My key KPI: Monthly recurring revenue

My key KPI
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‘My key KPI’ is a weekly content series where we ask CFOs and FDs what metrics and measures they use to drive their businesses forward.

The aim is to understand how different finance professionals across a broad array of industries and sectors use data to inform their decision making.

In this week's edition, Caryn Hubbard of social media startup Buffer talks AccountingWEB through her metric of choice. 

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My key KPI: Monthly recurring revenue (MRR)

“What slows me down the most is that communication component,” Caryn Hubbard told AccountingWEB. “Ensuring that information lands well and is received well.”

Hubbard is the finance director for a social media startup called Buffer. The company has been phenomenally successful, but not without its bumps.

Two years ago, it came as a shock when Buffer announced layoffs. The company had hit $10m in annual recurring revenue, three million customers, 50,000 paying subscribers and 90 employees.

Despite these ostensibly healthy figures, Joel Gascoigne, Buffer’s CEO, announced the company was laying off ten staff members. Gascoigne, to his credit, laid out this decision in an excruciatingly detailed blog post, detailing the exact amounts that would be saved by making the hard choice.

The layoffs weren’t the only changes. Buffer rolled back some its more generous perks - like an annual $1,000 allowance paid towards people’s holiday trips. Gascoigne presented the problem bluntly: “We moved into a house we couldn’t afford”.

Gascoigne added that: “We found ourselves with financial struggles after growing expenses without results following quickly enough. The rate at which our bank balance was decreasing made us realize that we didn’t have a proper grasp of our financials.”

Hubbard’s job, then, is ensuring this “proper grasp”. But Buffer is a tight-knit workplace and emotions can run high. That’s why, as Hubbard noted, the time-consuming bit is often the communication, not the formulation of KPIs.

But there’s still a job to do. And the metric Hubbard and Buffer’s leadership relies on is monthly recurring revenue (MRR). “It’s a fascinating metric because it’s not exactly revenue – but it defines the growth that happens in Buffer.”

Buffer is a subscription business, and MRR is probably the most important metric for any business of that nature. Acquiring a new customer unlocks recurring revenue which means you don’t have to worry about one-off sales every month.

“It’s dynamic as well,” said Hubbard. “It allows us to bet on these recurring customers.” And it opens the door to other metrics like churn and retention. “The aim is to get our basics right, and manage our cash flow on a more monthly, granular level.”

About Francois Badenhorst

Francois

I'm AccountingWEB's business editor. Feel free to get in touch with comments, tips, scoops or irreverent banter. 

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