Smaller companies we track have fairly thin offerings because it take time to write a full accounting package and they have much smaller teams. SI - How many customers do you expect to have in five years and an estimate of revenue and profit projections for those customers? SI - How is the company performing compared to your projections when you first started and has growth and or profitability stalled over the current economic slowdown and if so have you seen any indication of recovery ? SI - You seem to have a small band of loyal and devoted users within the software industry, why do you think that is and do you think that will translate into mainstream customers? RD - Actually I think at 17,000 customers and many more users we have much more than a small band or loyal users. We have always had a culture of good cost control. RD - Our main cost is people.

I think people are seeing we are executing well, communicating openly and they are starting to understand the size of the opportunity. SI - Is Xero capable of footing it with the big boys, especially as the company gains some sort of scale in terms of customer base and revenue size? RD -The challenge with doing our type of business is that we can control costs and product but its very hard in the early days to predict what adoption will be like and therefore what the revenue will be. Xero has excluded those unimplemented customers from its customer count to more closely align the timing of revenue. As the plan progresses over the next few years we will focus more on margin. The approach to market that has worked in NZ we are now rolling out in the UK and Australia and that is looking good but there’s much more to do. As we got into we saw that the consumer Internet, which must be the worlds biggest market is hard to directly monetize - often companies go to an advertising based model.

SI - As a user of accounting products why would a consumer choose yours over your competitors? SI -Are your customers new to accounting software or do they come from competitors products? Reader Question - Hi Rod, are Asian versions(non-English) of your products in the pipeline? Reader Question - Will the American version of Xero be launched this year? Reader Question - when I looked at this I couldn't believe with all the HYPE it doesn't have inventory management - will this come? SI -You seem to have strong brand recognition in New Zealand, how is Xero going in foreign territories? I enjoyed Richard Branson's latest book, Business Stripped Bare: Adventures of A Global Entrepreneur, that explained what the Virgin Brand promise is. SI - Was the intention of yourself and the Xero board to build the company up as a brand with the express purpose of selling, along the lines of say 42 Below? SI - What's to stop any current competitor or start-up operating a similar business model to Xero? We do want to build a significant business though and be one of the key global players in this space.

In the UK, the sales efforts were re-configured to focus on Xero implementation by accountants and to encourage adoption among key individuals within practices. The re-focus on implementation is working. This was a useful lesson as we reconfigured the team to assist with implementation which has proved to be a better approach. RD - Yes. Our team is first class across the board. Our senior team are all passionate about technology and improving productivity so a lot of what I do is keep reinforcing the vision so we can align with that. SI - The sector in which you operate is very competitive and fast developing, what is control cable why is what you are doing different and if it is will it keep you ahead of the pack? Xero is really easy to use and will save you hours of time each month. Say that costs 500k a month. Be rest assured that we are very focused on small businesses and say no to a lot of things. Our initial market research showed that 60% of small businesses used Excel.