From $0 and 3 people to $30 million and 50 employees
2 years ago my CEO sold his company for $30 million. It took him 8 years to scale his business from literally $0 and 3 people in a tiny office to $30 million and nearly 50 full-time employees in a high-rise downtown. When he started, he was hoping to sell within 5 years.
As the old saying goes: “If you want a cat, ask for a tiger.” I’m pretty sure my CEO not only wanted to sell faster, he probably had a higher valuation in mind, closer to $100 million. Yet because he had this crazy goal, he knew that even if he missed by a lot (60%), he would still be well off. If you shoot for the moon, even if you miss you’ll land on the stars.
In this article, I want to give you insights on what it takes to grow from $0 to tens of millions and build a team and a company along the way. This article is mostly aimed at Saas (Software as a service) companies and startups, because that’s the field I work in and that’s what my CEO built. That being said, you’ll find a lot of the advice relevant for any type of business in general.
My CEO’s company does employee engagement. Nearly all our competitors have had a clear pricing plan for a very long time, and we somehow managed to get through almost a decade without one. As a graphic designer and the person in charge of the website (you have to be multi-skilled in a startup environment), I’ve been pushing for a clear pricing plan for ages. We did have a few campaigns and slide decks where we presented a pricing plan, but we never had anything on our website, and this can be detrimental to the business.
Especially as a Saas, 90% of your revenue or more is based on monthly or yearly recurring billing. Customers purchase your product and pay for it on a regular basis. If you don’t have a clear pricing plan in place, you’ll run into 4 main issues:
- You will miss out on converting a lot of leads into customers because people will come to your website and have no idea how much your solution costs.
- Potential customers won’t be able to easily enter their credit card info and/or register for a demo version of your product. The only way to try and pay for it will be to reach out to the company, again adding a lot of friction and drastically cutting down your conversion rate.
- Your sales team will struggle to be clear in their sales pitch and contracts regarding the price, because they’ll work on a case-by-case approach, always trying to upsell a customer rather than just going with the regular pricing model.
- Because of the 3 factors above, your lead-to-customer pipeline will be extremely long (often many months), and it will slow down your scale-up process.
Having a pricing plan, a simple sign-up page with credit card info and a demo version from the get-go is very important. You can always update the pricing plan later, change the demo limitations, only allow for yearly billing…
These days it feels like only Silicon Valley unicorns are not short on tech resources because number one, they have the money to afford them and number two, everybody wants to work for them.
My CEO’s company has always been short on tech guys, but at times it got almost comical. The deadlines kept being pushed, as soon as a big feature came out we’d celebrate, and then the customer support team would come back with 10 negative reviews from customers. Some easy-to-fix bugs that had been around for ages never got fixed because nobody had time for it. There was also a time we had a pretty high turnover on the tech team, and projects kept being passed on from one person to the other, adding confusion to the mix.
The tech team is the brain of the company, and if it’s not doing well a lot of things are usually going wrong. Good tech guys are expensive, but they’re one of the best investments you can make for your business. A happy tech guy makes a lot of money, has exciting projects to work on, and a great team to achieve goals. Sure, this should be the case with any team that’s part of the company. But again you can’t scale up if tech is not doing okay, so you need to start there.
I was hesitating to include this part in the previous section about tech, but I think this is so utterly important it deserves its own chapter. I was on the phone with a very good friend of mine the other day, who works for a Saas company that provides health and fitness software for businesses that own gym franchises. This is how our conversation went:
Me: So how is work lately, exciting projects?
Friend: Not really, we’re working on this new feature and the whole organisation around it is just hell, it’s a total mess.
Me: What? How’s that?! Normally new features are fun and exciting, it’s part of making progress!
Friend: Yeaaah… This feature was requested by this ONE customer and nobody else is going to use it, so it feels like a big waste of time and again, creates a lot of chaos.
Me: Oh nooooooooooooooooo!
“Never, ever, oh god never release customer-requested features” should be one of the top golden rules of any Saas startup. We’ve been doing it at my workplace too, and this can literally kill the company. It’s a vicious process that usually goes like this:
- One of your biggest customers mentions to the customer support team they really need this specific feature that you don’t have right now, but this competitor of yours has it.
