Buffer's investor update on COVID-19 impact and approach
8th April, 2020 strategy
Note: this was originally posted on the Buffer blog.
Ever since the world got turned upside down by COVID-19, it’s been “business as unusual” for everyone – Buffer included.
I sent this update out to Buffer’s investors one week ago. I hesitated on whether to share it more widely, as I know a lot of companies have been impacted more severely in these times. That said, I believe it makes sense to lean into our company value of transparency, since there may be some companies this could help, and it shows Buffer customers that we will be around beyond this pandemic and are here to serve them long-term.
Buffer’s purpose is to help small businesses thrive – now more than ever. Many businesses are impacted right now, and the best things we can do for them aren’t immediately profitable for Buffer – including our COVID-19 support programs for customers with financial challenges. But I have no doubt that we’re doing the right thing by focusing on people first. If we give value right now, we’ll receive value for ourselves in in the long run.
I’m grateful to the whole Buffer team for the many ways we’ve sprung into action, reacted and moved fast with the changes needed at Buffer to help each other and our customers through COVID-19.
I hope you’re staying healthy in these uncertain times. I’m getting in touch to share an update on the impact of, and our response to, the COVID-19 pandemic and the volatile economic situation.
I’m glad to say that Buffer has been about as prepared as I could imagine being going into a situation like this. We had one of our highest months of net profit in February at $450k and we have $6.4m in the bank.
So far, we are seeing an increase in churn and contraction, and have observed two weeks of negative MRR change, which we are monitoring daily. We of course do not know the full extent of the impact this situation will have on Buffer, but so far we have confidence we are in a strong financial position to get through this relatively unscathed. Here are some more specific details across various areas:
- On March 4 we made the decision to postpone our annual retreat. This was scheduled for June, in Athens. By early March there were a handful of cases in Greece and we made an early decision to postpone the retreat, to give our team as much certainty as possible and thereby reduce anxiety.
- On March 13 we asked the team to cancel all upcoming work travel and avoid planning anything else.
- We have been working remotely for most of the Buffer journey, and so the disruption to our normal company operations is certainly limited compared to other companies.
- With that said, many people have been thrust into brand new “work from home” conditions such as having a partner also working from home, having kids at home and homeschooling, taking care of relatives, and generally feeling much more limited in their freedom to create the right balance for their day to day work. Not to mention the anxiety of the fast-changing news cycles and the way those in power are responding to the situation.
- We’ve told the team that it is very normal and expected during this time to feel distracted or stressed. We’ve lowered our productivity expectations and encouraged taking more time off.
- We’ve increased the amount of virtual get-togethers within the team to create more connection in these times of social distance. While we know that COVID-19 will impact all aspects of how we work, we also introduced a dedicated #covid19 channel on Slack to create a space to share personal impact, general news, inspiring approaches and fun reactions to the pandemic.
- We’ve shared with the team that if they become ill with COVID-19 or are caring for someone ill with COVID-19, they can take up to 12 weeks off (fully paid), knowing that their job is secure.
- February net profit: $451k, January net profit: $402k.
- Cash: $6.4m
- We have a line of credit we are able to draw a further $3m on if necessary
- As these numbers show, we are in a strong position. Even if we dropped revenue by several hundred thousand, we would still be profitable and have infinite runway.
- In a drastic worst case scenario where we drop to a $100k loss per month (dropping our income by $550k from our February numbers), we would still have 64 months of runway (over 5 years).
- We’re doing a thorough budget review, and are coming up with several different contingency plans where we can easily reduce some of our expenses, if we see MRR numbers change quickly.
- We’ve also recouped some costs by postponing the retreat and canceling ongoing work travel.
- February MRR: $1,854,998. ARR: $22,259,976.
- We are on track to end March with around $25k net decline in MRR.
- It’s likely we will see some further MRR decline in the weeks / months to come.
- Around 10% of our customers are physical businesses, and those were the first we’ve seen impacted by COVID-19. Of course, many of these businesses immediately needed to stop their operations, or adapt drastically.
- We’ve accordingly seen an increase in churn and contraction in the past two weeks, with the highest impact the week ending March 22. We observed less of a decline in the past week, which so far indicates the worst week was that first week of full lockdown across most of the US and Europe. This could, of course, look very different in a week or two.
- We saw a -$14k net MRR movement for the week ending March 22.
- We saw a -$7k net MRR movement for the week ending March 29.
- We’ve implemented a couple of COVID-19 support programs for customers who have contacted us and shared financial challenges as a result of the pandemic.
- Firstly, for customers who have had to halt their operations and do not have a need for Buffer right now, we have offered the option to pause their subscription for two months.
- Secondly, for customers who have seen a large impact on their income, and still have a need for Buffer, we are offering two months of free usage of the product.
- We believe that these two initiatives will help customers, and in the process help Buffer, by enabling us to retain more customers during the next few months.We are now in the midst of discussing more ways we can help both existing and prospective customers. We are considering loosening trial restrictions, and thinking about ways we can help beyond financial help, such as offering educational resources around remote work.
- We are constantly balancing how much we can help our customers, with the financial precautions we need to take as a company to protect our team and ensure the business can smoothly navigate these uncertain times. I believe that fundamentally, helping customers right now also helps Buffer, but it is a balancing act while we have incomplete information.
Overall, despite the immense ongoing challenges across the world in this pandemic, I am seeing a lot of creativity from small businesses in the way they are adapting to meet this new reality. I’m also seeing a lot of gratitude and generosity from communities everywhere, to help small businesses and healthcare workers. This connects deeply with our overall purpose at Buffer, which revolves around helping small businesses grow and thrive.
My personal reality these past few weeks has oscillated between the immediate reactionary needs of the business and the team, and a deeper reflection around our purpose and future opportunities. In many ways, this new reality has deepened and expanded the ideas we have around how much we can help small businesses. Many businesses are impacted at once right now, and I believe it is bringing into question an often universal assumption: that all of our business activities should be revenue generating.
A clear focus on our purpose of helping small businesses would instead mean that, at times, the best activities to fulfill that mission may not always be revenue-generating for Buffer. Right now, the best thing we can do for some small businesses isn’t immediately profitable for Buffer. In the long-run I have no doubt that if we contribute significant value we will be able to capture enough value for ourselves. As this situation evolves and improves, I will be taking these ideas to heart in thinking about how we can serve small businesses in more normal times, too.
Thanks for reading. I hope you and your loved ones are hanging in there through these difficult days and forced lifestyle changes.
Co-founder and CEO, Buffer