Top 10 Learnings Growing to (Almost) $10 Million ARR: Leo's presentat…

No notes for slide

Hi everyone, it’s so great to be here, for the last few years that Jason Lemkin has put on SaaStr, I was always excited to be able to make it and attend it one day, that I could even talk here today is a real honor. I’ve learned so much from the sessions I’ve been to so far and I hope I can pass along just a few learnings to you too that helped us at Buffer.

For context, who has heard about Buffer before? Oh awesome, yeah, we’re a social media management tool that helps you connect and organize all your social media accounts, schedule posts, analyze them and collaborate with the team.

As a company we got started about 5 years ago, and we now have a team of 75 people spread all over the world completely remote over 5 continents and over 40 cities. We have over 50,000 paying customers and we’re doing around $8.8m in ARR, so not quite at $10m yet. We’re estimating to get there in March though!

I’m really excited to share some lessons today and they range across product, marketing, general tips to build a better business - so I hope there’s some really actionable insights for everyone in there that you can walk away with after today’s talk and experiment with!

The first lesson I want to share is about how important it’s been for us at Buffer, when my co-founder Joel introduced me to a weekly peer-to-peer mastermind format. The key thing I’ve learned here is that working on the relationship between Joel and me on top of the work we’re doing on the startup, is extremely rewarding and useful. When I talk to other founders about this, they tell me something that I’ve told myself before which is “we’re already spending so much time together as co-founders, we know everything!”. And I found this a quite easy trap to fall into. Since we’ve done this every week, I feel like we’ve solved so many more problems that we couldn’t have otherwise.

This is the exact format of how it works. We take about 1-2 hours and do it when we’re less busy. On a friday afternoon or Sunday evening can be great times. We talk for 10 minutes each on achievements first. As entrepreneurs we often don’t celebrate our achievements enough and that can have a huge negative downside in the long run of making us feel burned out. Taking just a bit of time to think what is going great, even though there’s so much more to do can be so valuable. We then take 40 minutes for each others challenges, where we really try to go as deep as possible. One tip here, avoid trying to solve each others problems, instead simply listening here has been one of the most powerful things for me to learn on this. The feedback section at the end is also extremely powerful to make sure things that bother you don’t build up.

This second lesson was really powerful for us too. We live in a time where data is all around us and there’s a lot of great advice out there to show us to how to make better use of data. I’ve however found that, especially early on with your startup I think this can be a huge waste of time.

I love this quote from one of our mentors Hiten Shah. And he’s a guy that sells analytics and data software. So if even he advocates that you don’t do that, I find that double encouraging. If you can replace some of your current focus on quantitative data and shift to qualitative data (Say a number of face to face discussions with your customers), I’d highly recommend it.

Learning to talk to customers and learning to do it well is something I’ve found is extremely difficult to do in practice. Despite the fact that so much has been written and said about customer development, I’ve learned first hand, why it’s still such a difficult thing to do well. it’s taken us a long time at Buffer to get to a good process and we found that It’s really tough to be disciplined with this stuff. Here’s a simple way to immediately learn massive amounts from your customers with just 5 simple questions.

They come from a book called “Lean Customer Development” by Cindy Alvarez and I can highly recommend getting it. There’s so much useful advice in the book, that goes beyond the 5 questions, which are also from her.

These are the 5 questions we use at Buffer on a daily basis to make sure we’re learning from customers. The real key here is that you won’t see any leading questions here. There’s now “Would you like it if?” or “Would you use this?” type of questions. That’s really important. The magic wand question is one of my favorite - everyone likes to be a magician sometimes. It can feel a bit out of place to ask that question sometimes, but I found it really gets your customers creativity really going.

At Buffer we’ve had some a big rollercoaster ride when it comes to data. We went from building in house tools, to using an event tracking software, to building in house tools, to using a third party analytics tool again today. And out of all that back and forth, the one thing we learned is to always at least store your data, even if you send it elsewhere. That can feel like a waste of effort, but it’s really not. We found that too often when we use analytics software, and we give them our data, we don’t think we’ll need it ourselves. And the truth is that no matter how good the software, it’ll never be a custom software that’s just for your product. and that means that there’ll be ways that you’ll want to look at your data that they can’t give you. And in our case, that stop you from making some very important decisions. So if you can, I’d always recommend saving your own data, even if it’s more work for engineers, this can really come back to bite you.

Making intelligent use of data has been one of the most difficult things for us at Buffer. We’ve switched tools often and our most recent transition to a tool called Looker currently feels like the most sustainable and long-term strategy we have for now. And I hope some of the lessons on that can be useful for you too.

