How will you get to $100M?

Every SaaS business should have the goal to get to a $100M annual run rate (ARR). That is a major milestone that few SaaS get to, but if you’re on that trajectory it gives you incredible optionality to go public, acquire businesses, or sell your business at a unicorn-level valuation.

Honestly, even $10-20M ARR is an incredible place to be in and will give you life-changing wealth, whether you run it bootstrapped and are profitable, or whether you sell it to a strategic company or private equity firm. But the path to $100M needs to be there.

What does that path look like?

Well, I like to break it down to bunnies, deer, or elephants.
I’m not a hunter, so this mental model breaks my heart a little bit, but as an analogy, it stands:

Bunnies

Bunnies are small and easy to catch (I assume) but they don’t have a lot of meat so you need a lot of them. To get to $100M ARR you will need 100,000 customers paying $1,000 or less annually.

SaaS companies that sell to bunnies include Basecamp, Dropbox, and Freshbooks.

Deer

Deer are a bit harder to catch but they will feed you for a lot longer than bunnies and you’ll need a fair amount of them. To get to $100M ARR you’ll need 10,000 customers paying $10,000 or more annually.

Hubspot built a $1.7B ARR SaaS business mainly from deers.

Elephants

Elephants take a long time to bring down and require a team, but once you land one it will feed you for a very long time and you don’t need that many of them. 1,000 customers paying $100,000 or more annually.

Enterprise is where most of the big SaaS players live. Salesforce, Marketo, Snowflake, and many others sell primarily to elephants.
While the analogy is oversimplified, it gives you a firm idea of what your go-to-market motion should be.

What is a motion?

Basically, it falls under three categories:

No touch
Low touch
High touch

No touch

Users sign up for a free trial or a free plan
The product experience drives adoption
Upgrades happen in the product.
Customers may write into support if they have issues, but there is no other direct human effort.
The price point tends to start out low ($20-$100/month)

Low touch

Users sign up for a free trial or a free plan
The product along with sales drives the adoption
Sales are transactional, usually a one-call close.
It may include some light onboarding or setup by a sales or CS rep.
Support customers as needed but once they’re in they auto-renew and can add seats or expand usage as needed by themselves.
The price point tends to start anywhere from $100/month up to $700 or more.

High touch

Prospects come in through outbound meeting requests
They need multiple demos and meetings before using the product
Sales reps spend a lot of time in discovery qualifying opportunities
Prospects may require a paid trial or proof of concept period before committing to the full contract
They redline and sign an annual or multi-year contract
Customer Success onboards over multiple weeks
Typically one-time professional services are sold as part of the first-year contract
The price point may start as low as $10,000 annually but usually expands to $100,000 or more.

The size of the customer you sell to will dictate your go-to-market motion.

Elephants will probably not sign themselves up for your product, they’ll need a longer and more involved sales process.

Bunnies should not be given a high-touch onboarding experience because it’s too expensive and you need too much volume to grow.

Deer fall somewhere in between. They’ll need some level of sales touch along with some level of self-service, but you don’t want to be spending 12 months chasing down a $5K account.

Of course, there are outliers. Slack was able to sell bottom-up to larger businesses without much of a sales effort because the product is so viral and so sticky that adoption just happens naturally.

I’m not Slack, and neither are you.
Some well-funded SaaS companies spend a surprising amount of sales effort on very small accounts because they aren’t bothered with profitability, they just grow at all costs (but that’s changing in today’s economic environment).

How do you figure out which motion you should use?

If you sell to bunnies, look at a no-touch motion. It’s best under the following conditions:

Your product works completely “out of the box” with templates and guided walkthroughs.
You have a freemium model or your customer pays under $100/month
Most customers don’t write to support with questions or problems.
You’ll grow by acquiring lots of customers. Churn will be the real challenge to grow here, as small customers tend to have high churn, so you need a really sticky product that’s hard to leave.
There’s a very low cost to acquire a customer and you have channels that scale.
Marketing channels usually include SEO, top-of-funnel content, or affiliate marketing. It’s tough to make advertising work in this segment due to costs.
Some kind of in-app viral component is usually needed here as it drastically lowers your customer acquisition cost (CAC). Ideally, for every customer you bring in, they refer another customer. That’s a viral coefficient of 1.

If you sell to deer, look at a low-touch motion:

Your product works mostly “out of the box” without complicated setups. There may be some onboarding services required but companies can get up and running in weeks.
Your price point or expansion potential is $500/mo or month. $1,000 - $5,000 ACV tends to work here, but ideally, these accounts will expand well past $10,000 ARR.
Customers often have questions or need some assistance. A customer success manager may be required.
Your net churn rate is well below 2% monthly. Ideally 1% or less.
It’s a low-medium cost to acquire a customer and channels may include a mix of organic marketing (SEO, content, social) and paid advertising.

If you sell to elephants, it’s probably going to require a high-touch motion:

Your product requires manual onboarding and takes weeks or months to set up.
Your product has a lot of configuration needed, and customers need demos tailored to their needs.
There are multiple buyers involved in every deal.
You’re charging $30,000 annually or more, ideally closer to $100,000.
There is a lot of natural expansion baked into each account, and churn is in the negatives. It’s very rare to lose a customer once you have them.
Due to the sales cycle, it is a mid-high cost to acquire a customer and the channels that work here tend to be field sales and channel partners like ISVs who resell Salesforce to their customers.

Isn’t this a bit oversimplified?

Yes.

There are customer segments that fall on the outside edges of these 3 buckets.

On the smaller end, there are mice ($100/year) and flies ($20/year). These two groups generally fall under B2C, like Netflix and Masterclass which sell to mice, and products like Calm or Headspace which sell to flies.

Generally speaking, you should not build a B2C SaaS company unless you are really well funded, and have an extremely broad product that everyone can use, but even then it’s tough to make it truly scale.

There are also whale customers on the other end, say $1M or more annually. If you can solve a big enough problem for the fortune 1000 then this may be an attractive segment, but expect 18-month sales cycles which may be hard to invest in without funding.

Then there are all the gray areas in between: At what point does a bunny become a deer or does a deer become an elephant?
Should you still offer a high-touch sale to customers only paying $7K/year? Or a light touch to customers only paying $800/year? It’s completely up to you.

When your product isn’t yet mature and you don’t have a strong brand in your category you may need to offer a bit higher touch than you want to at the beginning.

But over time you should match the right sales motion to the segment because offering too high a touch will drive up your customer acquisition cost and drive down sales efficiency over time.