Ever dreamed of achieving $10 million in annual recurring revenue (ARR)? Jason Lemkin, the Founder and CEO of SaaStr, the world’s largest community of SaaS executives, founders, and entrepreneurs, says that not only can you, you can probably do so faster than you thought possible. At the 2019 Traction Conference, Jason presented a list of actionable steps companies can take to supercharge growth and hit that target in no time.
Scroll down to check out his advice and to see a recording of his presentation.
1. Once you hit $1million ARR, start hiring all the VPs you need straight away
Good VPs can transform your business, so don’t delay in hiring the best ones you can. Once you reach $1 million in annual sales, you’re absolutely ready for a VP of sales. In fact, even $20,000 in monthly recurring revenue isn’t too early for a VP, because a good one can generate better qualified leads and turn just a handful of customers into hundreds of them.
Jason recommends hiring early. A VP of customer success can make your net promoter score (NPS) shoot up in just one quarter and grow your customer accounts. Meanwhile a VP of product can make sure your biggest prospects and customers are happier, help teams close and upsell, and encourage customers to buy more and renew at higher rates.
2. Make driving up NPS a top company goal
Around two-and-a-half years in, startups often hit the low NPS wall. They experience churn and start to realize just how much renewals, word of mouth, and upsells matter. When this happens, turn to your employees. No matter how big or small your team is, everyone will have ideas on how to improve your NPS. That might be something as simple as adding the helpful phone numbers to your website, or something more complicated like visiting customers in person or reducing your customer ticket times.
3. Take the friction out of sales by letting customers buy the way they want to
With so many vendors out there, and so many products, why should customers buy from you? Jason says that on average, SaaS customers have already purchased 163 apps, so they’re smart when it comes to buying. They know what their apps should do and what they should cost. For that reason, it’s important to let them buy your product exactly how they want to buy it.
In 2019, that means that buying has to be easier than deploying. You need to allow and encourage downgrading and let customers buy the way they want to. No one wants to pay for 100 seats when they only use 20. Even Slack auto-downgrades, Jason points out.
4. Specialize your sales team
As you grow you’re going to want openers, middlers, closers, and retainers to match the customer life cycle. With sales, Jason says you need to start segmenting by vertical, timeframe, and size, as soon as possible.
Give the quick closers the leads that promise to close quickly. Give the closers who are more consultative the big ones. Meanwhile, make sure the VP of sales is recruiting and backfilling the team, not doing sales or creating marketing collateral.
And when it comes to hiring, Jason recommends that you train at least the first two reps yourself. Even if you don’t have a lot of money, it doesn’t cost anything but time to train them. And it’s worth doing. If you don’t train them, they won’t perform.
5. Force yourself to spend at least 20 percent of your time on recruiting
It’s all about the team you build, Jason says. Although most founders hate recruiting, it’s a necessary evil and you need to spend time on it.
If you have 100 customers, it’s the team you build that’s going to get you to 1,000. If nothing else, force yourself to interview 30 candidates for every position. Whether it’s through hacking, LinkedIn, or recruiters, you should be spending at least 20 percent of your time on recruiting. It’s exhausting, but if you force yourself to meet 30 people for every position you fill, magic will happen.
6. Keep $1 on your balance sheet for every $2 of ARR
If you don’t have 50 cents in the bank for every $1 of ARR you’re earning, you could be in trouble. Everything will seem expensive and you’ll hold out on hiring the people you need. If you don’t have sufficient funds in the bank when you go from $1 million to $10 million, you’ll be hesitant to hire the creative talent you need, just when you need them the most.
7. Staff up business development and partner early
Customers and partners love to meet with the CEO, but Jason explains that CEOs are generally great at creating relationships, but terrible at maintaining them. He suggests assigning one person full-time to your first two big enterprise customers to make sure important relationships flourish.
Make it someone’s sole responsibility to penetrate and work with your enterprise customers because if you don’t, your competitors will. Remember, relationships matter more than ever today and any good will you have with your customers will evaporate if you let your relationships lapse. The bottom line is that as soon as you have big customers, you have to shower them with love.
8. Don’t forget to market to your existing customers
Once you reach 100 customers, Jason recommends that you hire someone who’s dedicated to marketing to your existing customers. Instead of focusing all your attention on prospects, he says that it’s important to focus part of your energy on retaining customers and building ongoing relationships with them.
Marketing doesn’t end when you close a customer. Rather, it’s just the beginning of a journey that could last 10 years or more. In SaaS, you want positive retention and negative churn, so don’t spend at least 30 percent of your marketing budget post sales.
9. Invest heavily in your brand
Brands matter, especially in SaaS, Jason says. People make purchasing decisions based on your company’s brand. Unfortunately, most companies don’t invest enough in their brand. If you’re number one or two in your industry, and have a strong brand, your company will take off through word of mouth alone. If you don’t have a strong brand, however, you’ll be in a much more difficult position. Once you’ve gone to the trouble of creating a strong brand, protect it religiously. Host customer conferences, take out billboards, and spend the money it takes to constantly reinforce it.
For more advice on getting to $10 million in ARR faster, check out Jason’s full presentation: