Are Remote Teams Growing Slower Than Their Co-located Counterparts?
This episode might reference ProfitWell and ProfitWell Recur, which following the acquisition by Paddle is now Paddle Studios. Some information may be out of date.
Originally published: July 19th, 2019
This is the type of study that we’re going to lose friends over, even though there’s an incredible amount of nuance.
Remote company cultures have become more akin to a religion than a growth strategy with amazing people that I respect so, so very much, like DHH from Basecamp, Nick Francis from Help Scout, and Wade Foster from Zapier preaching the power of remote / working from home.
But first, if you like this kind of content and want to learn more, subscribe to get in the know when we release new episodes.
In the early stages, remote companies are growing at a much slower rate than those companies where everyone is co-located.
You’re seeing here a blend of a lot of different types of companies that are doing anywhere from $1M to $10M in annual revenue. Note that no matter the ARPU, which is charitable proxy for different types of teams, remote teams have growth rates that are roughly 20 to 30% lower than co-located teams.
What’s fascinating though is that as companies get larger, this growth differential starts to diminish.
When we look at a similar split of companies, but now looking at those doing $10M to $75M, you’ll note that the difference has essentially halved to remote teams growing 10 to 15% percent less than co-located teams.
You’re obviously seeing some survivor bias with this data, but when you think about it, this trend stands to reason. By $10M you probably have figured out your main channels and definitely product/market fit, so remote is less of an issue.
That’s not to say that figuring out product market fit and your channels requires you to be in the same room with one another, but it’s likely easier.
When we look at companies doing more than $75M, this growth differential essentially disappears, although the data is fairly sparse.
That being said, most companies when you get to this level have evolved to a point where they’re remote anyways with multiple offices, a contingent of folks who work from home, and obviously a high volume of different types of team members.
On the other hand, we do also see companies bring people back to the mothership when times get tough - like Yahoo and Reddit - to name a couple.
So should we say screw remote teams? Not exactly. There are a few big pieces to keep in mind here. For one, as stated previously all companies go remote or multi-office at some point, so it’s not an argument of either/or, it’s more of an argument of when.
Further, a lot more research needs to be done here, because the big question is why we’re seeing this data. Is it because co-located teams handle ambiguity better? Is it because of a technological connection problem that will diminish over time making the trend reverse?
Want to learn more? Check out our recent episode on The pricing power of 9 and subscribe to the show to get new episodes.
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You've got the questions,
and we have the data.
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This is the ProfitWell Report.
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This is Shyamili, CEO
of Surfboard Digital.
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And my question to you
today is how do remote teams
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impact growth?
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Bye.
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Welcome back, everyone. Neil
here for the ProfitWell Report.
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00:00:20,350 --> 00:00:22,990
This is the type of study that
we are going to lose friends
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over even though there is
an incredible amount of nuance.
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00:00:26,505 --> 00:00:29,545
Remote company cultures have
become more akin to a religion
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00:00:29,545 --> 00:00:33,280
than a growth strategy with
amazing people that we respect
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00:00:33,280 --> 00:00:36,240
so so much, like Nick
Francis from Help Scout,
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00:00:36,240 --> 00:00:39,760
Wade Foster from Zapier,
and DHH from Basecamp.
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Yet what does the data
tell us about remote teams?
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To explore the power or
lack thereof of remote,
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we looked at just over
three thousand subscription
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companies, and
here's what we found.
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In the early stages,
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remote companies are growing at
a much slower rate than those
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companies where
everyone is co located.
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00:00:55,970 --> 00:00:58,245
You're seeing here a blend of
a lot of different types of
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companies that are doing
anywhere from one to ten
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million in annual revenue.
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Note that no matter the ARPU,
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which is a charitable proxy
for different types of teams,
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remote teams have growth rates
that are roughly twenty to
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thirty percent lower
than colocated teams.
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What's fascinating, though, is
that as companies get larger,
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this growth differential
starts to diminish.
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When we look at a similar
split of companies,
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but now looking at those doing
ten to seventy five million,
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you'll notice that the
difference has essentially half
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the remote teams growing ten
to fifteen percent less than
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colocated teams.
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Now you're obviously seeing some
survivor bias with this data.
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00:01:33,650 --> 00:01:37,055
But when you think about
it, this trend stands to reason.
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By ten million, you probably have
figured out your main channel is
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indefinitely product market fit,
so remote is less of an issue.
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That's not to say that figuring
out product market fit and your
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channel requires you to be in
the same room with one another,
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but it's likely easier.
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When we look at companies
doing more than seventy five million,
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this growth differential
essentially disappears,
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although the data
is fairly sparse.
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That being said,
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most companies when you get to
this level have evolved to a
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point where they're
remote anyways.
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Right?
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With multiple offices,
contingent of folks who work
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from home, and obviously,
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a lot of different
types of team members.
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On the other hand,
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we do see companies bring
people back to the mothership
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when times get tough, like Yahoo
and Reddit to name a couple.
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So should we say screw remote
teams? Not exactly. Right?
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There are a few big pieces
to keep in mind here.
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For one, as stated previously,
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all companies go remote or multi
office at some point anyway.
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So it's not an
argument of either or.
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It's more of an
argument of when.
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Further, a lot more research needs
to be done here because the big
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question is why we're
seeing this data.
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Is it because collocated
teams handle ambiguity better?
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Is it because of the
technological connection
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problem that will diminish over
time making this trend reverse?
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There are a lot of
unanswered questions here.
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Finally, though, this also assumes
growth is what you're optimizing for,
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which I know sounds a little
preposterous to question,
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but growth can have a cost on team
membership happiness and health.
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You also may not care about
growth above everything else,
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which a lot of folks in the
remote camp have stated is not
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what they're all about.
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Ultimately, there's an
element of choice here,
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and more research is needed.
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For now, that's
all for this week.
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If you have a question,
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send me an email or video to
nia at proper well dot com.
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If you got value here or any
other week of the report,
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we appreciate any and all
shares on Twitter and LinkedIn
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because that's how we
know to keep doing this.
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I'll see you next week.
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This week's episode is
brought to you by Reforge,
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selective programs for
experienced professionals in
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marketing, product,
data, and engineering.
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Reforge dot com.
