The hardest phase in SaaS is scaling from $1MM to $10MM.

‍

You can brute-force your way to $1MM. Founder-led selling. Doing things that don’t scale. Etc.

‍

It’s like playing a solo trumpet on the street corner. 

‍

You will sound beautiful, but you aren’t going to attract a huge crowd.

‍

If you want to fill an auditorium, you are going to need more than a trumpet.

‍

You need an orchestra.

‍

That’s what it is like going from $1MM to $10MM.

‍

Once you hit $10MM, things get a bit easier. 

‍

You have a brand, even if it’s a small one. You have a leadership team. Your culture has taken a shape. You have referrals coming in from happy customers. You have cashflow that you can invest in new products and new revenue channels.

‍

At $10MM you are also more attractive to other companies that want to buy a business. The universe of buyers opens up once you have some scale to the business and you can project revenue growth.

‍

It’s no wonder that every company wants to get from $1MM to $10MM as quickly as possible.

‍

It took us 63 months to scale Levelset from $1MM to $10MM.

‍

We could have done it faster, but we made a ton of mistakes along the way.

‍

If I had to do it in less than 36 months, this is how I would do it:

‍

The path from $1MM to $10MM by the numbers

‍

First, let’s look at the math. In order to go from $1MM to $10MM in 36 months, you must grow 6.6% per month.

‍

That may seem easy when you are at $1MM and you just need to get another $66k in net new revenue the next month. 

‍

It’s much harder when you are at $8MM and you need to get $500k the next month.

‍

Here’s what the net new ARR needs to look like each month:

‍

This is an unrealistic revenue forecast.

‍

Your bookings will be lumpy. You will have good months and bad months.

‍

But the net result is that you need to grow in your net new revenue every single month to get to $10MM in 36 months.

‍

If you go down in net new revenue from one month to the next, the growth is so much more difficult. 

‍

So how you can grow net new revenue month-over-month, every month for the next 36 months?

‍

There are really only 3 ways to get revenue to go from $1MM to $10MM.

1. Get 10x more revenue from existing customers. This path requires expanding your product or services so you can sell more to the same customers.
   
   
2. Get 10x more customers at the same average sales price. This path requires expanding your distribution so you can acquire more customers.
   
   
3. Get more customers AND more revenue per customer. 

‍

#3 is the path that most companies pursue for revenue growth, but be careful.

‍

To scale from $1MM to $10MM in 36 months, you need to acquire more customers AND increase your revenue per customer at the same time.

‍

It’s a scary, winding road that has left many SaaS companies bankrupt.

‍

But it’s possible. Here’s how you do it.

‍

Make sure your Total Addressable Market (TAM) is big enough

‍

Big markets can support fast growth. Small markets cannot.

‍

If you are trying to scale from $1MM to $10MM in 36 months, you have to sell into a big market.

‍

Your product needs to solve a real problem.

‍

At least 10,000 companies must be willing to pay money to solve that problem. 20,000 is better.

‍

Let’s take a fictional B2B SaaS company that sells its product with an average selling price of $15,000 per year.

‍

At $1MM in revenue, this company has about 65 customers.

‍

With no pricing changes over the next 36 months, the company needs 650 customers to hit $10MM in revenue.

‍

Getting 650 customers in a market of 10,000 companies means you need 6.5% of the market.

‍

There are many market headwinds and the margin for error is very small.

‍

Start with a big market to make sure you have plenty of space for growth.

‍

Get crystal-clear on the Ideal Customer Profile (ICP)

‍

When you have a big TAM, it’s easy to feel like you can sell your product to anyone.

‍

Don’t fall into this trap.

‍

Yes, it may be true that all of the companies in your market could buy your product. But it doesn’t mean that they should or will buy your product.

‍

It takes intellectual honesty for a founder to admit that their product is only a strong fit for a very specific part of the market.

‍

So be specific about which customers love your product. Look through your existing customers and write down exactly what they look like.

‍

You must be able to clearly explain how these customers use the product, how they get value, and how to find more customers that look just like them.

‍

If you are selling a $15k per year product, maintain focus on the customer that buys that product.

‍

No enterprise customers. No channel partnerships. No transactional products. Stay focused on your core customer.

