Growing from $5M to $10M ARR is almost the opposite game for B2B SaaS companies than getting to $1M in revenue.
It’s so different that very few sales leaders or salespeople who got you started will be around when you scale. It’s a different DNA, especially for practical SaaS companies without VC funding.
Here’s why:
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Starting up is messy; $10M in revenue is not.
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 kind of sucks. Founders do most of the selling themselves.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 $5K average annual customer value (ACV), because…
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The bigger you get, the more customer retention matters.
This is hard for startup founders to see at first, but someday 90% of your revenue every month will come from existing customers.With a 2% monthly customer churn and a $300/month product at $5M ARR, you need to sell 30 new customers that month before you have ANY positive MRR growth. That number grows to 60 customers at $10M ARR before any net new revenue. And to 600 at $100M!
Is your sales leader ready to work as much on customer and revenue retention as on new customer acquisition?
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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 the right kind of customers and keeping the wrong customers out, with very 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.
Is the DNA of your marketing and sales engine capable of focusing on finding the right customers and scaring away the wrong ones?
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Startup selling is simple; scaled-up selling is more complicated.
Founders often do all the selling to $1M revenue by moving fast, selling hard, and being flexible.An effective and efficient revenue engine at $10M is totally different, with multiple teams, systems, channels, and often multiple products. Growing pains through levels of maturity in leadership, hiring, compensation, metrics, operations, and planning.
This turn from scrappy to organized generally happens to SaaS companies between $1M and $5M ARR. Some are forced to get there earlier; others can procrastinate controls, systems, and processes a little longer.
A startup looks like a crazy band of capable people making stuff up and getting stuff done.
A $10M 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.
#practicalfounders
