Once you hit Initial Traction in SaaS, say that first $1m-$1.5m in ARR, you’ll finally find something that works.
One channel, often. E.g., partnerships. Or Facebook ads. Or an app store. Or a specific outbound strategy. Or blogging, or podcasting, or something. Or paid webinars.
A channel that works.
Once you do, one thing I’ve learned, both as a founder, an investor, and now again at SaaStr: every marketing initiative, and almost every channel, plateaus. There are limits.
There is only so much you can spend on Adwords in SaaS. There is only so much reach on FB. Perhaps this isn’t true as much in B2C. If TikTok really spent ~$1 billion in ads (per Wall Street Journal) to become a dominant social network, then clearly the limits are high in B2C.
But in B2B, the world you are trying to reach is customers, not users. At least usually. And that world, while large, isn’t infinite. And you can reach only so many on any given channel.
So that means once you really dial-in a channel that works, you have to be searching out the next one. You can to add outbound to inbound. To add field sales to inside sales. To keep adding new initiatives.
Here’s an example on the community side we see at SaaStr in all our social channels. Together, we have almost 1m followers now. They start off slow, then we figure it out, then growth or hypergrowth, and then … plateau. Here’s one example on LinkedIn, you can see the S-curve here clearly:
We can add similar charts for Quora, Twitter, etc.
It’s the same for everything. Channels are hard enough to get any customers from. Then you finally figure it out, and magic. You can spend $1 and make more than $1.
And when you find a good one, lean in like there is no tomorrow. If Zendesk is a good partner, hire up a team to make them happy. If Shopify is your top source of customers, run that playbook hard. Don’t mess around.
Just also as CEO, and as a VP … assume whatever channel or initiative finally works, also will plateau. Or at least by that I mean, the growth will eventually slow.
So if you don’t want your overall growth to slow, you have to keep adding layers of new initiatives. Before the plateau shows up in your MRR growth.
And finally, remember the two exceptions. The two “channels” that never plateau for the best SaaS companies:
The first “channel” that scales infinitely, if you invest in it, is Word of Mouth. The viral loop from happy customers telling their friends scales forever.
I love this chart from HubSpot that even at $1B+ ARR, Word of Mouth remained their #1 “channel”:
The second “channel” that scales infinitely is maintaining High NRR. Net negative churn.
Slack, Zoom, PagerDuty, all the latest ones to IPO all have net revenue retention of 140%+ still! You can keep that well above 100% forever. MongoDB is seeing close to all-time high NRR as it approaches $2B in ARR. We weren’t sure of this in the earlier days of SaaS. Wouldn’t NRR almost have to come down as you scale? The answer has turned out to be No. High NRR can scale and last forever. More here.
So if you don’t know what channel to invest in next, invest in that one. Invest in customer success and customer happiness. And more products that your existing customers will truly love.
Take a look at Crowdstrike’s NRR all the way to $3B+ ARR (!). Invest more here. High NRR can scale basically forever:
And a great deep dive with Datadog CMO on this topic and more here:
(note: an updated SaaStr Classic post)