others can plug in their own technology to solve a customer problem.”
Macquarie’s new BPAY by DEFT app is just one example of this partnership approach.
For Hipwood, building partnerships with businesses engaging contractor workforces is the key to their distribution model.
“We needed a top down model, so we talked to organisations with large numbers of contractors, explained the importance of making sure those people are compliant with ATO requirements as well as finance, insurance and business advice to ensure their succes, and they gave us the opportunity to speak with them.”
“We’re effectively helping our partners deliver outstanding service delivery to their clients, by providing guidance to their contractors so they can remove the day to day stress out of running a small business.”
CTB has developed partnerships to deliver its holistic service offer. “We have referral partners to support our clients with insurance and finance, so we can focus on the accounting. We do some outsourcing to ensure we match the resource to the task, and get the job done better. This also allows us to scale rapidly when required.”
From a zero base less than five years ago, Contractor Toolbox is now servicing hundreds of new clients across Australia.
Tailor your offer to the market
While accounting processes (and admin headaches) are fundamentally the same in every country, Xero had to allow for very different compliance regimes within the 180 different countries it now has customers in.
Its biggest opportunity is the US – but with hundreds of banks and thousands of different state and local tax regimes, it’s not an easy task.
“A lot of our international customers use the global version, which does the accounting, and then the app ecosystem extends that capability locally,” explains Innes. “But we’ve also opened offices in Australia, the UK, US and now Singapore to make sure we’re relevant to those markets. For example, we’re building in payroll capability for the US now as part of our ticket to play.”
He admits that what works in one market may not resonate with another – one of the biggest challenges for global expansion.
CTB Advisory took the opportunity to change the accounting service dynamic with Contractor Toolbox – and in the process, created a personalised advisory service that works, no matter where their clients are.
“We know, from talking with our clients, that most accountants haven't prioritised them. So we’ve reversed that – we provide a dedicated client manager who will answer your questions within 24 hours.”
This ‘sounding board’ for financial decisions has helped some clients avoid making costly mistakes or get through financial difficulty. It has also supported others through significant growth.
“We’ve had one client who has gone from being a one-man contractor to employing 24 people and turning over $4 million. He’s been able to talk through ideas for expansion, remuneration models, cash flow.”
What works in one market may not resonate with another – one of the biggest challenges for global expansion.
Get your systems in place
As with any growth strategy, having a streamlined model and processes to deal with an increasing number of clients is essential. “If we can’t sit with someone to discuss their financials, we need a different service model,” explains Hipwood. “We have a workflow platform and document storage to track and manage it all.”
He says monthly fee structures form an important part of this model for their own cash flow. “We use fixed fees and no timesheets.”
And yes, they also use Xero.
Broaden your mind
Hipwood admits it took a very open mind to make the leap into this interstate acquisition strategy. “We’ve rolled with the punches, and we know it takes persistence. But it feels like we’re on the right path now.”
Xero now has over 862,000 users. But for Innes, the story is still just beginning.
“There are more than 60 million English-speaking small businesses around the world, and more than 200 million all together. They’re all under-served from a technology perspective, as accounting is still very manual. We want to make it as easy as possible for all of them – help them get paid faster, remove the red tape.”
More than 92% of Xero’s Australian customers are now digitally connected with their accountant, which means the platform is also shifting their role from compliance to growth advisers. And that’s an opportunity CTB has already grasped.
“I honestly think there’s never been a more exciting time to be an accountant,” says Innes.
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