A software company CEO with a growing $2M ARR software company asked me what he should expect on their march to $10M in revenue.
He can feel that his business is changing fast internally. He knows what got them here won’t get them there.
He hasn’t been through this phase before, but he knows he has to manage some big changes. What does every SaaS business experience here?
I have been through this phase several times myself. I have worked with 50+ software founders who have gone through the transition from a $1M messy startup to a $3M early-stage business to a $10M scalable business.
Funding or no funding, a business of any type faces non-linear internal shifts as the company grows up.
You just can’t do more of the old things to get through it. You have to start doing new things and stop doing it the old way.
Here are the main shifts that happen in almost every growing SaaS business going from about $3M ARR to $10M ARR:
- Your key leaders go from scrappy hands-on department managers to confident executive leaders.When you have 25 employees, you have leaders of departments and most employees don’t report to the CEO. But these teams are small and can be pretty informal.
When you grow to $10M ARR with 75-100 employees (or more if you have big funding), you need leaders who can manage leaders. Capable VP types who can handle strategy, complex execution, and bigger teams.
Do you have leaders who will grow to the next level you need?
- A $10M ARR business has more systems, processes, and structure so the larger team to do great work together at much higher volumes.You need a reliable customer acquisition engine, a factory to deliver customer value consistently, and a culture where big teams can operate together.
Do you have the right leaders and culture to create and run this factory?
- A $10M SaaS business is almost always more focused than they were at $1M. Anyone who has been through it knows you FOCUS TO GROW at this stage.You stop the crazy startup experiments and double down on JUST the customers you can make happy and JUST the channels that are efficient and JUST the employees who fit your clear culture.
You say no ten times more than yes when you are bigger. Product-market fit is more about saying NO to things that don’t fit.
Do you know which customers, features, channels, and employees you will say no to? Does everyone in the company know that too?
- Your customer-acquisition engine typically goes from one tactic to three reliable tactics. Not 10.The three-legged stool. One main, a good second, and a useful third. Like content-inbound, partners, and sales-outbound. Or whatever.
Can your sales and marketing leaders build a reliable engine?
The founder needs to grow into a founder-CEO of a bigger team with a bigger role in the market. I’ll write about that later this week.
What other transformations have you seen happen in software companies as they grow from $3M-$10M?
#practicalfounders
