Once your startup has passed Series A territory, your expected to grow your ARR at 2-3x rate per year. The term T2D3 is sometimes used to describe this ideal 5 year period of exponential growth.
How to do this?
The biggest mistake I've seen SaaS executive teams make is to focus on one part of their funnel. The only way to drive ARR growth at the T2D3 pace is to address multiple KPIs in parallel:
- Churn - Reduce churn and fix any ‘leaky bucket’ before pouring in more cash.
- CAC - Get your Customer-Acquistition-Cost under the Customer Lifetime Value. (LTV)
- ARPU - Improve Average Revenue Per User (or Customer) and grow deal size.
In addition your team of course needs to keep driving growth of incoming leads and improve their quality (MQLs). But the days the product team and sales team could just point at marketing for growth are now over. The product needs to be improved to help support retention and upsell. The sales team needs to sell in ways that drive high retention, and provide high quality feedback to marketing to improve lead quality.
It's truly a team sport to execute a high growth ARR plan.
- Implement nurture and retention programs to reduce churn.
- Optimize marketing channels and lower your Customer-Acquistition-Cost.
- Improve funnel speed and conversion by reducing friction.
- Drive upsell discipline and automation to improve ARPU.
While only a small % of companies make it to $100M in 5 years, this focus on ARR growth is crucial and it has to be holistic. You cannot fall in the trap of just focussing on lead gen or customer success. MQL, ARPU, Churn and CAC all need to be addressed together to get ARR (or MRR) to scale exponentially.