Dear SaaStr: What are The Most Common Mistakes Founders Make When They Are Just Starting to Scale Revenue?
Let me list some of the ones I see most often going from say $1m to $10m in ARR:
- Chasing the Shiny Penny. One of the biggest mistakes I see after $1m in trying to enter new market segments, new verticals, where you have zero traction. It’s one thing to invest in an area where only 5% of your business is today. But 0%? Leave the pipedreams for $100m in ARR. Or at least, maybe $10m-$20m ARR. Then, you’ll have enough folks and experience to put a small team on a new initiative / segment / market.
- The “I Give Up” VP Hire. Hiring is >hard<. And at some point, you definitely have to compromise in some ways. But not on quality. Hiring a VP you don’t really believe in, to get the hire done after X months … never works. They will spend all your money, fail, and derail your growth.
- Micromanaging Your First (and Second) Management Team. I know you can do it all. But there’s a reason you hired managers. To manage. If you don’t let them do that … you’ll frustrate the heck out of the best ones. And stymie all of them.
- Bad operational model / misunderstanding the burn rate. Often, you can sort of intuit the business model up to $1m or $2m or so in ARR. After that, it all starts to change. It’s a ton of reps, higher absolute marketing spend, more CSMs, etc. If you don’t model it properly (and often for the first time) — your burn can creep up on you, no matter how carefully you think you are managing expenses.
- Getting too comfortable with yourself because of your High Win Rates. As you scale, your win rate — the % of deals you close vs. the competition — should go down. Because as you start to develop a mini-brand, you should start being considered for deals you never would have even been part of the selection process before. If your win rates stay extremely high, that means your are doing a pretty terrible job of getting into more and new deals. More on that here: Beware of the Confidence of High Win Rates
- Not being 100% laser focused on NPS and CSAT (and driving down churn). Your happy customers beget more happy customers in SaaS. Measure your NPS, and then have the whole company align on raising it every quarter. If you don’t … you’ll stall out somewhere around $5m, or $10m, or maybe even $20m ARR. But you’ll stall out if your customers don’t recommend you to others, and if they only reluctantly buy more from you. More on that here: I Was Wrong. NPS is A Great Core Metric.
