Ok, you’ve finally crossed $1m, $2m, $4m ARR. Now — you just want to get there faster. And that’s where you’ll make a lot of mistakes. The most important thing is not to chase the shiny penny, assuming you are growing at least 60% Year-over-Year.
You’ve done the Impossible. You’ve gotten 50, 100, whatever # of businesses to pay you $1,000,000 a year. There are 10,000 new apps out there. It’s “impossible” to get to $1m. You did it.
The #1 biggest mistake I see from $1m to $10m ARR is chasing new market segments, new categories, new areas where you have 0 or almost no traction. Because you want to grow faster.
We all want to grow faster. Almost none of us are happy with our monthly growth rate once we hit $1-$1.5m ARR. We all want to go and grow faster.
But there is a proven formula to get from $1m to $10m the most efficiently:
- First, double down on what is working. Period. If SMBs are your core, stay there, at least until $10m ARR. Do not chase customer segments where you have zero, or only token, traction. Not at $1m. It’s “too late”. You’ve already established your initial, organic customer traction and segmentation.
- Put proportionate effort into your customer segments. This is critical, and a mistake so many founders make. Break your customers into, say, Small, Medium and Larger segments. Then assign percentages. If 20% of your revenue is Smaller customers, 50% Medium, and 30% Large (a not uncommon scenario), align your energy and efforts proportionately. Align your marketing budgets. Your product / dev budgets. Your sales headcount. Don’t chase “whales” and big deals IF that’s not your core. Don’t try to add a magically cheap or free version if that didn’t work before $1m ARR. It’s just going to distract everyone now.
- Go all-in on customer success. Get your NPS up to 60 or higher. Second-order revenue and a mini-brand start to become huge accelerators around Year 3. Make your existing customers happy, and they will both buy more from you, and get you more customers. Period. More here: In The Early Days, You Won’t Have Enough Customers. But Your Mini-Brand Will Come to Your Rescue.
- Hire a real management team. This always works. And almost every SaaS start-up hits a wall around $4m-$5m ARR at the latest if they don’t have any true VPs on the team. Hire a VP of Sales that knows what they are doing. Revenue per lead “magically” goes up. Hire a VP of Marketing that knows demand gen cold. You’ll “magically” get more MQLs, and the funnel will be managed more efficiently. Hire a VP of Customer Success that is great … and upsells, retentions, and renewals will all go up. Like magic. More here: How My VP, Sales Doubled Our Sales in 90 Days. And No, It Wasn’t Magic.
- Raise prices, one way or another for new customers — as you add more value and build your brand. You can just do it on the high-end. You can add more functionality. You can raise prices $1 a month. Different things work for different companies. But usually, at $1m ARR, your product is “underpriced” because you have no brand and no way to justify premium pricing. Find an authentic, customer-centric way to justify premium pricing. And ask for it. More here: A Solution Sale Can Capture 3-20x the Revenues of A Tool Sale. With Almost the Exact Same Core Product. But. 90% of the time don’t raise prices on existing customers. They are too small a cohort for it to matter. And you’ll harm the relationship with the very folks that will be your staunchest advocates.
Follow this 5-step playbook, and I guarantee you will get from $1m to $10m ARR faster than you otherwise would, with less risk and stress and more success. Without having to chase crazy new product segments, categories, or other shiny pennies.
After $10m ARR, or as you come up to it (say $8m ARR), you can start adding more of a budget for more experimentation. You can even put small teams on new things. At $10m ARR, there will be fat and redundancies. There are no redundancies until then.
Until then … if you have something that is working … Stay True.
(note: an updated SaaStr Classic post)