Scaling from $0 in ARR to $10MM in ARR is the most challenging phase of an early stage SaaS business. Getting an idea off the ground, getting your first customer, hiring your first few team members, hiring or promoting your first leaders, scaling your team and culture. It’s hard work and it takes years for most companies. Getting to $10MM faster requires founders and sales leaders to be disciplined in how they go-to-market with the product.

Let’s explore the different phases of growth on the path to $10MM and outline what your sales team might look like along the way

Do you know your customer?

There are many ways to design your go-to-market strategy. The type of GTM tactics you use is highly dependent on the customer type and the average sales price (ASP) of your product. The larger the ASP, the fewer customers you need to build a real business.

Many founders are looking to raise venture capital funding without fully understanding what it means to be a fundable business. Venture capital relies on power laws, which means a small number of investments in a portfolio generates the vast majority of returns. For this to be true, each business needs a path to being valued at $1B+. Current SaaS multiples for late-stage growth technology companies are 8-10x revenue run rate (the current month of revenue x 12 months). The math is simple: you need at least $100MM in revenue to get a $1B+ valuation.

Let’s work backward from this $100MM goal, since that’s what you need to hit your $1B valuation. Cristoph Janz has a great article from 2014 that shows 5 ways to get to $100M:

1. Enterprise: 1,000 customers at $100k per year
2. Mid-Market: 10,000 customers at $10k per year
3. Small-Business:100,000 customers at $1k per year
4. Consumer/Prosumer: 1,000,000 customers at $100 per year
5. Advertising/Monetization: 10,000,000 “customers” at $10 per year

You can imagine the products that serve each of these types of markets. Building a product that a company buys for $100k per year requires lots of time and money. The customers are sophisticated and the sales process to acquire those customers is expensive.

On the flip-side, building a product that an individual pays $100 per year to use is much less expensive and time consuming. Building the customer base requires totally different sales and marketing tactics compared to a product that sells to large enterprises.

This may sound obvious when it is laid out so clearly, but many founders get this wrong. They try to sell to both large and small businesses at the same time. They use enterprise (read: “expensive”) GTM tactics for a small-business customer and a low product price point. They choose a market that doesn’t have a large Total Addressable Market (TAM) to achieve revenue targets. The list goes on.

The market, the customer, the product, and the price point must all be aligned to get to $100MM in ARR. We call this elusive state “product-market-fit”. It’s difficult to grow revenue even when you have product-market-fit, because your go-to-market strategy and tactics change as you scale your business.

It all starts with your beachhead to the market, your first customer. Make sure you have your go-to-market strategy set up to serve this customer so that you can get traction as quickly as possible.

Here are some ways to structure your go-to-market at each stage of scale. For the purpose of this article, I assume you are building a B2B SaaS business that sells to a large market with a $10k per year price point.

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Under $100K ARR - Will people buy this?

So you have built a product. You may have a customer or two, likely someone that you know or someone from your network. You need to get your first 10 customers as quickly as possible. The founder is responsible for 100% of the selling at this stage. You DEFINITELY do not need to hire a salesperson yet. Here’s why:

You don’t have the sales pitch figured out, you don’t know exactly who the customer is. You likely don’t have the product totally figured out. You are still getting feedback from customers and iterating the product to make sure it delivers on the value that you sold them. When you hire a salesperson at this stage, they are expecting you to tell them how to sell the product. If you don’t know how to do it yourself, a mercenary salesperson is not going to magically figure it out. They don’t have the time invested in building the product that you have. They don’t have the equity that you have. It’s a very low probability that a salesperson is going to help you figure it out. It could work, but it’s just unlikely.

The better bet for the founder is to put your head down and focus on getting your first 10 customers. Figure out the pitch. Get the product experience right. Make sure the customers are happy and that the price point is aligned with the value you are delivering.

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Under $1MM ARR - Can we build demand for this product?

Those first 10 customers were not easy. You had to claw and scratch your way to making them happy and successful, but now you have some traction and your customers are telling their peers about this new product that is saving them time and money.

Now that you have your first 10 customers, the race is on to get to $1MM in ARR. This requires that you sell to a bunch of companies that are not associated with you or your network. Many of your sales conversations on the path to $1MM ARR will result in objections like “now is not the right time, call us next quarter” or “come back when you have _____ feature”. Don’t take the bait.

If you can get 10 customers, you can get 100. Getting those other 90 customers requires different sales skills and a slightly different sales team than it took to get the first 10. Start thinking about how you fill your sales pipeline, how you generate demand from companies who fit your ideal customer profile.

