If you’d read my post last week, you would have seen I was in Brisbane, Australia for Xerocon South. And given I learned so much, I just had to do a follow up post this week.
First and foremost, Xero see themselves as an enabler of small business – globally. Which means they are pretty invested in seeing them succeed. Yet often you’ll hear a relatively frightening statistic thrown about when it comes to the expected lifespan of small business, the fact that around 50% fail in the first 5 years. This certainly doesn’t bode well for SaaS businesses like Xero that want to limit churn as much as possible.
Now, it’s relatively likely a number of these businesses deserved to fail. Perhaps their business idea just didn’t quite cut the mustard, or perhaps they were overcharging customers or providing such bad service that going out of business was a natural, Darwinian outcome.
But what if they did neither of those things? What if they had a great idea and great customer service, but just couldn’t manage their books properly, or couldn’t access finance, or couldn’t find enough hours in the day to get their admin done?
It’s not that farfetched. Most of us know of one or two stories of businesses that failed due to innocent mismanagement. The thing is, wouldn’t the economy be better overall if those businesses succeeded?
Given small business are the engine of most economies worldwide, the answer to this one is most certainly yes.
So the next question is, what if there was a way to improve this statistic simply by a small business engaging the services of a fintech provider? And are there any early statistics that back this hypothesis?
The notion that fintech is to small business what exercise is to a healthy body – good for you – could gain currency in small business circles thanks to some data that came out of Xerocon South last week. After crunching the numbers Xero came up with the following data points:
- 88% of businesses on Xero make it to 5 years, smashing the average statistic
Was there anything making these customers more successful than simply their connection to cloud accounting? Xero had some stats on this as well.
- Businesses that connect with an advisor through Xero’s platform grew their net-profit by 23% more than those that didn’t (so cloud platforms connecting finance experts to small business helps advisors see the data in real time and act)
- 99% of small business that make to 5 years have a live bank feed coming into their software (so visibility of their businesses bank balance in real time helps business owners make informed decisions)
- 40% have at least one app connection from Xero’s ecosystem (so best of breed financial add-ons, customised to a business owners needs help them manage their business better)
The reality is, as CEO Rod Drury posited, is that thanks to the cloud, small businesses now have better access to business technology applications than many medium to big businesses. Considering that less than 1 percent of the world’s small business owners currently have access to cloud accounting, a massive opportunity therefore awaits the early cloud providers. Xero is only one of them.
The good news for fintech is that if the numbers continue to ring true, choosing cloud accounting platforms that connect to fintech apps could soon become an absolute no-brainer for a business owner, thus accelerating the growth of the fintech ecosystem. Going fintech and cloud could be the financial business equivalent of an apple a day. Here’s hoping!