SaaS Startups

At $50k in MRR, Running Out of Money Is No Longer an Excuse

echojason@gmail.com'

Jason Lemkin

We’ve talked a lot on SaaStr about the challenges in getting from nothing to that first $1m-$1.5m in ARR, “Initial Traction”.  That it takes longer than you think.  That if you get 10 customers, you can get another 10, 100, and so on.

There’s a particular moment in time I want to focus on here on the path to Initial Traction.  It’s when there isn’t enough revenue to make it, to get there.  But there’s too much that you just can’t quit.  You can’t.  Period.

I think that’s around $50k MRR.  At this point — Money Is No Longer an Excuse.

This doesn’t mean money isn’t an issue.  Money really won’t “not be an issue” usually until about $6-$8m ARR, sometimes later.  By that point, you’ll have enough cash coming in to fund the core team of 50-60 you need to properly run a SaaS company.  As you approach $10m ARR, Initial Scale, money per se shouldn’t be an issue, other than the rate at which you can and should invest it.  But the core business will be self-sustaining as long as you have happy customers, a mini-brand, and strong word-of-mouth and second order revenue.

So let’s roll back in time to $50k MRR.

This is enough to pay for a couple of engineers, below market rate.  A cr*ppy office.  And a couple of sales guys, running in part, on commission.  And maybe almost nothing for you and your co-founder.

And this is the time when it can start to get hard.  Yes, you finally got 10 Unaffiliated Customers!  That felt great.  And then as you approach $10k a month, $20k a month in MRR … that’s no longer beer money.  It starts to feel real.

endlessThen at $50k in MRR, yes it’s real … but you still can’t really afford anything.  Every hire is just too expensive.  But assuming you are growing > 10% a month (which you sure better be) … you will get there.  You will eventually get to Initial Traction, to $1.5m+ in ARR, to a self-sustaining engine.  And eventually to $500k MRR (10x where you are today), when you can afford to pay yourself a living wage, get out of that horrible co-working space, hire more help, get ahead of things — finally.

At $10k MRR I’m not sure.  I can’t be sure you’ll really get there.  But at $50k MRR, if you are growing, I know if you will it to the next level, if you don’t quit, if you still run sales, marketing, customer success, and support all by yourself … you will get there.

So what do you do, if you are $50k MRR, but it’s just not quite taking off yet, and the VCs won’t fund you yet, and you can’t afford to hire that Great VP of Sales with her $500k OTE?

A few meta-suggestions:

  • Take a deep breath and settle in at $50k MRR.  This is the time to get a little zen.  Yes, you aren’t Slack yet.  But Slack didn’t start off as Slack, either.  I know you can’t even afford to take your husband out to dinner.  But this thing you brought into the world, this start-up, it won’t fail if you don’t quit.  That’s something real.
  • Upgrade one position.  Just one.  I know there isn’t enough money in the bank to really do all that much.  But pick one position and upgrade it.  One great sales rep.  One amazing engineer.  This will pay off.  You’ll be able to close one more $50k ACV customer.  To convert those leads at a higher rate.  To get outbound actually working.  Don’t try to fix everything.   Or even every area.  Just pick one core position to upgrade.
  • Don’t listen to the VCs.  At $50k MRR, you will either be Hot or Not.  It’s OK if you aren’t Hot today.  Get to $1.5m or $2m in ARR, growing 8-10% a month, in a good space, and you will be then.  You may get 100 “No”s at this phase.  It s**ks, but it’s OK.  Don’t take it personally, or even, too seriously.  You just haven’t really proven it yet, in the right way, mitigating the right risks.  But you may well do that by $1m+ in ARR.
  • Drive upmarket.  I know I say this a  lot.  But do it — now.  At the high end.  If you have 100 customers, the pattern is set.  I know there aren’t enough leads, and you aren’t growing fast enough.  And also, upgrades and upsells are happening, but it’s too early for this to be too material yet.  So find the confidence to double your pricing, at least at the high end.  This is a phase when sometimes we lose our confidence to ask for more money.   Don’t.  This is the fastest, easiest way to get to Initial Traction, and get you out of this tough time.
  • Spend more time with customers.  Don’t crawl back in front of the monitor.  Get out there.  Meet every customer that is local.  They will want to meet with you.  This is the best way for you to learn how to grow faster.
  • More importantly — No More Optionality Talk.  This is banned effective at $50k MRR, if it was ever allowed.  Maybe you allowed folks pre-revenue to “give it 12 months”, or whatever.  Maybe at $5k in revenues, you said “we’ll see.”  Well, if you did so be it.  But effective today, that talk is banned.  At $50k MRR, there is zero excuse to fail.  So it’s no longer OK to even discuss it.

The best SaaS companies scale faster than ever today.  But there are so, so many of them.  So product-market fit is harder than ever.  Achieving it is magic, that first 10, then 100 customers.  The next bit of magic is being just big enough that no one can question you’ll get there.  That’s around $50k MRR.  Even though it won’t really feel like it.

Published on April 26, 2016
  • Hi @Jason,

    This is all great, but we, http://unified.vu just started our revenues two weeks ago, so moved from $0 to something – we’ve signed three customers so far. Our first goal is £10k MRR (we are in the UK). Do you have any advice? We are a team of 3 (2 software engineers plus me). 100% self-funded by me. Ideally we want to get to 1000 customer in 12 months – steep asking given that I would need to bring all of them myself.

    • jlemkin

      Great start! It just always takes a little longer than you think … so budget a few more months to get to 1,000 🙂

    • iangotts

      Make the first 3 customers super successful and ask them what will make your product even easier to adopt (without you standing at their shoulder)

  • We’re exactly at this point (https://demo.baremetrics.com). The “move upmarket” part is something I always debate on exploring and then talk myself out of, convincing myself we don’t have an “enterprise” product (at least at this point). I should probably just put my big boy pants on, get out there and just start going after enterprise customers and see what happens. 🙂

    Thanks for the article!

    • It’s interesting how everyone is trying to follow *the* path like there is only one destination & one way to reach it. That’s so super odd.

  • Just went live not to long ago and have 10 paying customers over at http://accelerlist.com and the first ten felt great. We need to scale to about 2500 to hit $50K MRR so its going to take some time but the journey is the ride.

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