This post is by Jason Lemkin from SaaStr
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When I was CEO at EchoSign, I made a big strategic error in Year 1. I set an insane plan of going from $0m to $2m in ARR in our first 12 months in business. It wasn’t because I couldn’t build a model — the model was sound. The mistake was a combination of not knowing enough about SaaS back then, and also having incredible confidence in the team’s past track record. I thought we had the best of the best and we’d hit the number for sure. There was no doubt in my mind, in fact. And of course we didn’t get to $2m by Day 365. But we did hit almost $200k in Year 1. It wasn’t something, and it wasn’t that terrible, relative to the times, in Year 1 from launch. But the team was dejected. It quickly became
even with paying customers in our first weeks after launch on TechCrunch, that we’d never hit the $2m plan. And that worse, we’d probably run out of money because of it. The team fought and squabbled and became dejected. One founder quit. Another fired another founder without talking about it first. It was tough. I didn’t know what to do, exactly. First, I did everything humanly possible to help. I got out of the office and closed BT, Dell, GE, Qualcomm, and other Global 2000 leaders in Year 1. I did every piece of press and PR I could think of. I spoke at any event. I won every award you could. I found a great first VP of Marketing in Year 1. And even with all of that, it wasn’t enough. So I came up with micromilestones out of desperation. And since then, I’ve seen other CEOs and founder successfully adopt the same strategy, especially in the $0m-$2m or so ARR days, and often even later. What is a micromilestone? It’s:
- A tangible milestone that can be hit in the next 2-6 months, given the reality of where you are today
- That supports your revenue goals for the year, but
- Is abstracted away from that longer-term revenue goal, either by metric or timing, or both.
- Going from 10 to 20 customers. Then 20 to 40. And then 40 to 100 customers. I love this one in the early days. 10 customers may only be enough money to pay for a few lunches. But going from 10 to 20 customers will double your team’s knowledge of the market. And 20 to 40 will do the same. So maybe make doubling customers in the early days a micromilestone. You can get there soon enough — and get a free team education while you go.
- Revenue under management. This one only really works with fintech or revenue management-related products. But the team gets excited when you manage $100m in revenue. Even if that’s only $500k in ARR to you.
- $100k in Bookings A Month. Then $250k. Etc. Picking a new “high water mark” for bookings in month is a great way to align the team, even if the month-over-month growth isn’t Slack-like yet. If you closed say $60k last month, set a micromilestone of $100k. You’ll get there at some point.
- Paying Customers. I did a bit of this, too, see above. But growing your customer number can be a way to get the team excited, even if many are small, or come and go, etc.
- Driving NPS Up to a Key Number/Goal. Driving NPS up to say 50 can inspire the team to improve everything. This will benefit revenue. Even if it takes a little while, or even, a longer while.