Why If You Can Get to $10m ARR, You Can Get To $300m ARR

Why If You Can Get to $10m ARR, You Can Get To $300m ARR.  Whoa.

That may sound controversial, or even silly.  VCs may mock this.  But hold on.  Let me prove it to you.

If you can get to $10m ARR, with positive revenue retention, you can indeed get to $300m ARR.  In fact, the odds might even be seen as high.

How can that be?  It’s just math.  Three factors combining together:

  • First, the overall market for SaaS continues to grow.  It will more than 2x over the next 5 years, and then likely double again.  See the below chart from Gartner.  So riding this wave alone should 2x your revenue, maybe even 4x it.

  • Second, you’ll likely 5x your market share over the next 5 years.  At $10m ARR, very few of us have even 1% market share of our truly addressable market.  Over the next 5 years at least, and probably much faster, you’ll 5x that market share.  At least to 5%!  And maybe, over time, significantly more.
  • Third, you’ll find a way to 3x your average deal size over time.  Most of us do.  By selling to larger groups, by increasing pricing a smidge, by adding more value.  Even by $2m in ARR, you’ve probably already figured out a way to drive up deal size a little more.  You’ll keep figuring it out.

Plus …

  • And Fourth, if you have net negative churn — your accounts will grow dramatically over time.  Net negative churn compounds.  A lot, over 5+ years.  Your ARR may just double from this alone, maybe much more.  It’s the main engine of growth for SaaS IPO success stories like PagerDuty.  This multiplier may have overlap with the prior point however (i.e., if the main way you grow deal size is from existing account growth).

So … if you just keep doing what you’re doing well, keep the net churn negative, then wherever you are today, should grow 2 x 5 x 3.  That’s 30x, without the account growth.  It could be 60x-100x with account growth.

$10m ARR today x 30 = $300m ARR.

You can play with the math a bit here yourself:

 

Sounds crazy.  And it may well take longer than you think.  But calmly do the math, and see if you believe.  At least believe its possible.  And then go long.

It’s why all the Cloud leaders today are marching to $1B+ in ARR or have blown past it, from Zendesk to Twilio to Hubspot and more.  More on that here.

I don’t know how long it will take.  I don’t know if you’ve built a strong enough team yet to really execute here.  But I do know that if you hit $10m ARR with 100%+ net revenue retention, and happy customers … well, it can be you, too.

SaaS eSignature Market: From $1 Million in 2006 to $1 Billion in 2018

 

Published on January 2, 2020

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