Every stage of growth for your SaaS startup brings with it inherent challenges. But many SaaS businesses never even get to $50 million in annual recurring revenue. Between developing your product, your internal processes, and your team, there are a lot of moving parts to manage to keep the business moving in the right direction.
Whether you’re in the early days of trying to establish product-market fit, searching for a profitable growth model with limited resources, or in the middle of scaling your startup — understanding the needs of each phase of growth is crucial to successfully increase SaaS revenue.
Having worked with hundreds of early-stage tech startups over the last decade, we share best practices we've observed that will help you build a business roadmap to get your SaaS startup from $0 to $50M in ARR.
Build Your SaaS Startup Roadmap
Stage 1: From $0 to $10M ARR
1. Establishing product-market fit
Establishing that you have a product-market fit is the most important part of your early days as a startup and a crucial first step in your business roadmap that simply can’t be ignored. Don’t steam ahead and build a product without building a prototype and testing your hypothesis on buyers first.
Once you’ve met enough buyers to establish demand, your business roadmap should prioritize building out the product, and then concentrate on acquisition and retention of users to further validate your product and market positioning. When you have a number of (happy) customers using and finding the value in your product, it becomes easier to plan your next growth moves.
Take the time to talk to your customers as much as possible. Survey them, interview them, and meet with them. Finding out what they love (or don’t love) about your product is a valuable part of clarifying your product-market fit and refining your product at this stage of your business roadmap.
2. Managing cash flow
The failure rate for startups (especially in the SaaS industry) is high. In the early days of any startup, cash flow can be unpredictable and new business can be sluggish. If your annual subscription value is $300, that means you’re only making $25 a month from each sign-up. Balance that out against ensuring your startup maintains a scalable cost structure (the tons of work, overhead, and wages you need to cover with these tiny revenues), and it can feel like an uphill battle — for a long time.
Annual customer prepayments can be helpful to get a cash boost, but in the meantime, you’ll need to accept the painful realities of startup life. Defining, tracking, and optimizing your SaaS pricing models and strategies based on your key metrics will become an obsession, but one that is central to your success.
The good news is that your SaaS revenue will eventually start compounding, which is one of the biggest advantages of a subscription-based business model. If you have a great product, stellar customer support, and you’ve nailed your market fit, you’re more likely to end up with happy customers that stick with you over the long-term and refer other subscribers.
Out of all the challenges your SaaS startup faces getting from zero to $10 million ARR, generating at least some initial MRR in the early stages and working towards your first $100K ARR may quite possibly be the largest and most difficult hurdle you face.
Finding a way to get to $100K ARR can be extremely difficult, but growing from there to $200K, then $500K, and so on might come a little easier once you’ve got a working system in place and monthly recurring revenue coming in on a regular basis.
This is a good time to start investing more heavily in developing your product and building out teams.
At the $10 million ARR mark, your business will be experiencing the thrill of success and you’ll be ready to move into the next phase of your roadmap, which will allow you to focus more on growth and less on fine tuning your product offerings and pricing models.