‍

Become the destination for professional development for your ICP

‍

In order to scale quickly, you need to maximize every distribution channel that you can use to find customers.

‍

The best of all distribution channels is inbound. Build an audience that drives leads to your website. Work these leads to turn them into customers.

‍

The best way to build an inbound channel is to become a destination for your ICP. 

‍

Make your website the resource that your champion uses to get better at their job.

‍

This is content marketing.

‍

It’s not a “blog”. It’s different.

‍

Do not outsource this. You need to own it. You need to curate it.

‍

Think of the educational content that you deliver as part of the product. 

‍

Put a product manager on it. Make them responsible for designing a content experience that consumes the user.

‍

Build free courses, free tools, directories, libraries, resources, and templates that the ICP uses in their daily work.

‍

Surround your ICP with so much help that they see your brand as the most trusted resource in the industry.

‍

Make this part of your company DNA.

‍

This is how you create an audience.

‍

Build a community around your ICP

‍

Once you have an audience, convert that audience into a community.

‍

You are the platform where your ICP goes to get help and solve problems for their business.

‍

So create a place where your audience can connect with each other to help solve business problems.

‍

This is user-generated content that adds to the brand mass of your company.

‍

Stoke the community fire by creating ambassadors that are champions for your brand. They don’t even need to be paying customers, they just need to be active members of the community.

‍

Get on the road and meet them in person. Run events in cities across the country where community members and customers can get together and network.

‍

Community activity accelerates your customer’s connection to your brand. 

‍

It also gives you tons of valuable feedback about how you better serve your core customer.

‍

Obsess over the customer experience

‍

Now that you have an audience, and a community, you can listen and learn exactly how to get more revenue from more customers.

‍

Become obsessed with the customer experience. Understand their challenges at the deepest levels.

‍

Listen to customer feedback and iterate on the product. Use the community as your sounding board. Create a customer advisory board to steward the product development.

‍

The customer feedback tells you exactly what products you need to build next. It shows you what language to use in your marketing materials and sales pitch.

‍

Caution: Your team will change 6 times in 3 years

‍

So many things about a business change in 63 months. The team, the leadership, the culture, the product, the customer-base, the brand. It’s a totally different company by the time you get to $10MM.

‍

It goes without saying that you must have a strong founder and supporting executive team to grow this quickly.

‍

Turnover at any level of the organization slows your growth. And a toxic culture makes the company less durable.

‍

Every 6 months, it will feel like a totally different business. 

‍

From $1M - $3M you implement a real management layer. No more flat management structure. Some people get promoted, others get offended. 

‍

Managing this transition is hardest for many early-stage companies. 

‍

That’s why so many companies stall-out at <$5MM in revenue.

‍

Somewhere around $6M you start bringing on real executives, VPs who have “been there” and “done that”. You need a real HR function and the anonymous Glassdoor reviews start piling up.

‍

As you approach $10MM, the founder spends less time in the business working with customers. They rely on their executive team to manage the business. 

‍

Instead the founder focuses on the strategic vision for the business. They spend time recruiting more key talent and raising capital. They find ways to expand the market for the business by adding new distribution channels or new products. 

‍

That is so much growth in a very short period. To grow 10x in 3 years, you need people that are committed and capable of also growing 10x in 3 years.

‍

Make sure you have 10x people on the team. You can’t afford to have anything less.

‍

A final note: is this even possible?

‍

Yes, this still works. Even in 2024.

‍

You may find companies that can do it without venture capital funding, but they already have a large audience.

‍

You may find companies that can do it without a large audience to start, but they are going to burn a lot of capital to build the demand.

‍

There are very, very few situations where a company goes viral and scales super quickly without a ton of capital or a big audience. Companies like Deel, Slack, or Groupon come to mind. These are once-in-a-generation companies. 

‍

Each of these companies inevitably build a large audience and raise capital from investors to grow faster.

‍

And your $1MM business is probably not a once-in-a-generation company, so don’t get distracted by these outliers.

‍

Focus on what you can control. Focus on your TAM, your ICP, your customer, your audience, your community, your customer experience, and your product. That’s what lies at the heart of scaling quickly.

‍

That’s how you create an orchestra for your business and scale from $1MM to $10MM in 36 months.