Getting to Initial Scale

6 Things in SaaS That Are Only Obvious At Scale

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Some thoughts:

  1. Churn Lurks. Churn doesn’t happen overnight, especially with annual contracts. It lurks. Use customer visits, NPS surveys, and more to root it out before it happens. Oftentimes, you don’t even lose customers until Year 3. So it really only hits you just when things are getting good. More on that here: Why It’s Year 3 When You Lose Your Customers
  2. You Hit a Wall Without VPs. Don’t Underhire Here. Everything in SaaS starts to get pretty complicated around $4m-$5m. Too many customers, too many workflows, too many marketing programs, too many salespeople. Without a VP to head each functional area, you will hit a wall. Exactly when, varies. The faster you grow, the longer it takes to show up in the numbers.
  3. Insanely Happy Customers Carry You Really Far. And Especially, After $10m in ARR or So. An NPS of 50+, a CSAT of 90–100, whatever metrics you use, find out if your customers are really happy. SaaS companies with super happy customers many inertia after $10m ARR. SaaS companies with somewhat happy, or many unhappy customers, start to get bogged down there. More here: Why Some SaaS Companies Stall Out at $20m ARR
  4. $10m ARR + Net Negative Churn + 80% Growth + Great CEO = Unstoppable. You really can get from $10m to $100m in ARR with a high degree of certainty with a great CEO, happy customers, and at least decent growth. It won’t feel like it, but you’ll look back at this stage (~$10m ARR) and see it’s where everything came together from a brand, community, retention, etc. perspective.
  5. Competition is The Root of All High Burn Rates. It’s hard to tell early, because it will seem like you are winning so many deals. But that’s only because you aren’t in many deals. As you cross $10m and $20m, you’ll feel a lot more competition. How directly you take that competition is on, is up to you. But taking them on will drive your burn rate way up. More here: https://www.saastr.com/in-saas-y…
  6. At $20m ARR or so, You’ll Start Getting Disrupted Yourself. Slowly but Surely. Eventually, your 1.0 paradigm will get old itself. You were a disruptor, but if you don’t evolve every 4–5 years, you’ll start to get disrupted. Be paranoid here. Reinvent your company every 4–5 years.

A good overview of the learnings of scaling from $1m to $250m in ARR with Aaron Levie of Box here:

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Published on June 28, 2017
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