When less people are buying globally

Today, our leadership team and I laid off 13 employees. Some were parents supporting families and children. They were in multiple countries. We took many steps before getting here.

We paused 401k matching, reduced leadership salaries, reduced software spends, pulled from some event sponsorships, reduced contractor hours, stopped donating 1% of revenue to Stripe Climate, and moved our quarterly bonuses to be annual. But it still wasn’t enough. What happened?

Data

We had a great previous financial year that ended in January. In February, we net added $200K of ARR, March, $300K, and in April, about $250K. We had forecasted $1.5M based upon last year’s average of $500K/month. We’ve been following a quarterly cadence that matches Salesforce’s, so the first month of each quarter is always low, and it grows.?

So we wrote off February due to pushing for closes in January and due to lackluster sales execution. In March, a number of deals pushed to April, potentially also from sales execution. But as April has just finished, here’s what we’ve now gathered has happened over the past three months:

• Smaller deals of $10k-$30k across some of our segments, where we were closing 5-10 per month, are now just 1-2. The deals aren’t there, the market just doesn’t have them. Smaller companies just aren’t buying. The same sentiment is echoed from multiple other company founders I speak with.
• Bigger deals in the $150k-$250k range have had their budgets tightened significantly. Verbal commits on $250k+ are now only able to start at $50k, due to their internal budgeting changes.?
• We went from closing 55% of our pipeline to closing 35%, and the number of deals in the pipeline decreased.

We sell across a spread of nonprofits, higher education, and for-profit organizations, and across each segment, there is now evidence matching the global economy. It just didn’t hit us till February, but we couldn’t see it, and come March, we started to see hints. Now it’s obvious.

Externally

• TechCrunch reported that 184,000 people have been laid off in the tech sector thus far in 2023.
• Dropbox laid off 500 and Amazon/AWS laid off 9,000, both just last week.
• Eight other Salesforce ISVs out of nine our size that we know are flat on the year so far.
• We thought we were immune from this, but we’re not.

Cash

We still have $4M in the bank, our burn is low, we’re not going anywhere, but rather staying within our covenant limits from our debt facility. This keeps us operating without interruption and mitigates financial risk. With these layoffs and the above adjustments, we'll break even early next year at this pace. As noted above, last year we were net-adding $500K/month on average versus $200K/month now.

This is a significant economic downturn. We're still growing, just at a slower pace.

Decision

With more people comes more responsibility. A business never has a constant revenue trajectory, so there’s a relentless game of chicken and egg played with business expenses, with our number one expense being employee salaries. Balancing demands on product, growth, and customer servicing, while keeping an eye on pipeline, sales, and churn, are a matter of probabilities.?

As a CEO at this stage of the business, this was really hard for me. I’ve never been faced with this type of abrupt balancing need. Never in almost eight years has the shape of our sales pipeline changed so quickly, it has defied probability. I was faced with keeping everyone employed versus risking more people’s employment in the future.

I'm also hesitant to even post this, as many companies try to keep this type of action under wraps. But I feel transparency is key to trust, and being transparent with our numbers will help sure up this trust amongst our customers and partners.

Next

I suspect this downturn will last another 6-12 months and that next quarter we’ll see a negative GDP, solely based upon buying habits we’ve seen across our uncorrelated customer verticals. We’re now in a position to be fine, though I hope other companies can weather the storm as well.

We’re launching a host of new products and features across the coming months, and I’m optimistic about where we’re headed, but this just hit us harder and faster than any of us could have imagined. Had it been slower, perhaps we could have adjusted our hiring plans. This wasn’t an impact from covid, I believe it was an impact just from the height of low interest rates and cheap debt.

If anyone reading this is in need of B2B SaaS people from sales or engineering, with experience in the Salesforce ecosystem, please email at [email protected] and I’ll see if any of the impacted employees are interested in the applicable role being offered.

-Chris