Growing from $3M to $10M ARR is almost the opposite game for B2B SaaS companies than getting to $1M in revenue.
It’s so different that most sales and marketing team members who got you started won’t learn the new game to scale. It’s a different DNA, especially for practical SaaS companies without VC funding.
Here’s why:
1) Starting up to $1M ARR is messy
You do things that don’t scale to get revenues going (aka customer funding). You’re experimenting to learn what works. Your product is useful, but it kinda sucks. Founders do most of the selling themselves.
2) Growing past $5M ARR is repeatable and doesn’t require founder sales.
All that scrappy founder-led stuff that got you going won’t work at some point. Savvy salespeople need to be able to sell effectively without the founder. PLG buying processes get narrowed down.
A $10M ARR business has a more organized customer acquisition engine with a clear customer qualification process. This is especially important for SaaS companies with less than a $5K average annual contract value (ACV) because…
3) The bigger you get, the more customer retention matters.
This is hard for startup founders to see at first, but someday 90% of your monthly revenue will come from existing customers.
With a 2% monthly customer churn and a $500/month product at $1M ARR, you need to sell 3 new customers that month before you have ANY positive MRR growth. That number grows to 30 customers at $10M ARR before any net new revenue. And to 300 at $100M!
Is your sales leader ready to work as much on customer and revenue retention as on new customer acquisition?
4) 50% of customer churn comes from who you sell to–who you let in.
Starting up is about saying YES to anyone who will buy. That’s the survival game of funding your company with revenues while finding something that could turn into product-market fit.
At $10M ARR, it’s about attracting only the right kind of customers and keeping the wrong ones out, with clear definitions of who you say YES and NO to. You can only afford to “buy” the new customers who stay long enough to be happy and profitable, especially when you don’t have piles of VC funding.
5) At $10M you have a repeatable customer acquisition engine.
An effective and efficient revenue engine at $10M has multiple teams, systems, channels, and often multiple products. Learned through multiple maturity levels in leadership, hiring, compensation, metrics, operations, and planning.
A startup looks like a crazy band of capable people making stuff up and getting stuff done.
A $10M ARR SaaS business looks like an organized factory where you can reliably and efficiently acquire customers and ensure their success.
The laws of gravity of the SaaS business model require these changes.
This is why acquirers value a well-organized $10M SaaS business at much higher multiples of revenue than a scrappy $3M SaaS biz.