This is another quite counter-intuitive point I’ve found from talking to young founders and thinking of our own learnings as well here. We sometimes feel that we want to use the “we’re just doing everything and we’ll see what sticks” strategy. Since you’re so small early on, I’ve found that that can be a huge distraction and at Buffer, we employed a single marketing strategy for the first year or so - which in our case was content marketing - and it’s been one of our best decisions looking back in order not to spread ourselves too thin.

If you’re looking to figure out that one channel that works for you, I’d recommend the “bullseye exercise”. It’s developed by Gabriel Weinberg, the founder of DuckDuckGo and his book Traction is an outstanding one. He creates three steps for you to go through to find the 1 marketing channel that works. First you write down every marketing channel that’s possible. Then you narrow it down to 3-4 channels where you run cheap and quick tests for now longer than a few weeks. And then you pick 1 single strategy that you double down on that you’ve found to work.
What you’re really looking for is early repeatability; you want to be able to repeat a process as many times as possible and see a reward from it, that’s the best way to build momentum early and quickly. This is really how you can lay sliver over sliver of small successes on top of each other, which will eventually create what we call the marketing fly wheel - which means that the sum of your individual efforts will be greater than each single one combined.

This has been a particularly important lesson for myself, because the way I operate is quite opposite from this. I hear some advice from someone and I’m hooked. I want to go ahead and do that thing immediately. One lesson I’ve learned is that this is really counter-productive to finding your own way and building an authentic business. Take any big decision, like if you should fundraise now and how much; if you should build that new product; if you should hire that person for that role. If you speak with someone that has one opinion. Try and immediately get someone else’s opinion where you know she might think about this quite differently.

This is one of the most obvious, yet most neglected things I see in saas startups - and also at Buffer, we feel like we can experiment with pricing a lot more still than we have been doing in the past. And that’s experimenting with your pricing. We’re often so zoomed into our day to day work that we can easily forgot how much value we’re adding to the products we’re building with the new features we’re rolling out. On top of that, we found that pricing changes often start with a huge barrier in our heads. We think it’ll cause backlash, or that all of a sudden no one will pay us anymore. We just have this mental barrier often when it comes to pricing. Yet, in our experiment we haven’t quite found this to be the case.

Here’s some real data on the pricing changes we’ve made at Buffer. One in particular was when we changed from $5 to $10 per month on our cheapest plan, we had a 0 change in conversion rate. We literally doubled our revenue from one day to the next.

As a note of caution, we usually like to grandfather all existing customers, so that’s important to keep in mind here.

There’s a very strange phenomenon going on in the startup world and I discussed this with Hiten Shah once, I think he even had a special name for it. It’s like a law that goes “Startups use the lean startup methodology once, then never again”. I’m not quite sure why that is, maybe because we think once we follow it once, we then have all the knowledge about what to build in our heads. At Buffer we learned the hard way that we don’t know it. After Joel successfully used the lean startup methodology to launch Buffer, we then went on to build a number of features without talking with our customers about it or validating it in any meaningful way. That created a lot of waste.

And here’s how we got our lean startup mojo back. When we built a new product at Buffer, geared towards bigger businesses, which we called Buffer for Business, we were super disciplined about it again. It’s still a bit embarrassing to think back to how we did it - this was our first pricing page of that product - it was literally a wufoo page where people selected a plan, gave us their email and we would then by hand start a trial and get them setup. We went back to interviewing customers, building MVPs and so on. And Buffer for Business is now doing 45% of Buffer’s total revenue.

Since then, we really institutionalized the lean startup methodology at Buffer - we have 4 people full-time doing customer development. We create a process for anything we’re building that would include the following. A hypothesis for the feature that could be invalidated. A customer development phase before building anything. A clickable prototype to get feedback even after we feel something is validated. And a roll-out of a working version that embarrasses us slightly. I think this is a really useful to checklist to have in place - if you can check all these things off when building your next feature or product, I think you’ll be in a much better place.

At Buffer we had 4 serious offers over the last 5 years and every one of them was not easy to work through. The one lesson I want to share around when you consider an offer is to make a list of the experiences you’re possibly leaving on the table if you’re selling your company. We often think about how much money we could make now with selling, versus how much money we might make in the future. But I think that’s sometimes not the most useful - thinking about personal growth in both scenarios can be oftentimes a better indicator.

These are some of the things we’d miss out on learning, things like how to let someone go, how to acquire another company. At Buffer, we often talk about wanting to be a person of value, where we can offer advice to others and be useful, that’s often only possible if you’ve had a lot of these experiences. So this exercise can help a lot with that.

This quote from one our investors also really puts this into perspective I think and if you take that angle, you can sometimes come up with some really interesting insights about whether it’s the right time to sell or not.

Top 10 Learnings Growing to (Almost) $10 Million ARR: Leo's presentation at SaaStr Annual 2016

Buffer

Top 10 Learnings Growing to (Almost) $10 Million ARR: Leo's presentation at SaaStr Annual 2016