A global pandemic turned Zoom into a household name, drove a projected 314% year-over-year increase in revenue, and sent the company’s stock price skyrocketing to a 600% increase in 2020.
The simple explanation? Remote work became the norm, the videoconferencing market exploded, and Zoom was the market leader in the right place at the right time.
But, in this case, there’s so much more to the story.
Zoom’s financial success isn’t just about a pandemic windfall. If you look at CFO Kelly Steckelberg’s time at the company, there are four strategic finance lessons you can learn from Zoom's sustainable growth that can help put your company on the same path.
The way you measure business and financial performance has to evolve alongside the business because the metrics that matter most today may not be most important a few months from now.
This was especially true for Zoom when the pandemic hit. As demand went through the roof, the metric Steckelberg and her team typically used as a marker for Zoom’s performance no longer aligned with business and customer needs.
Steckelberg told CFO Dive that before the pandemic, she was using daily active users to track the software’s performance.
But with server capacity stretched to its limits, the finance function had to start prioritizing concurrent users as the leverage point for Zoom’s success.
Shifting the metric for success helped Steckelberg and her team make a tough strategic financial decision—to increase its reliance on public cloud infrastructure.
In the same CFO Dive interview, she said, “[The public cloud] gives us the ability to flex [server capacity] up and down as we need to going forward. We’re being thoughtful about not getting over-committed from a resource perspective and looking where we can use third-party resources to flex. We’re going to have this hybrid approach.”
Tracking the right metrics makes it easier to identify variance points in your numbers that ultimately help you solve strategic business challenges as circumstances change. With a focus on concurrent daily-meeting attendees, Steckelberg was able to better understand server capacity needs and manage Zoom’s hybrid infrastructure cost-efficiently.
When you’re experiencing hypergrowth, headcount planning becomes the most pressing challenge across your business. Scaling to meet that challenge requires deep collaboration with business leaders and a rigorous focus on ROI.
Zoom’s rigorous, ROI-focused approach to hiring didn’t start because of the pandemic. In a 2018 interview, Steckelberg explained Zoom’s high-growth hiring challenges:
“We ended our fiscal year in January with 950 employees. We’re projecting to end this fiscal year with 1,600 to 1,700. That’s a lot of people to hire, and it’s really hard to hire today. But when your growth model depends on adding a certain number of sales reps and business development reps, which means you have to grow you HR and finance teams, there’s no choice.”
The company continued on its high-growth trajectory in the years following that interview. According to Owler, Zoom now employees more than 3,800 people.
Each step of the way, Steckelberg says, “we have been very thoughtful about every incremental headcount addition, to ensure the ROI on it makes sense.”
But it’s easy for a strict focus on headcount ROI to get out of control and negatively impact company culture. To find the right balance, Steckelberg made collaboration a critical component of her headcount planning processes.
During her time as CEO of Zoosk, an online data site and app, Steckelberg said she gained “a much greater understanding of how marketing, engineering, and product development come together,” and she became “more able to prompt people to think, if we’re adding all this headcount over here, don’t we need something on this side as well?” She brought this collaborative approach to Zoom, where she oversees the HR function.
When you play such a vital role in your company’s headcount planning, it’s important to get out from behind the spreadsheets and build relationships with business leaders. A rigorous focus on ROI can drive sustainable growth—but only if it’s coupled with a collaborative approach.
A customer-first mindset isn’t just for front-office departments like sales and marketing. Drawing on experience as CEO of Zoosk, Steckelberg embraced the customer-first mantra that has driven Zoom’s financial success and guided the company to new heights.
For Zoom, a customer-first mindset is the primary building block for the entire business. CEO Eric Yuan started the company following frustration with how Cisco’s acquisition of WebEx hurt customer experience. He said, “I was paid very well as a VP at Cisco. But WebEx was my baby. In 2010 and 2011, I did not see happy customers. I was very embarrassed that I spent so much time on the technology.”
Sometimes, a customer-first mindset requires you to sacrifice financial performance in the short-term to maintain sustainable, long-term growth. Steckelberg learned this lesson first at Zoosk.
“We’re always listening to our customers and learning from them what is most beneficial to them.” — Kelly Steckelberg, CFO at Zoom
Reflecting on Zoosk’s main issue, she said, “There were aspects of our product that were making money but causing great customer dissatisfaction.” Eliminating those money-making features in favor of improving customer satisfaction helped Steckelberg eliminate all of Zoosk’s debt and build up some cash in the bank.
This experience made it easy for Steckelberg to bring Zoom’s customer-first mindset to the finance function. The increased use of public cloud infrastructure during the pandemic is the perfect example of that customer-first mindset in action.
Without a customer-first mindset, Zoom may have tried to scale by building more private infrastructure. They would have preserved profit margins, but call quality would have suffered, and Zoom might have lost out to its competitors in the long term. Instead, Steckelberg and Zoom sacrificed profit margins, negotiated a public cloud partnership with Oracle, and enabled the company to prioritize call reliability and customer experience at the scale the pandemic required.
Steckelberg told CFO Dive, “We’re always listening to our customers and learning from them what is most beneficial to them.” It may sound basic, but that relentless customer focus is the foundation of Zoom’s sustainable growth.
As your business scales, it becomes increasingly important for finance to balance forward-looking planning with backward-looking accounting tasks. That’s one of the biggest reasons Steckelberg was brought onto the Zoom executive team leading up to the company’s IPO.
When Steckelberg first joined Zoom, “accounting was in good shape, but planning wasn’t in place.” That didn’t necessarily seem like a problem for the company at the time. According to Forbes, “Zoom grew 300% in 2016 and raised $100 million in January 2017 at a $1 billion valuation” before she joined in November 2017.
But without the planning side of finance, Zoom was bound to hit a wall when it came time to meet the quarterly projection cadence of a public company. Steckelberg came on and prioritized hiring a head of financial planning and analysis to make Zoom’s growth sustainable.
Systematizing the forward-looking side of finance is what put the company on a path to becoming one of few profitable tech IPOs. Between 2017 and 2018, Zoom more than doubled its revenue from $60.8 million to $151.5 million—and then nearly doubled revenue again between 2018 and 2019.
It’s never too early to prioritize balancing the accounting side of finance with the planning side. The earlier you strike that balance, the easier it will be to scale a strategic finance function that drives sustainable growth.
All the stories about Zoom’s explosive growth during the pandemic are flashy. The numbers are eye-catching.
But don’t let all that distract you from the core of the success story. At the most basic level, Zoom has been successful in recent years because of the partnership between CFO Kelly Steckelberg and CEO Eric Yuan. In a 2019 interview following Zoom’s IPO, Steckelberg said:
“There are many things that make Zoom stand out as a company, but chief among them are our rate of growth, especially at scale, combined with our profitability and positive cash flow. The fact is that Zoom’s fundamentals are very solid for a company its age and size, and that a profitable company going public is something of a rarity in the tech industry.”
Not every company will see the kind of growth numbers that Zoom has. But any finance function can embrace the lessons listed here and push toward more sustainable growth.