Recently we reached what was a big mental milestone for us, breaking through $1 million in annual recurring revenue.
From a humble beginning, along our journey at Elevio we’ve hit a number of internal milestones that are more meaningful to our situation, such as raising a seed round, reaching profit, numerous product releases, major customer wins, and some epic product usage metrics.
But a revenue milestone is something that’s easier for others to relate to, and is easier for us to relate to those that have come before us.
So, it seemed like a good point to stop and reflect on what we’ve learnt along the way, and share what we could to help others on their journey.
Note: I need to preface this by saying we’ve still got a long way to go, with a good number of lessons still to learn (and unlearn), so what comes next shouldn’t be taken as a roadmap to success but instead an insight into how we got to reach this particular milestone.
Look after yourself
You’re no good to your family, team, customers or yourself if you’re burnt out. When you’re well-rested and spending enough time away from your daily grind, you give your mind permission to wander, and that’s when the magic happens.
You’d be amazed how many of the ‘important’ and ‘critical’ tasks can actually wait.
Know your runway
Keeping an eye on how fast you’re burning cash and how much money you’ve got in the bank.
But don’t just look at those two raw numbers. Instead, try and factor in as much as you can here, including any unpaid tax, changes in rent, future hires, and any increases in services or servers over time. This way you won’t get blindsided.
It’s also a good habit to be pessimistic about how fast you’ll hit your ‘d-day’ (the day you run out of cash if your revenue and burn stay constant) by assuming you’ll hit it sooner than planned.
It’s great to have a monthly growth target, but be careful not to tie a growth goal to your runway, or you’ll feel things get uncomfortable if you miss your target for a few months.
If you’ve got a good handle on how much runway you’ve got, then if things look like they might get tight, you will see this early and have plenty of time to course correct and make sound decisions.
Try not to say yes to the feature request too early
Sometimes a feature request comes through that just makes sense. But before diving right into the build and release, step back and see how this might work for other customers at a higher level, as well as if it might have adverse effects or channel your product down a specific narrow path.
Try and think about edge cases and other ways the underlying feature could be reused. You might find if you keep things abstract enough, you open up the possibility for other customers to use that same feature in a way you hadn’t thought of.
Want to see into the future? Find a leading indicator
It’s all well and good to have goals for your growth and say you’re going to triple-triple-double-double-double, but this means that you’re aiming to grow at about 10% a month for the first two years and then 6% a month for the following three. This will get increasingly hard as you start to grow. Looking back on charts, it’s easy to see if you’re heading in the right direction, but how do you know what the next few months hold for MRR growth?
To do this, you need to find a leading indicator.
This is something that happens well before your conversion. A classic one is simply the number of leads or visitors.
Sure, some months will have traffic that ends up converting more than others, but if you can grow your traffic by 10% month on month, the conversions will follow.
Keep asking ‘why?’ to find the gold
The more you ask your customer (or yourself) ‘why?’, the closer you’ll get to the real nuggets of gold, the real drivers for success and where the pain points are.
Your customer will tell you the symptom of their issue or their want. It’s your job to learn more and diagnose the underlying problem or pain point and find a solution, not a patch.
Product market fit is a moving target
There is so much focus and importance placed on finding product-market fit (PMF), and it’s often how a startup is judged: ‘Have you found product-market fit yet?’ If you’re hoping to raise a seed investment from investors, it’s assumed you won’t have PMF yet, but come Series A investors will be hoping you’re at least close to showing some traction with PMF.
The thing is, over time the market changes and that’s out of your control. But if you don’t change with the market, you and any PMF you had will be left behind.
So even if you think you’re getting close to PMF, continue to test things, continue to speak to people, and continue to check on where the market is at.
Positioning is key when it comes to product-market fit
When you’re still looking for PMF, the huge temptation is to tweak the product here and there, add on a new feature, and keep telling yourself ‘this feature, this is the one, people are going to beat down our doors when we get this out’. So you spend months on the feature … and can barely tell in your charts when you released it. Why!?
When you’re selling your product, you need to position yourself in a given market and show people why they need what you’re offering. There’s a high chance you’ll get this part wrong, but the good news is it’s less work to change than rebuilding your product, again.
Step back and take a look at what your product does that nothing can do, and who has a burning need for this.
April Dunford has a great talk on this that’s worth checking out.