- This biggest customer’s contract renewal date happens to be in 6 months from now. If they don’t renew, the company will lose a lot of money.
- Customer support brings up the feature request at every meeting they have with tech and marketing: “We need this, we need this, we need this.”
- Some big manager hears about it, puts it on the high-priority list, and tech implements a timeline for the project. This takes an extra month.
- Now tech has only 5 months to work on something they hadn’t planned, the whole team is stressed, the schedule is hijacked, everything else will be postponed, and other customers will feel like they haven’t been heard while others have.
In the best-case scenario, tech releases the feature on time, and the customer somewhat likes it and renews, but every other customer you have feels let down.
In the worst-case (and most common) scenario, tech ends up releasing the feature late, the customer who requested it is not happy with it, doesn’t renew, and there go 5 months of chaos for nothing, plus all the money spent on the tech team during that time. Repeat this a bunch of times and you have a dying company burning through cash on useless features.
It’s completely understandable to want to please your biggest customers as a business because you don’t want to lose them. But there is not one single company in this world that makes money by prioritizing some customers’ needs over others. There is not one company that became successful by favoring a bunch of customers and ignoring all the others.
As a Saas company, work on developing a kick-ass product that appeals to as many potential customers as possible in your industry, not on developing something that only a few big customers will want to adjust to their needs.
Lastly, don’t freak out about losing big customers. Every time this has happened to my CEO’s company, we were able to rebound with other customers, fill the financial gap, and keep scaling the business.
Instead of panicking about customers leaving, how about widening your pool of prospects, maybe even increasing your conversion rate? The more people know you’re here, the more you’ll be able to attract new customers.
Now, I’m not talking about throwing insane amounts of money down the marketing drain and wasting it all on Google and Facebook Ads for a mere 1% click rate. Instead, here is the approach I suggest:
Pick 2 or 3 communication channels maximum
Focus on a social media presence relevant to your target audience. Are your customers and decision-makers scrolling on Twitter, browsing through Linkedin, or liking Instagram posts?
Get basic video gear
1 of your communication channels HAS to be video. Whether you publish on Youtube, post 1-min bits on Linkedin, or host webinars on Livestorm, you can’t afford to not engage with your audience through video. 82% of all internet traffic will come from video, for both businesses and consumers, by the end of 2022. Investing in basic in-house video equipment and 1 or 2 marketing people focused on video making is the best way to scale up your online presence.
Publish high-quality content
Whether videos, blog posts, or even ads, your content needs to look professional. You’d be surprised how many companies out there are doing $10M+ in recurring revenue and publish terrible content, if any. If you can place yourself ahead of the big players in terms of content creation and look better than them, more and more people will come to work with you. Look at what your competition publishes, how they market themselves, and do 10x better than that.
In this article, we talked about a few elements that can hinder the development of your Saas company. At the end of the day, whether you make mistakes or only hit home runs, the money you spend to get new customers adds up to your acquisition costs.
In 2022, the best way to reduce these costs is to optimize your marketing pipeline. People don’t buy software because they get a phone call from a sales guy anymore, whether you like it or not. People buy an online solution because they’ve seen it in their social media feed, they’ve read a great blog post published by a specific company, they got access to a great demo, and were given an easy option to enter their payment information.
Switching to digital for lead acquisition also has the advantage of being able to get a clear picture of how much you’re exactly spending on leads and acquisition. Everything is stored on the cloud, and you can create dozens of different dashboards, spreadsheets, and reports to see where you spend your money versus how much is coming in.
Don’t get me wrong, sales reps are still important and relevant. They can help “seal the deal”, clearing out the last formalities, upselling/renewing… But many Saas companies are still relying too much on a sales team while they could automate a ton of things with the powers of online marketing done right.
Investing a lot of money in content creation, social media presence, a stunning website, a clear pricing plan, an online payment system… Those are some of the elements that will take your business to the next level, not hiring double the amount of sales guys.
With a little bit of luck and a lot of hard work, maybe you’ll sell your business for $30 million like my CEO did…
Good luck, and enjoy the journey.