The $100 million annual recurring revenue mark is a significant milestone for SaaS companies that signifies sustainable company growth. While every startup wants to hit this number as soon as possible, it’s a process that takes time. According to Kimchi Hill, on average it takes 4.5 years to hit the $10 million ARR mark and at least 50 percent of companies take between 5 and 10 years to finally hit $100 million ARR.
Successfully scaling your SaaS business takes time, dedication, and the right business strategy. Below are some tips you can use to scale your business and achieve startup growth.
Recognize when you’re ready to scale
The path to the first $1 million ARR is when most SaaS startups go through a strong learning phase. As you work toward $1 million ARR, you should be learning what works for your company and what doesn’t. For example, by the time you hit $1 million ARR, you should have determined the right product for your market, identified new customer leads, secured long-term business contracts, and have repeat customers, just to name a few. If you’ve seen consistent growth for a least two years in addition to ironing out your business strategy, you should be ready to scale your business.
Avoid common mistakes
Scaling a SaaS company takes skill and not all startups follow best practices. There are a number of common mistakes seen in the SaaS startup realm, but below are the top four you should avoid as you work to scale your business.
Startups are eager to attract customers, and a common strategy they’ll use to gain customers is discounts. People love discount deals, so it can be tempting to offer big discounts to bring more people to your service. The problem, however, is that SaaS companies start offering excessive discounts which can lead to attracting the wrong audience for the product and undervaluing the service. Instead of focusing on discounts, create a plan that includes customer incentives instead. This way customers are still encouraged to purchase the product, but you’re not giving away too much.
A common fallacy among startups is that new customers are more valuable than current customers. This is simply not true. Customer retention is a huge aspect of business success. Your current customers can bring you repeat business, and they’re also a valuable source of referral business. Too often startups become overly focused on acquiring new clients or leads and forget to give their current customers the best experience possible.
Hiring decisions are always difficult, but startups seem to have an especially hard time finding the right people. The main problem is that startups tend to focus too much on technical skills and not enough on candidate qualities and culture fit. SaaS startups have unique cultures and expectations that employees need to understand and accept before being hired. If you’re adding new positions to your team, make sure you review candidate characteristics in addition to their overall experience and background.
Growth hacking has become such a buzzword in the startup scene. Startup leaders are trying to figure out the fastest way to achieve rapid growth, but don’t be fooled by growth hacking strategies. There are several problems that startups run into when attempting to growth-hack their business. First, growth hacking often involves a number of shortcuts which leads to missed learning opportunities. Second, by scaling too rapidly, startups can’t keep up internally with growth and the management of the company falls apart. Finally, growth hacking often leaves customers feeling unheard and undervalued. All this to say, shortcuts will have a negative impact on your SaaS company long-term if you try to growth hack your startup.
Build your employee base
A major aspect of scaling is effectively growing various teams. In particular, the $10 million ARR mark is typically when startups begin to hire middle managers to oversee more of the business process and separate C-suite leaders from the general business process.
Adding another layer of sales management is also done at this time and can be especially difficult. Startup CEOs are accustomed to being involved in the sales process, but now the crucial role of managing sales falls on the VP of sales and department managers. The sales department needs particular attention as the startup scales and becomes larger, too. By the time you hit $10 million in ARR your company should have a dedicated sales team with a reliable sales pipeline in place for acquiring and driving business. As your startup grows, make sure you’re not neglecting this vital growth department.
Demand generation marketing strategies are tactics used to generate interest and demand for a company’s products or services.
Demand generation can include a variety of communication channels from blog posts and social media messaging to targeted promotions and list creation. When all is said and done, demand gen is typically involved in every aspect of a business’s sales funnel. Every marketing strategy should include some sort of demand generation process for attracting people to the brand and pushing them through the sales funnel.
Demand generation is the focus of targeted marketing programs to drive awareness and interest in a company’s products and/or services.
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A lot of companies actually mistake demand gen for lead generation. These two terms, while related, are not the same thing. Lead generation refers to a specific subset of demand gen. Demand gen attracts people to business and piques interest in the overall brand, product, or service. Lead gen then comes in and turns the interested parties into more concrete sales leads by collecting contact information.
Every company needs some form of lead generation if they want to continue growing and to see success. Without lead generation, targeted marketing efforts are much more difficult. Once the lead generation is complete, demand gen takes back over to continue pushing people down the sales cycle with more targeted content and value.
The problem with demand gen is that it takes a lot more work and manpower to accomplish successfully than businesses realize. This is not a process that can be managed by a single employee. To properly run a demand gen strategy, you need a full team or department working on the process.
In marketing, lead generation is the initiation of consumer interest or enquiry into products or services of a business. Leads can be created for purposes such as list building, e-newsletter list acquisition or for sales leads
One main role of the demand gen team or department is to bridge the gap between marketing and sales. The overall demand gen campaign process includes multiple components that require a lot of work. A few of aspects of demand gen covered by the demand team are listed below:
The demand gen team is constantly reviewing customer insights to ensure the sales funnel is working appropriately. By monitoring what works and what doesn’t, the team can tweak the marketing strategy as necessary to continue generating growth and sales.
The sales funnel encompasses many key metrics, all of which should be tracked by your company. Detailing customer experiences, engagements, and decisions can lead to more efficient and accurate campaigns in the future.
The demand generation team knows not only what to say to potential customers but also how to say it. Value and customer-relevant information are conveyed through a variety of content delivery systems. Each message must be carefully constructed and targeted to convey the most important information to customers.
In today’s tech-heavy world, companies have a number of delivery systems they can use for reaching customers. Email, social media, blog content, and advertisements are all content delivery options available to your company. A demand gen team knows which delivery system is best for your content and goals.
Revenue generation is one of the most important activities any business can engage in. It is defined as a process by which a company plans how to market and sell its products or services, in order to generate income.
There are two positions in the C-suite that facilitate the overall success of the demand generation team. These two positions are chief growth officer (CGO) and chief revenue officer (CRO). A CGO monitors all aspects of the business that help drive growth and the CRO is responsible for ensuring the company is leveraging all marketing opportunities to generate the most sales. Together, these two leadership roles help shape and drive the overall marketing strategy involved in demand generation.
Under these two important positions you’ll often find the VP sales and the VP marketing. The vice presidents of these two departments are responsible for overseeing the demand generation process, from strategy to revenue goals. These two positions help create the overall demand gen campaign funnel and monitor the progress to ensure metrics are being hit. https://cowenpartners.com/sales-marketing/embed/#?secret=qWs9cSA7VF
Finally, you have marketing managers and sales development representatives. These team members are responsible for executing the overall demand gen strategy and nurturing potential customers throughout the sales cycle.
These positions are just a few of the main roles needed for a successful demand generation team. Since demand generation touches on sales and marketing, you need people who can confidently handle every part of customer development. In addition to managing customer development and business growth, you also need leaders in these positions who can work well together throughout the sales cycle. Demand gen teams can struggle when sales representatives and marketing managers fail to communicate important data insights and value propositions.
A demand generation team is a must for the future success of your business. Determine which essential demand gen positions are missing from your company and fill those roles as soon as possible so you can see an improvement in company growth.
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