We all screw a lot of things up. But I think the biggest, #1, mistake successful first-time entrepreneurs in SaaS make time and time again these days is they micromanage too long.
I see this again and again, and in SaaS, it’s a real lost opportunity. I think it’s a byproduct, in part, of the fact that founders are just so much better these days. So an amazing founder CEO often can also be the VP of Sales, VP of Product, hack Marketing, fly across the globe as the VP of Customer Success, and sometimes, even continue to write some code. That’s great. But it’s way, way, way too much for one person to do one day longer than necessary.
That can be great in the very early days if it gets you to your first $1m in ARR. Even better if it helps you skip a round of financing. But after you hit Initial Traction … If you’re serving any of these VP-level roles yourself — the business simply won’t grow as fast as it otherwise would.
My #1 recommendation to do even better as a first-time SaaS CEO: make yourself obsolete by the time you hit $2-$3m ARR. In every single function. Sales. Engineering. Product. Marketing. Customer Success and Support. Finance.
Even best case, you’ll become a bottleneck all over the place. And beyond that, it will distract you from focusing on the few things that really will get you to the next level.
Post Initial Traction, once you have built your 1.0 management team — your job there is really just to bring in, and where necessary, backfill the team. Not to be a role player on that team anymore.
There’s just one of you. You have to only do High ROI things. In SaaS, that means not hacking being a VP of Anything as soon as you hit Initial Traction and can afford to hire a full management team.
Or put differently:
- By 20 employees, you should have 1-2 good managers in place such that at least 50% of the company can run based only on weekly staff meetings, 1-on-1s, and “grab me when you need me-s”. E.g., a great VP of Sales that can just handle sales. A great VP of Engineering that can just ship the product from spec with no drama, etc. So you don’t have to directly manage at least several of the key functional areas in the company at all. You won’t have it all but you need to not be the Interim VP for at least 50% of the operations.
- By 40-50 employees, or say $3-$4m in ARR — you must have a complete initial management team. This means you are no longer the effective VP of any functional area. You must not be micromanaging anything at this point, if at all possible, and have fully become a “macromanager.”
- By 200 employees, you don’t need to have a role in hiring any non-managers. Not only are you no longer the boss of any area, but every functional area needs to hire and manage its own staff and self-propagate. You should spend all your recruiting time just on VPs and above, and helping screen Directors.
- By 500 employees, it’s OK if you don’t really know the names of the new folks anymore. Employees start to simply become resources at this point. They’ll come and (hopefully at not too high of a rate) go. Your VPs and managers will deal with this. You just make the company meetings great. Inspire the troops. And hit the plan.
So as soon as you hit Initial Traction — $1-$1.5m in ARR — just STOP. Take a pause.
Let it go. Let your VPs do their job as well as they can. Let them make their mistakes. Help them, but let it go and trust them to do their job. Even if some things, in some ways, they do a worse job than you would have. And if you don’t have real VPs yet — dude. Go hire them. Spend 20% or more of your time here. Stop futzing around on the small stuff.
I know you can do it all, but the whole game in SaaS is getting from $1m to $10m as fast as humanly possible.
That’s the momentum that gets you to $100m and beyond, to the IPO, the Unicorn, and all that.
If you’re the bottleneck, if you’re still taking out the trash at $2m in ARR … you’re going to get there that much more slowly. It ain’t worth it.
ugly org chart from here
(Cross-posted @ SaaStr)