Dear SaaStr: What’s the Harder Part About SaaS Companies, At Each Stage?
The hardest part changes every 12–24 months, and the whole company changes every 30-36 months or so.
But a few thoughts on “the hardest part” for the first few stages:
- From $1-$100k in ARR, the hardest part is often how little revenue you get from each customer. Most SaaS products are inexpensive. You work so, so hard to close 100 customers … at $10/mo/customer … and that’s only $1,000 a month! Not enough to pay even a single salary. So much work, so little revenue.
- From $100k-$1m in ARR, the hardest part is how slow it is. It seems to take too long to get anywhere. Yes, you now know how to make customers successful and happy now. But it is so slow. You have 2,000 customers now. But at $10/mo, that’s still just $20,000 a month. Enough to pay some salaries and AWS bills, but it’s not that much. And each month, you barely add enough new revenue to hire just one of those great engineers you need.
- From $1m-$10m in ARR, the hardest part is you don’t have enough people or patience. You finally sort of get the formula working, but you need 2x-4x the number of people you can afford, or even find.
- From $10m-$40m in ARR, the hardest part is growing fast enough. At this point, your customers start to generate most of your growth going forward, and you know you’ll grow XX% a year, more or less. The hard part is growing 20% faster than that. So much work and stress to grow a smidge faster.
- From $40m-$100m in ARR, the hardest part is rebuilding the team. Again. And human churn. Here, you often have to start hiring B players because you just need so many people. And team members start to leave routinely. Your life becomes all about recruiting, even more than it was. It’s harder to find that Magical VP that can make a huge difference. You start making up for it in volume — with headcount.
- At $100m+ in ARR, the hardest part is you have to add a Unicorn each year. If you are at $100m in ARR, and your goal is to grow $50m next year … that’s an entire, new, super-successful start-up itself! The absolute numbers begin to weigh on you after $100m+ in ARR. It’s just so much revenue to add in absolute terms.
- At $1B+ ARR, the hardest part is you have to be so Multi-Product that you are really running 2-5 SaaS companies. Something it took us a while to figure out.
(note: an updated SaaStr Classic post)
A related post here:
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Jason Lemkin, Khareem Sudlow
