Even though Xero turned things around from an unprofitable half to a $54 million profit, investors still weren't happy.
👉 Background: Xero is the accounting software that was created in New Zealand in 2006. It grew from a humble NZ-based company to a global accounting platform with over 3.7 million subscribers.
👉 What happened: Last year, Xero brought in a new CEO who promised to improve returns to investors. That meant increasing the profit while also maintaining strong growth numbers.
👉 What else: Even though Xero turned things around from an unprofitable half to a $54 million profit, investors still weren't happy. That's because they weren't satisfied with Xero's growth.
💡The balancing act between growth and profitability is real. And this is Xero's Goldilocks moment.
💡In 2022, Xero's investors were concerned because it was growing fast but it wasn't profitable. While in 2023, Xero's investors are concerned because the company is profitable but it just isn't growing fast enough. So investors are waiting for its "just riiight" moment.
💡Many tech businesses aim for the Rule of 40—that means profit margin + revenue growth rate = 40% or more. And right now, Xero is sitting at around 33%.
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