How to 3x your ARR..
..Inside 12 months!
If you're a founder that was recently funded there's a high chance you promised you'd 3x your ARR in the next 12 months.
You did that under pressure to get the valuation you wanted in order to minimize dilution.
And 3x at series A is just what VCs expect nowadays. So fair enough (kinda 🙄).
But anyway, looking forward, how are you gonna get there?
I bet you, encouraged by your VCs and advisors, you're planning to hire?
You're going to focus on adding quantity. And you wouldn't be wrong.
But quantity takes time... ...people, leads, etc
And remember, you don't have time. 12 months will fly by.
And you'll need to 3x again in the following 12 months.
Is your head spinning yet?
Here are 8 things that will happen if you only focus on quantity
I have witnessed countless investors, advisors, founders, CEOs, CROs, and VPs of Sales myopically focus on quantity. It obviously makes sense on one level, but for such smart people to be oblivious to the axis of time in this equation has always baffled me:
1) You'll aggressively hire the wrong people.
2) You'll damage your culture in the process.
3) You'll lose the trust of your team fast.
4) The lead volume will get split amongst more salespeople leading to fewer leads per salesperson, and the confidence of your team to hit the goal will drop instantly.
5) You'll end up firing perfectly good people if they haven't walked themselves out of the door already.
6) You'll make your quantity strategy even harder to execute because hiring just got harder - people talk.
7) All the while your cash burn will increase, rapidly reducing your runway.
8) You'll have wasted precious time, and caused irreparable damage to your reputation and potentially your company's chances of success.
Focus, focus focus, on quality! Here are 5 exercises that you should run:
I routinely run exercises with my companies that develop solid points of view of the following:
Competitive landscape
Unique selling points
Compelling narrative
Ideal customer profile
Pricing
I then train my companies on running optimal sales discovery processes to ensure they beat market conversion rates.
Here are 5 things that will happen when you sharpen your focus on quality
1) Optimize time spent
Time is the biggest killer of sales & marketing productivity. Everything from having salespeople work poorly qualified leads, to salespeople wasting time on deals that were never going to close will kill the efficiency of your go-to-market operation.
It's not unreasonable to see productivity increase 50% with a more defined focus on where your teams should spend their time.
2) Optimize conversations
I guarantee your sales team are speaking with the wrong companies, and worse, the wrong people at the wrong companies. Optimizing which companies they are speaking with, and who in those companies they engaged with is a force multiplier. Me and my teams over index on this.
It's not unreasonable to see ACV increase by >100% almost overnight
3) Optimize deal value
When you're spending much more of your time speaking with ideal companies and the ideal buying personas in those companies, you significantly increase your chances of successfully acquiring a budget that can routinely be 2-3x your previous level.
4) Optimize existing relationships
Long term, if you're successful the majority of your growth will come from your existing customers, not net new revenue acquisition. If you have customers, you should be nurturing those relationships now. Lean into existing clients, the network around their organization, and leverage the equity you've built with them to uncover new opportunities. They will close much faster than net new deals.
5) Reduce cash burn
OK, so your VCs will tell you if you're not burning cash you could be growing faster. But at this stage you still need to optimize the base of your go-to-market strategy, so buying yourself time is a smart move. Get your formula right before you aggressively burn runway.
The math. How does quality increase ARR 3x?
If you're an enterprise SaaS play, you'll need to work 6-8 weeks lead time for these results using my methodologies, but these numbers are conservative, and I base them off 20+ years of at-the-coal-face enterprise sales experience and leadership, so they are very real.
Pre & post focus on quality sales productivity:
50% increase in productivity:
Deals per salesperson per quarter pre: 2
Deals per salesperson per quarter post: 3
ACV at least doubles:
Average ACV pre: $50k
Average ACV post: $100k
ARR pre:
2 deals per quarter/8 per year
ACV $50k
$100k per quarter/$400k per year
ARR post:
3 deals per quarter/12 per year
ACV $100k
$300k per quarter/$1.2m per year
At the end of the day, it's a combination of quality and quantity that wins out.
However, it continues to surprise me how many founders ravage what they've worked so hard to build, by focusing solely on quantity as soon as they get to series A, when in fact, quality is the key differentiating ingredient at this stage of growth.
Good luck everyone!
Wayne