Buffer: Gaining an edge in the Valley with a 100% remote workforce model
Buffer combines a unique labor model with radical transparency to maintain its competitive advantage.
Business model
Core Offering
Founded in 2010 by Joel Gascoigne and Leo Widrich, Buffer is essentially a software platform that allows start-ups, small businesses and marketing agencies to manage social media communication with customers. The application lets marketing teams schedule messages for a set date and time across various forms of social media (e.g., Twitter, Facebook, LinkedIn). This tool was developed on the basis that social media is a crucial trend to pay attention to, and there is great value in effectively managing these outlets to drive traffic and ultimately business. For instance, Buffer’s research has shown that scheduling a tweet for an optimal time during the day can increase clicks by ~200%. The Buffer platform extends beyond content management to offer analytics as well.
Pricing
Buffer’s customer base consists of 2 million users, of which 98% are individuals using a freemium model. The Company makes its money by offering Business plans utilized in more of a corporate setting. The different Business plan annual fee price points are $10, $50, $100 and $200, and come with varying access to certain features. The Company generally sees ~2% conversion from free to paid plans. Within paid plans there is ~5% customer churn annually, a metric very much in line with the industry.
Operating model
Buffer is truly an outlier in the industry in terms of how it runs its operations. The Company has built itself around a unique labor model which sees 100% of its employees work from home. In addition to this innovative human capital strategy, Buffer is creating a reputation for itself by embodying ‘radical transparency’—a culture that believes in sharing what most would consider to be sensitive data both internally with employees and externally with the general public. These operational tactics have ultimately given Buffer a major competitive advantage and catapulted the Company into the limelight.
100% Remote Workforce
It started as a logical way to do work given the team was made up of only five people, but Buffer’s remote employment model is here to stay and has become a defining characteristic of the rapidly growing company. The Company’s ~70 employees are spread out across the globe with the highest concentration in any one city being only 5 (San Francisco).
“Our labor model is what gives us an advantage. We are not limited by geography for talent and can find the best people in the world to fill a single role. Finding talent is actually a key challenge companies in the Bay face.” – CTO, Buffer
Buffer used to have central office space in San Francisco but shut its doors in April of this year. Instead, employees utilize a vast array of collaboration apps and tools to engage with each other in a way that makes distance an equally or more effective way to work. Employees sitting in the same city may opt to meet in a co-working space once every couple weeks. In addition, there are 2-3 company-wide retreats each year which enable folks to get to know each other on a personal level.
This working style is of course not suited for everyone. The Company will hire employees with an initial 45 day contract during which both the employee and Buffer will evaluate the relationship. On average, these short-term contracts have a ~75% conversion rate to full-time employment.
‘Radical’ Transparency
Buffer believes transparency can open up doors to new ideas, partnerships and better relationships within the firm. Though the Company is private, it offers full financial transparency to the general public via a dashboard that provides key financial metrics (e.g., revenue, profit). Also available to the public is employee salary/equity data, employee e-mails, and fundraising/valuation data among other sensitive datasets. While some critics feel much of this is unnecessary, Buffer believes it’s a key driver of trust and motivation within the company. The ‘radical transparency’ in fact is a key source of Buffer’s collaborative culture. This culture of transparency also translates to how the Company does business. For instance, customers can see the exact breakdown for how their money is spent and what types of margins Buffer takes. Secondary benefits have related to general boost of brand equity and an increase in job applications.
Concluding Thoughts
In a world where new start-ups pop up every other day proclaiming a revolutionary solution for businesses, Buffer has been able to carve out a niche by focusing on its transformational operations. By offering a unique employment model, the Company retains top notch talent from across the globe which ultimately means a better solution for customers. Its transparency tactics have also built a culture of openness and trust not only across employees but also across its customer base. By embodying such a culture, Buffer can better serve its customers and ultimately focus on what’s best for their customer base.
Sources:
- Interview with Buffer CTO (Sunil Sadasivan) on 12/6/15
- http://www.inc.com/jeff-haden/4-habits-of-highly-successful-remote-teams.html
- https://open.buffer.com/remote-working-means-tools-use/
- http://blog.cloudpeeps.com/top-10-companies-winning-at-remote-work-culture/
- http://www.thenational.ae/business/the-life/buffer-app-successfully-streamlines-social-media-performance
- http://blog.sqwiggle.com/6-remote-teams-and-how-theyre-changing-the-face-of/
- https://buffer.com/about
- https://www.youtube.com/watch?v=m6yCKoSetW8
- https://www.youtube.com/watch?v=Ox1-pRFM4fw
- https://www.youtube.com/watch?v=b7d9vYswRig
- https://www.youtube.com/watch?v=WabUJunxQH4
Really interesting talent / transparency strategy – I wonder whether this business is the highest and greatest usage of such an internally / externally aligned organization?
Maybe I’m missing something about the business model but it feels like the automation of coordinated social networking communications could eventually either be a.) automated through a simple operating tool or b.) work better as one piece of functionality in a broader offering from a company servicing social media needs (e.g., SEM, consulants) that they could “toss in for free”.
Specifically on the transparency point: while this could be beneficial early on to develop trust, does it potentially hurt the ability to convert freem-ium users in the future (e.g., need to disclose targeted offers, volume discounts)? Maybe everyone having access to that will incent more loyal usage but could be complicated to manage as complexity / heterogeneity of customer base increases.
Which all leads me to the fundamental question: if you took this model – with 100% outsourced but high talent work force, along with “radical transparency” – what other issues could you go solve?
Perhaps Buffer’s operating model only works because it has a focus on smaller clients who are start ups and small businesses. I have a feeling Buffer’s operating model might not be suitable for interactions with larger companies, given the potential for Buffer’s message to be clouded when the scale of a customer requires multiple representatives from Buffer.
When people are not located on the same floor of a building, collaboration often decreases. The long-trial period hiring process and company retreats, of course, help to make sure the team will be compatible, but it likely still takes a lot of purposeful meetings to make sure workers are leveraging each other’s experience effectively. People are more effective when interacting in person. This leads me to two conclusions about the remote workforce model: (i) it only makes sense for a limited type of business models, and (ii) the model is likely not scalable to be effective when interacting with larger clients.