Dear SaaStr: We Are Growing Too Fast to Handle the Workload, but We Can’t Afford to Hire New Employees. What’s wrong with our business model?
Nothing. We’ve all been there. Almost all of us, at least.
In SaaS, this typically happens somewhere between $3m and $8m in ARR or so … finally, you have enough customers, enough of a mini-brand, enough going on to get the flywheel going … but all of a sudden, it’s too much for the team.
- You can either try to raise money now, or you can power through it. It will be hard. There won’t be enough engineers, enough customer success, enough marketing dollars, enough salespeople. Everyone will get a bit ragged in this phase.
- It tends to get toughest around 40–50 folks … that’s the core of a full first team. But — there’s no room for redundancy. You lose anyone good, man, you are in tough place.
- But as you get to $10m ARR, it gets easier. You can hire enough folks for redundancy. You can hire enough managers and enough VPs.
Hang tough until the cavalry comes around $10m ARR. Or raise a few more dollars, if you can.
As you cross $10m ARR or so, assuming you are pure software and have 80%+ gross margins, that’s $8m+ a year in funding, in essence. And if you are growing say 60% at $10m ARR, that’s another $4m-$5m net of expenses you can invest. Put half or more into hiring.
The cavalry is coming, enough cash to make more hires. But often not until $8m-$10m ARR or so.
More here: From Initial Traction to Initial Scale (~$10M in ARR): The Hardest…
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Jason Lemkin, Khareem Sudlow