Begin by having conversations with your first 10 customers:

• What industry are they in?
• How much revenue do they generate per year?
• How many employees do they have?
• Where are they located?
• Who are the power users?
• What is their title or role in the company?
• Who is the executive buyer?
• How did they find out about your product?
• Why did they buy the product?
• How would they describe the value of using your product?

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These are essential customer development questions that help you define your ideal customer profile and outline your TAM (how many of those customers are out there in the market). With a clear understanding of your customer and your TAM you can decide which tactics you use to drive demand for the product.

In order to get 90 customers, here’s what the funnel might look like:

4,000 leads

600 opportunities (15% conversion from leads > opportunities)

180 demos (30% conversion from opportunities > demos)

90 customers (50% conversion from demos > customers)

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Using this math, you need to generate 600 sales opportunities to get to $1MM in ARR. This is impossible to do as a 1-person sales team. At a $10k price point, consider hiring a couple of sales development reps (SDRs) to cold-call potential customers and set up sales meetings for you. You aren’t ready yet to hire your account executives (AEs) that run product demos and close business for you. this comes later. First you need to make sure you can drive enough demand for the product to source your next 90 customers.

If you are hiring SDRs to generate opportunities for you, make sure to hire two at a time.

• You might get the hire wrong. Sales hiring is a low-success-rate endeavor, especially for an early-stage company that doesn’t have the training to get young hires up to speed. It’s very unlikely that neither of your hires work out. If both work out, that’s excellent. If one doesn’t work out, at least you have another one that can generate pipeline while you find a replacement. Remember that you are working against time, the opportunity cost of not having productive SDRs is like a ball and chain for your growth.
• Teamwork is better than solo work. Sales is lonely, lots of rejection, emotionally taxing. Hiring in pairs gives each person a support that they can rely on during the tough days. On good days, winning together feels way better with someone to share your successes.
• SDRs ramp faster in teams. The two learn together, they compete with each other, they push each other to get better each day. This improves your chances of success and makes the team much happier
• SDRs become closers. Within the first 6 months, one of your SDRs will emerge as a good candidate for closing deals. You are still in the founder-selling stage, so you remain involved in almost every sale. But as you approach $1MM, you can start shifting some of the responsibility to your more ambitious SDRs that are ready to step up in their career.

Final note about SDRs, make sure you have leads for them to work. Get them from ZoomInfo if you have to. Put them on exactly the companies that you want them to call on and make sure those prospects look a lot like your first 10 customers.

In addition to hiring SDRs, this is when you layer on other channels like content marketing, search engine marketing, trade shows, etc. Be careful about trying too many channels at the same time. Content marketing is the gift that keeps on giving, get started early and stick with it for many years. Your future self will thank you. Search engine marketing is effective, but expensive. Make sure you aren’t paying too much for your leads. Stay away from trade shows unless you have existing customers who already plan to be in attendance.

There are many ways to generate demand, find the one that works for your customer and product and push as hard as you can until you get your first $1MM.

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Under $10MM ARR - Can we build a team that sells this product with predictability?

You did it, you hit $1MM ARR. You have the beginnings of product-market fit. You have salespeople on your team who are generating demand. Perhaps some of them are closing deals on their own. You likely have enough sales and customer data to put together your first look at your business’ unit economics - David Skok wrote the canon on how to use these metrics to measure your business.

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There are 3 metrics that are most important:

• Customer Acquisition Cost (CAC) - the cost to acquire a typical customer
• Lifetime Value (LTV) - the lifetime value of a typical customer
• Months-to-Recover CAC (MTR) - the month

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Using these three metrics, you can measure against these benchmarks:

1. LTV should be at least 3x your CAC.
2. MTR should be 12 months or less.

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Once you have hit $1MM, you can start measuring these things with some reliability. It’s tough to do earlier than $1MM because there isn’t enough data to make the numbers real.

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So you understand your metrics, now start thinking about building your first real sales team with an eye on predictable and repeatable growth. This is tough because sales teams generally lose efficiency as they get bigger. For example, the founder is going to have a better demo-close rate than a newly hired AE. It’s not all bad, your brand improves and your marketing starts to work. Referrals come in from existing customers. The sum of all of these efforts is that your unit economics at $1MM should stay the same or get better as you approach $10MM.

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You may be tempted to go hire a VP of sales or a sales leader to build your sales team. This is the wrong move. It’s the founder’s job to get those first few critical salespeople into place before hiring a sales leader. You wouldn’t hire a salesperson to sell a product before you have figured out how to sell it. So don’t hire a sales leader to come and build a team before you have figured out if a team actually works.

