What should I do with my slow-growing SaaS startup? Should we stick it out or find a better opportunity?
A founder I know asked me this question this week and we talked about his situation and options.
He’s a smart and savvy founder who can sell, but after 4 years, revenues are still less than $1M ARR. Their ERP product works great and provides big results, but it takes too much effort to sell.
His customers in a specific heavy industry don’t want to change their core, mission-critical ERP platform, so decisions and implementations take a year or more.
It’s bootstrapped so he doesn’t have impatient investors telling him to do crazy things.
And he doesn’t think getting outside investment would help him speed up sales growth.
He’s a much savvier SaaS founder now and he’s seeing great new opportunities with AI-powered software that are unrelated to his current business.
Should he keep grinding away in his current business? Or find a way to play a new startup game that would move faster?
This is a common question that many young founders face.
Now that they understand the SaaS startup and growth games, did they marry the wrong opportunity when they got started?
There is no right advice here, so I argued it both ways. But I did lean one way after we talked about it.
- Stick it out.
The SaaS flywheel is started and he has a sustainable business. Deal with the slow pace and reset your expectations and time frames. He wants to move faster than his market.Could this be a $5M ARR business in 5 or more years? Likely. That would be worth something significant when he gets there.
- Find a new startup gig.
Young founders often get started on the first decent idea they find, but learn a few years later that it wasn’t a great startup opportunity after all.Great founders usually don’t win in bad markets. Good founders can win in great markets.
This question is less about the odds of winning a big prize than how he wants to spend the next 10 precious years of his life.
The opportunity costs can be huge if you stick with the wrong bet for a long time.
Generally, I leaned on “Do something that inspires you that is worthy of your prime time years. But don’t quit your day job yet.”
If his current business were already at $3M-$5M ARR, he could readily sell it to a practical acquirer who loves this industry and can deal with the slow pace of change.
But he’s sub-$1M revenue, so finding an acceptable offer would probably be hard.
Here’s what I told him:
- Start exploring options to sell to strategic and financial buyers. It might take 2-3 years.
- Keep growing the current business and get it on the road to $3M ARR.
- Start experimenting with new ideas on the side.
- Set your long-term success criteria and filter out ideas that don’t fit.
- Run in-market tests and see how fast customers will buy his new thing.
What else should this founder consider?
#practicalfounders
