Focus on Profit

I had the pleasure of attending Joel Gascoigne’s presentation on Buffer at a recent San Francisco Financial Startup Meetup. Joel cited some interesting numbers:

• 400,000+ registered users
• 1.7% conversion rate
• $10/month membership

I ran the math, and here’s what I found. As a pure web business, meaning virtually all expenses are wages, it equates to a break even with 7 full-time employees. This was confirmed a week later by an article in Techmeme. It’s always refreshing to see a startup that actually focuses on cash flow.

Joel did an excellent job of telling the story of Buffer’s start, a not-unusual account of starting a business on the side and growing it through paying customers.

From a mere two pages (Page 1: "This is our service"; Page 2: "Sorry, you caught us before we are ready, please enter your email for updates"), he managed to confirm that his business idea was sound. Very early on, Paypal was integrated…well, sort of (Joel would quickly log into the database and flip "activated" on a user entry each time he received an e-mail from Paypal that a user had paid). Eventually, by guest posting on various blogs, actively managing his Twitter feed and monitoring statistics using Mixpanel, Joel got to the point where he could stop freelancing and dedicate himself to Buffer full-time.

And what of seed money? As we’ve learned, if you are willing to work for free for a little while, you don’t need much capital to start a web service - $37 is enough.

Gascoigne’s focus on revenues and cash flow from Day 1 really resonated with me. Last week while attending a movie preview about design thinking, I picked up this quote worth throwing around at your startup's next meeting:

"It ain't called 'show art', kid. It’s show business."