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Start with one sales pod: 1 Sales Development Rep, 2 Account Executives, 1 Customer Success Manager. The responsibilities for each are as follows:

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Each SDR is responsible for booking 10 demos per month, these are shared across the two AEs

Each AE carries a $50k per month ($600k per year) quota, they are responsible for sourcing 50% of their pipeline each month

Each Customer Success Manager is responsible for a portfolio of $1MM - $2.5MM in ARR.

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The On-Target-Earnings for each role:
SDR: $60,000 ($40k base, $20k variable)

AE: $120,000 ($60k base, $60k variable)

CSM: $100,000 ($80k base, $20k variable)

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This sales pod costs $400k in OTE. Fully loaded costs (healthcare, tech, overhead, etc.) are closer to $480k.

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Fully-loaded costs: $480k

Revenue responsibility: $1.2MM

Cost of Sales at 100% of quota: 40%

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This is a good structure to think about funding your first sales pod. It is the founder’s job to assemble this team and to get them productive. Once you have hit 3-4 months of reps hitting their quota, you can start thinking about expanding to 2 or more pods of the same structure.

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Start recruiting your Head of Sales once you have a few reps hitting quota consistently and the handoff to customer success is going smoothly (customers are happy). This is the perfect time to handoff the sales leadership responsibility to someone who has done it before. Resist the temptation to promote your star salesperson. If your top-performer really is a sales leader, it will be obvious in how they interact with others on the team. This is rare, but it does happen and it is wonderful.

After $2MM in ARR or 200 customers, whichever comes first, split your sales efforts into new logo sales and expansion selling. Customer Success should not be responsible for upsell and expansion. They are the relationship manager and should remain focused on being a trusted advisor. Put a salesperson in the seat to manage upsell, expansion selling, and renewal conversations. This lets each person focus on the activities that are aligned with their skills. The result is a better customer experience and more revenue. Most companies don’t specialize until way later in the business. Do this as early as possible for your team. It takes some time to get right, but your growth accelerates significantly once your upsell motion is working.

The road from $1MM to $10MM in ARR is a slog. Most SaaS companies stall in the $2MM - $5MM range. They run out of TAM. They can’t hire the right leaders. They don’t invest enough in customer success. They run into churn problems.

The companies that push through to $10MM usually have the same things in common:
- Huge TAM

- Happy Customers

- Reliable product

- Healthy and positive team culture

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Founders in this stage shift from being a product/sales/marketing/technical leader to really becoming an executive and leader of people. Your go-to-market structure has a good foundation and the company should be focused on getting to $10MM as soon as possible.

Fight the urge to move upmarket too early, or to expand products to sell down-market. Just focus your sales and marketing efforts on your core customer, if there are enough of them, and you’ll be there in a few years or less. Focus on hiring the right people so that your culture evolves and gets stronger. Focus on building more product that is useful for your core customer. This is the way to grow quickly in the early stages.

As you approach $10MM ARR, you invest more in Revenue Operations so you can measure funnel performance, pipeline, forecasting etc. You build sales enablement for your existing sales team. You build a training program to enable and onboard new hires. You add new tech to your sales and marketing tech stack. You build a recruiting function to make sure you are sourcing the right talent for your team. All of these things are important, but they are less important than getting the team structure and GTM strategy right. The best technology in the world is not going to close customers for you. That’s where the team and the strategy are paramount

Getting to $10MM is perhaps the hardest part of scaling a business, but as Jason Lemkin says “the cavalry is coming”. Don’t give up. It gets better so long as you keep pushing.

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After $10MM ARR - How big can this thing get?

Once you have hit $10MM, you are a real company. The game changes. You have a brand and you have customer gravity. You continue scaling your primary go-to-market structure but you may start to think about adding a segment (enterprise sales, for example) or expanding to a new vertical.

The challenges continue but they are different. Your focus shifts to the company vision, product strategy, and how you can get from $10MM to $100MM as quickly as possible. This requires new executives mixed in with your existing leadership team. It may require some of your leaders to be “layered” because they can’t level up into the role you need them to fill. You become more of a motivator, recruiter, and politician than you ever have been in your life. This is what the business requires of its founder as the company gets bigger. You are no longer a tactician. You are the inspirational leader.

Don’t be fooled by this leadership evolution. It’s important to always have your finger on the pulse of your company’s Go-To-Market. No one in the company knows the customer how you know the customer. No one has the vision that you have. To continue scaling quickly, you have to remain close to the customer because the customer only cares about what you can do for them.