3 tips for SaaS founders hoping to join the $1 million ARR club

Building a SaaS company from the ground up is never easy. In fact, it’s generally a grueling, all-consuming process that strains every fiber in your being.

But it is much, much more difficult if you approach it without a tried and true process. After starting and scaling five successful companies, I can tell you that there absolutely is a repeatable process to building a successful SaaS business, one that can reliably guide you to product-market fit and then help you quickly scale.

That doesn’t mean it’s easy, but it does mean that you won’t waste years of your life pursuing a solution that nobody wants.

Begin with finding the right problem

In the earliest stages, the process begins by finding the right problem to solve. At this point, you likely already have a few hypotheses about that problem. But no matter your conviction, you must test those hypotheses against a consistent set of criteria. For example, these are the questions that my co-founder and I used to evaluate the earliest concept of our current company, Drift:

  • Is the problem big enough?
  • Is the market big enough?
  • Does the problem have a recurring use case?
  • Can we build the solution for the problem?

If this sounds like a simple, straightforward exercise, it’s because it is. But not enough entrepreneurs ask themselves these questions at the beginning of their journey. We successfully avoided wasting months or even years of precious time building products that didn’t fit these criteria. This simple step will save you an incredible amount of pain and aggravation.

The only way to find product-market fit

Once you settle on a problem to solve, it’s time to build a barebones product that solves it and to then test that product against the market.

My co-founder Elias and I approached it this way: First, we personally spent hours each day in communities like LinkedIn, Twitter and Product Hunt, giving folks early access to our product and asking them for as much feedback as they could offer.

We were happy if they responded in the comments or to our direct messages, but we always went deeper by asking them to speak over the phone or on a video chat. We also hit the pavement by going to in-person Meetups and events around our hometown of Boston. We even took flights out to small events around the country so that we could interact with potential customers in-person.

If this sounds inordinate, it isn’t. This is the kind of attention that you need to devote to gathering intelligence from potential customers, so that you can relentlessly laser in on a product that they will actually use, value and pay for.

That last part is important. If you receive positive feedback during any of these conversations, always ask for money. We didn’t care if a customer only had $20 in their pocket — we needed to confirm that they weren’t just being polite and that they valued the product enough to give cash in exchange for it.

As you build momentum with early customers, do not slow down. In fact, do everything that you can to accelerate that feedback loop. We even hired a product manager whose full-time job was to continuously evaluate feedback from customers and potential customers, then figure out how to best integrate that feedback into the product.

Product-led growth or sales-led growth? The answer is both

I am not a sales guy. In fact, I’m an introvert with a background in computer science and product, so I am unabashedly biased toward those functions and cultures.

People like me often think that we can product our way to growth. If we just make the free version a little better, we can funnel more users through to the paid version, and then, domination! But unless you want to wait years to get to $1 million in ARR, while competitors sprint ahead, I highly recommend investing in a real sales team shortly after finding product-market fit.

To put Drift’s growth in perspective, we hired our first sales pro at $250k in ARR. Just 18 months after that hire, we rocketed past $10M in ARR. That’s the power of sales.

But I say that you need both product-oriented growth and sales-driven growth because the latter cannot work without the former. Meaning, if we hadn’t invested so much upfront work into deeply understanding the needs of our customers, and building a solution that fit those needs perfectly, our sales team would have quickly hit a ceiling.

Accelerating revenue beyond $1 million ARR: Brand and customer exposure

I could fill a book with tactics to help you accelerate revenue, but I’ll leave you with two pieces of advice. First, invest in your brand early, and second, make sure that everyone on your team interacts with customers as much as possible.

I think about brand in this way: Pick a SaaS category and odds are that there are thousands of companies competing in it. In martech, there are literally 7,000. You cannot effectively compete against thousands of companies without a polished, memorable brand. A generous investment in brand and careful tending will provide you with more sales and marketing leverage than 100 hacks.

For customer exposure, I mean that your entire company, from the CEO on down to the newest entry-level hire, should constantly be in touch with real, live customers. There is absolutely no substitute for the kind of insights and goodwill (read: word-of-mouth marketing) that you’ll gain for making your entire team customer-facing. In the companies that I’ve run, it’s directly informed everything from our marketing down to our products and culture. Customer exposure is the fuel that fires the benevolent feedback loop that gets you to scale.

So what are you waiting for? Go build the next great SaaS business.