Accounting software firm Xero is a prime example of how a little strategic pivot can go a hell of a long way when the market’s mood turns from greed to fear.
A better mark of Singh Cassidy’s new philosophy is the change in underlying earnings and free cash flow in the 2023 financial year. “It’s amazing to still have low cloud penetration and pure total addressable market available to us. But also, on the other hand, to feel like there are dials in the business that we can learn to use across our products, across our pricing, across our mix.”The early indications are that Xero may have struck gold with Singh Cassidy, whose explanation on Thursday of how she saw strategy and capital allocation spoke to her experience in roles across the tech lifecycle.
But from year to year, Xero also needs to be measured about the way it invests in longer-term bets. Expanding into a new market, for example, will take time, which is fine. But Xero also has to be able to know when to cut its losses, as it did with the aforementioned Waddle; Singh Cassidy says Xero likes being able to offer customers SME lending products, but it doesn’t need to do this itself when it can partner with experts in this field, and so the hard decision was taken.
Chief financial officer Kirsty Godfrey-Billy – yes, this is the only all-female CEO/CFO team in the ASX 200 – did warn that Xero was watching churn closely as financial pressures on SMEs increased. Singh Cassidy says her experience as a small business person says SMEs usually need to rely on their accounting software systems even more as cash gets tighter.“There’s never time we’re not stressing about our money. In good times we’re stressing. In bad times, we’re stressing even more.