What’s the weakest link in your SaaS revenue growth chain?
Where should you focus first to have the most efficient impact on revenue growth?
Growing revenue isn’t simple or obvious or just one thing. Otherwise, every company would grow big without interruption. They don’t.
It’s a whole system that is generally sequential in any SaaS business, with some links in the chain that are weakest and stifle growth the most.
Anyone who runs a SaaS business understands there is a customer “lifecycle” or funnel or chain, or whatever they call it.
Here’s how I see the links in the SaaS revenue chain:
- Awareness – How do potential customers find out about you
- Engagement – How do they engage with you and consider your product?
- Conversion – How do you convert an interested prospect into a paying customer?
- Product Value – How do customers use your product and get great value?
- Retention – How do you keep customers coming back year after year?
- Expansion – How do you help customers buy more from you over time?
- Referral – How do your current customers help find more customers?
When you start, the weakest link is usually building a product that is valuable to someone, finding customers who will pay you, and seeing what works.
When you start growing, things get complicated quickly. Who is this really most valuable for? How do we find more of them? Do customers get great value?
When you have $1 million ARR or more, the problem is usually not about building a product, hiring people, accounting, or funding. Those are all hard, but they are figuroutable.
From there, it’s all about revenue growth, which is a lot less figuroutable and predictable.
At that point, it’s always best to start working on the links at the end of the chain (or funnel) and work your way back up.
- First, are your customers staying year after year? Are they happy and expanding their usage or consumption?
- If you have high churn, fix that before trying to find more customers and wasting money to fill your leaky bucket.
- Then it’s conversion. If you have happy customers who pay you, are you closing more customers that fit that ideal customer profile? Don’t waste customer acquisition resources on bad-fit customers who don’t stay.
- If you have happy customers who pay, and you can close them when they engage with you, how do you get more of the right prospects to engage?
- After that, the biggest challenge for most SaaS companies is to get more qualified leads/demos/trials of the right kind of potential customer.
Increasing awareness and attracting qualified prospects is more than just “more sales and marketing.” It includes your product, your message to the market, and your reputation in your market.
Scalable revenue growth is where everything ends, which is why most experienced founders work on efficiently acquiring new qualified customers before they start their companies.
Efficient revenue growth is the ultimate game. It’s where most founders should start.
