Recently I put together a quick list on twitter of the Top 10 things that with hindsight, I could and should have done to get from $1m to $10m ARR faster — and with less stress. I thought it would be worth drilling down deeper into each of them, and sharing the learnings and mistakes:
1. Spending less time fixing things, more time recruiting senior folks to own them
This is the mistake I’ve tended to make over and over again, and I see so many of the CEOs I work with make. No one spends enough time recruiting as it is, after $1m ARR or so. What makes it worse is when you excuse it by doing it yourself and fixing it yourself. Yes, you can manage the sales team yourself. You can do the drop marketing campaigns. You can certainly convince yourself you can still be head of product, even once the product is so complicated you start to forget how it all fits together. You can do this. But all that time would be much better spent recruiting a VP to own it. Fixing it yourself becomes to biggest time sync and excuse for not hiring there is.
2/ Hiring a full-time head of biz dev once I had a few key partners
I got this advice and believed it, but didn’t act on it. Cash was tight and I didn’t know any great VPs of Biz Dev, so between myself and my VPs of Sales, Product and Customer Success, we all jointly managed our key partners. The team approach wasn’t a total fail, and it ensured all our partners got VP or C-level support. But it also meant no one really owned partners strategically. Almost everything was reactive. That’s not good enough, especially in competitive markets. Someone needs to map out all the ever-changing stakeholders at each of your partners. Get on jets and go meet them. Make sure your joint customers and jointly happy. Fight and create mindshare with partners that deliver you leads and are critical. It’s a full-time job even once you have 2 critical partners. It may not feel like a 50-hour a week job at first (and maybe it isn’t). But that doesn’t mean it’s not a full-time job.
We did a great session at the SaaStr Annual with CEOs and ex-SVP Partnerships at Box on just this topic:
3/ Getting on more jets. Go visit more customers, prospects and partners in person. A lot more.
This is where I cheated. I got on jets, but not often enough. I excused myself from visiting enough customers because I was backfilling so many things (see Point 1). But I should have forced myself to get on more jets. As I learned later, we never lost a customer I actually visited, at least not on my watch. Many of them are still customers 11-12+ years later! But when the CEO doesn’t visit a top customer, the relationship there is never that strong. Get on a jet, at least twice a quarter. More on that here and here. This is also one of the least expensive (in terms of hard costs) things you can due to help the company scale in this phase, and beyond. Even if you have almost no capital, you can afford to fly to visit your top customers, prospects and partners more often.
4/ Keeping $1 on the balance sheet for every $2 in ARR. Less and you under-invest.
We went cash-flow positive around $4m in ARR. We did it by focusing on second-order revenue to generate low-cost leads, and by taking in 110%+ of our MRR each month in cash. Do that, and even if you didn’t bootstrap in the beginning, you can start to go cash-flow positive around this point.
That was great and created freedom from venture capital and many other benefits. But it had a hidden tax I only mostly understood. We went cash-flow positive at $4m in ARR with about $1.5m on the balance sheet. I added a small amount of debt ($1.25m or so) to get our balance sheet up to $2m, but as we grew, it wasn’t enough. At $8m in ARR, if you have $2m of cash in the bank, you get real nervous investing much more than $500k-$750k, $1m max. It’s hard to hire 20 extra sales reps (which you need as you look at $10m ARR), open an extra European office, spend on big campaigns and events … when you are worried more than $1m will put you at risk. It’s subtle, but in SaaS I’ve learned you under-invest if you have < 50% of your ARR in the bank.
Once you approach Initial Scale, it’s worth at least considering bring on some strategic debt if not equity. You don’t even want the Almost Empty light on the gas tank to turn on just as it’s getting good. That’s when you want to lean in.
5/ Moving from CTO-led -> VPE-led dev team. Hard go truly enterprise without it.
This is a transition most of us figure out, but sequence just a little wrong. Most of us hire a VP of Engineering to take over from our CTO because we see the CTO is getting burnt out, or has trouble building a dev team > 8-9 folks, or gets disinterested in solving technical debt, bugs, etc. That combination of factors is probably enough to signal a good time to hire an experienced VPE. But in SaaS also, there’s a more subtle phase transition. To truly support to needs of larger enterprises, you almost need a VP of Engineering. That can speak to power. That has done it before, and truly understands how enterprises think about security, data, protection, code reviews, encryption, key stores, release management, etc. Enterprise customers need that VP of Engineering to trust you. And that VP of Engineering will drive changes that help you serve those enterprise needs earlier.
6/ Adding an outbound team earlier. It always works.
