The Big Interview: Gary Turner, co-founder of accounting software firm Xero

Paranoia, at least a healthy dose of it, is vital if you want to avoid being steamrollered by the next big thing in tech, says Gary Turner. 'How disappointed must Friends Reunited be that they didn't see the bigger picture? They were way before Facebook and they effectively were Facebook. Today's successes are tomorrow's chip paper!' says the UK managing director and co-founder of accounting software firm Xero. 'We've come in and we've disrupted quite a stable, staid sector that lacked innovation. We would hate for a new Xero to show up and do that to us, so there's been a healthy sprinkling of looking over our shoulder.'

Xero co-founder Gary Turner was convinced at an early stage that cloud-based technology would grow to become a vital part of our lives. Picture: Emilie Sandy

Glasgow-born Turner joined Xero, which supports more than 1.5 million small businesses worldwide with its cloud-based accounting platform, when its UK arm was a three-person start-up with no brand presence. It now has annual revenues of £40 million and serves more than 312,000 subscribers, up 100,000 year-on-year.

In 2009, Turner left his role as product group director at Microsoft to join the Wellington-headquartered firm, established by New Zealand software entrepreneur Rod Drury to help small businesses manage their finances. Although it may have seemed a risky choice – he admits that others around him thought it was “quite insane” – Turner was so convinced that Xero would be a success that nothing could have talked him out of it.

He says: “There were two people in the business in the UK, no revenues and no customers. Although that contextually seemed like a really high risk, it was the least risky decision for me. I had so much confidence, having been in technology for so long, that it was all going to change. I saw this as an opportunity to get into that change before everyone else saw it was coming.”

Turner had spent two decades in the software industry, spanning the transformation from pre- to post-internet capabilities. After four years as MD of software firm Pegasus, he moved to Microsoft in 2007, but found himself still waiting for a new kind of opportunity. He had hoped for a “lightning bolt” moment from a development at Microsoft but, although there were potential contenders, after the financial crisis hit “all the cool stuff” was put on the back-burner and it left him frustrated.

Cloud-based technology was at a very early stage at that point, but Turner was confident that it would grow to become a vital part of our lives. “It seemed so instinctively attractive to me. Because I’d never done a start-up and I knew that the world of software and technology was going to change dramatically, and cloud software was going to become the prevalent technology we would use.”

Less than ten years down the line, this has proven to be the case. In both the professional and private spheres we are now in daily contact with technology reliant on the cloud, either by remote working through a cloud-based network, or by snapping a photo on our mobile phone and having it sync to cloud-based storage.

Founded in 2006, Xero’s vision was to send its product global as soon as possible; Turner was to drive its growth in the UK. Although he began his career in software coding, subsequent roles had encompassed sales, marketing, product design, business development and management by the time Drury tapped him on the shoulder. This combination of experiences – he calls himself a “Jack of all trades” – prepared him well for those initial years at Xero, jumping from lily pad to lily pad. Tuner was fielding PR, sales management, strategic development, product development and design, among other things. This generalist attitude still persists and steers him today, as he views the business as a whole, “constantly scanning the horizon”.

What has changed in recent years, is that Turner has been able to pinpoint where his drive for wanting to help small businesses stems from. The odds are seemingly stacked against SMEs, which have a four in ten survival rate in the UK. Cash flow remains a key issue, with Xero’s own research showing that the average British small business is owed £24,841 in late payments on any given day, equating to roughly 11 months’ average staff wage, or 37 months of mortgage payments.

For Turner, who was raised in a family business household, the passion to have Xero succeed is also something of a personal vendetta. His father ran a car repair business and his mother handled the finances.“I grew up in Glasgow listening to all the daily troubles of running a small business,” he says. “Managing cash flow, people issues, getting paid on time – I remember as a teenager being only vaguely interested in it, but it’s obviously imprinted on my brain.” His father’s business ultimately went under, at a “huge cost” for his family, including the family losing their home and his parents getting divorced.

“It has given me a sense of how real it is for small businesses. Small businesses are families. And the impact, as I learned growing up, isn’t just some statistic or number on government websites. It can be the making or breaking of a family. When people talk about a small business being successful, I have a real palpable connection to what that means. That means, do you get a holiday this year, or not? Do you lose your house because you remortgaged it to fund your new endeavour? As well as my sense that Xero could be successful I thought, ‘we have to be successful’.”

This has been a momentous year for the group, which posted its first positive annual ebitda of NZ$26 million (£14m) and employes 2,300 staff. In the UK, it has partnered with Small Business Saturday to provide free mentoring and, last month, Turner joined small business support body Enterprise Nation to advise on the network’s growth strategy.

Speaking of his own small business journey with Xero, Turner describes a start-up business as “a hungry baby that’s never satisfied”. But the toughest times were the scale-up years, in which staff numbers hit 60. He says: “You stop having the same degree of intimacy with everybody, you can’t know everything that’s going on in the business any more because there’s too much to know. All the things that used to work, don’t work any more.”

Xero’s global set up, with teams based throughout the time zones, has also presented challenges. Yet Turner sees this as empowering, with teams able to pass problems they’ve run out of time to solve “onto the night shift”, who are plugging in on the other side of the world as they power down. “Traditionally, international businesses are just a random collection of companies scattered around that have the same owner. Xero grew up with the licence to say ‘we should be global’. We made decisions about how we should build the business with a global context in mind. There’s been a co-dependency.”

Xero has also built interdependent troubleshooting into its product. Using an artificial intelligence-driven tool, the platform has autocorrected more than 100 million mistakes during the past three years, when users have mis-keyed invoice data. It was the first tech provider to incorporate bank feeds into its software, with the aim of completely digitalising SME finances, and it recently launched the Small Business Insights Index dashboard, which provides a real-time picture of the nation’s SME health. Xero’s goal is to become a well-rounded small business support platform, which includes fully harnessing AI to enable features which flag up credit risks in the supply chain.

Turner, who is targeting one million UK users in the coming years, says: “Small business represent two-thirds of employment in the private sector. If Xero can effect even just a 5 per cent improvement in SME wellbeing, that has a huge knock-on implication. If we can help small businesses, that helps everybody.”