Be wary of analysis paralysis
In the early days you simply won’t have the volume of data to make statistically relevant decisions, so take a calculated guess and run with it.
Don’t get caught over-engineering some A/B test when you could just make a decision. If you get it wildly wrong, reverse it.
While you’re small, it’s much easier to change your mind on almost every decision in your company. Use that to your advantage before the ship is harder to turn.
Don’t aim to be correct 100% of the time
It’s your job to see what other people can’t. To create something that people didn’t know they needed, or thought was possible. You need to read between the lines of what people are saying they want and deliver something they truly need (and make it easy for them to convince themselves they need it).
But, you’re not a mind reader. You will get it wrong from time to time, and that’s okay. If you continually play it safe and don’t try something with a chance of failure, you’ll never break through a self-imposed plateau.
Sometimes you might think something won’t work, and be pleasantly surprised. You won’t know unless you try.
Customer saying you’re too expensive? Maybe they’re the wrong customer
When someone says your product is too expensive, they’re right. It is too expensive, for them, at this point in time.
We have a few different plans that are public, and a growing number of customers on custom plans. The companies that complain about price are almost always the ones that are already on the lower-priced plans.
How does this even make sense?
It’s because they aren’t feeling the pain we’re solving as much as our larger customers are — the delta is huge.
It would be easy for us to have a knee-jerk reaction and lower our price point when people complain, but when we step back and look at who is complaining about price and why, we can see it’s actually customers who aren’t that suited to our product in the first place.
When a company is still tiny, customer experience and the need for a solid self-service support system like ours seems like a ‘nice-to-have’, so they don’t see the value.
But as that same company grows, the value of what we offer grows exponentially, to the point where we’re considered a bargain since we can save them hundreds of thousands on support staff, we’re helping activate more of their users, and we help close and retain more deals.
Similarly, this can also mean your early adopters might not be the best ones to base your pricing model on. They’re smaller and more nimble and open to testing out new things, but they probably aren’t feeling the pain as much as your main target market. They’d likely be basing their willingness to pay on another product they relate yours to, rather than on the value you provide.
One option is to start your pricing out lower (not low, lower) and when you feel you’ve learnt enough and got the product to a point where you can confidently go after your main target market, increase pricing and go get’em.
Understand why customers leave, and address it
Churn is something we thought we understood early on, but it’s not until you start working with bigger numbers that you truly understand how important it is to keep your churn low. This is one metric where it pays to be a pessimist.
When you only have 20 customers, a 5% churn means you lose one customer a month. When you have 200 customers, that’s 10 customers a month, which is a bit worse but doesn’t sound like the end of the world, you still have 190.
But when you look at what happens over the course of a year, a 5% churn every month, in the end, leads to almost half of your customers leaving. So just to stay at the same size you are now, you need to replace every one of those customers.
The earlier you can set yourself up to identify the signs of churn and retain customers, the easier it will be to continue your growth later on.
Use an exit survey to learn what you can, and talk to those customers to find out what went wrong. Collate the data somewhere you can look back on over time to spot trends. We use a simple Trello board which works well.
Understand why customers join, and double down
If you’re speaking with your customers and asking them the right questions, there’s a good chance you’ll find out they discovered you and decided to start paying you for a reason that differs from your initial hypothesis.
Leave your ego at the door and explore this new discovery.
Setup a new landing page as if it was your home page, and reframe the way you explain your product to match how your existing customers are thinking about you, set up some paid advertising and see how well that converts against traffic you’re sending to your main home page.
Celebrate your milestones
The day we broke through the million dollar mark I was at a conference. I was excited about our achievement and told a few people who asked how things were going. Someone (well ahead of us on their journey) responded with “yeah but, it doesn’t really mean anything though does it?”
Yes, it does. I walked away feeling sad that person isn’t celebrating their own milestones along their journey.
There’s a lot of different goals and milestones you can set: user count, staff count, investment, revenue, internal metrics. If you want to celebrate those, go for it, do it with gusto.
Don’t let anyone tell you can’t celebrate any of those steps in your journey, but don’t let it go to your head either.
Celebrate, move the goal post, and get back to it.
Always remember, you’re not alone
There’s a hell of a lot of us on this journey and more often than not we’re there to help each other, so reach out.
This article originally appeared on the Elevio blog and was republished with permission.