This is pretty well understood today, but was fairly new to me. I’d never managed or built an outbound. And from $1m to $10m in ARR, we had so many inbound leads (of various quality, but tons of them), that we didn’t really build a traditional outbound team until later. Now we all know. The key is, it always works.
The lesson for today’s SaaS world is build an outbound team even if you have tons of leads. At a minimum, they can target the largest accounts in your sweet spot. That alone is worth it. Getting those logos, brands and names closed earlier in your company lifetime. These “additive” outbound teams maybe even only need to cover their costs too, if the core inbound enginer is working. Bigger customers have longer lifetimes and more accretion to your brand. Maybe it’s OK if you spend $1 to make a $1 — here.
7/ Having a customer conference earlier.
This may seem laden with irony given the scale of the SaaStr Annual, but I was late to see the point of customer conferences. I saw the power of Dreamforce — but Salesforce is a very complex product. I didn’t even know how to fill up a full day of content, given how easy to use our product was, and I wasn’t sure enough customers would even come.
So we didn’t even do one until $12m ARR or so. That was wrong. You always want to get your customers together. Probably even as early as 10-20 of them will come.
Your customers invest a lot of themselves in your application, especially the more of a solution it is. They want to meet you, and their peers, and other users. They’ll fly out and Uber up. Enough of them will. Get them together. You can do dinners at first, and half-day meet-ups second, and then a full-event later. But start early. Steak dinners always work.
8/ Specializing the sales team earlier. Closers should close, openers should open. Field vs. mid-market vs SMB early.
This is something that many of us have figured out by now, but it took me a while to learn. “Full stack” sales professionals are maybe OK in the early days — but only then. Sales professionals are good at one thing. Outbound. Account management. Inbound. Big deals. Small deals. Medium deals. Complex deals. Two-call close deals. High velocity vs. low velocity.
The days of a rep opening the yellow pages to fill 50% of her days, hoping for a random lead to come in to fill the others 25%, and building her own collateral the final 25% … those are gone. You want everyone to be specialized, even as early as rep #3. Get reps doing what they are good at. For example, SME/mid-market closers should have 4 appointments a day on their calendar, not 1 or 2. To do that, usually, someone else sets up those appointments and qualifies them. But if she can do 4 appointments a day instead of 2, that’s double the effective closer productivity. And you should be able to expect a whole lot more productivity from that rep.
9/ Much more customer marketing. Marketing doesn’t end when you close the customer.
We’re going to talk a lot more about customer marketing on SaaStr — it’s really the next frontier in marketing. You know how much you spend to acquire a customer. But what % of the customer lifetime after sale do you spend to market to retain (and upsell) that customer? Very few SaaS CEOs reading this will know what % they spend — or should spend.
You should. In a recurring revenue model, post-sale customer marketing is just as important as pre-sale prospect marketing. You want a separate team, with goals tied to renewals, acquisition from competitors, and upsell. And they should have a % of those revenue streams to market and spend here. At least 5%, and probably 10% if you are going long.
Customer success professionals are great and critical, but they aren’t marketers. Having CS hack customer marketing may be OK in the early days, but you are leaving a lot on the table if you have CS own it after $8m-$10m ARR.
10/ Investing aggressively in brand as approach $10m ARR. It seems silly in the early days … but it’s how 70%+ of non-early adopters choose a vendor.
A final point, but a subtle mistake I made. I well understood the power of second-order revenue, referrals, and happy customers as a I approached $10m ARR. But I didn’t think of all of that truly as “brand”. Brand doesn’t really matter much in the early days, since you don’t have one. Then you start to get a mini-brand in your niche, and that generates leads. More on that here.
And then as you approach $10m ARR, you usually move from mini-brand to brand. The difference to me is you become a default choice to non-early adopters. Early adopters take vendor risk, they seek out innovation, they kick a lot more tires. But as a space matures, and you leave the early adopter phase, more and most customers just want to be told. To be told which vendor to purchase. Some will pick you because they used you at your last job. Some will see some great blog post or Techcrunch article. But as you approach $10m ARR, more and more will pick you just because you are very well known in the space.
So invest in your brand at $10m+ ARR. Go to the top trade shows not for leads, but to meet your existing customers. Be present, maybe even be everywhere. Do content marketing that helps your customers, not that promotes your product. Get on stage. Hire a VP of Corporate Marketing.
And protect that brand. Once it’s gone, it’s tough to get back. But if you keep invest in it … it can last decades. Almost no matter who else enters your space.
(Cross-posted @ SaaStr)