Scaling from $1M to $10M: A growth checklist

Hitting your first $10M revenue milestone is a critical leg in the growth journey of any SaaS business. It requires rigorous focus, flawless execution, and a strategy seamlessly evolving as you sprint from one milestone to the next. 

As you scale, you’ll need to shift your focus on different things, gradually prioritizing repeatability over instant results. In this blog, we take you through the strategies and initiatives you’ll need to focus on each stage to maximize your growth and hit your goals efficiently. 

Stage 1 – Acquiring Lighthouse Customers

Lighthouse customers are early customers that build your understanding of your product’s market appeal. 

These are your early adopters, voluntary testers, and tech enthusiasts and can provide critical feedback about your product experience. This feedback can be transformative, shaping your product roadmap and functionalities.

• Lighthouse customers bring in your first revenue and can serve as influencers, earning you credibility and helping you attract more customers. You can offer free-trial/freemium products to land early adopters before converting them into paid customers. In doing so, you can test your product’s value proposition while lowering entry barriers.

• Focus on product usage, providing guided content such as interactive walk-throughs or step-by-step tutorials to help lighthouse customers use your product hands-on. Identify touchpoints in the user journey to encourage adopter engagement.

• Do not build additional features on a whim. Be data-led when adding capabilities – speak with customers, collect feedback, analyze, and implement

Price intelligently

A pricing strategy can be successful if it communicates value quickly to your customer while giving you a competitive market advantage. Intelligent pricing involves:

•  Identifying the value metric -the aspects of your product your customer associates value with. 

– Send a survey or conduct customer interviews to understand your customer’s values of your product. Charge along these stories of value. 

– Make the value metric intuitive to the customer. They should understand it instantly, which is only possible if the value measured aligns with their needs. 

– Ensure the value metric grows with your customer to generate predictable MRR. 

• Analyze the competition when setting pricing

– Consider how competitors’ pricing scales through the prism of a value metric

– Review the cost for their product for a startup (1-5 users), scale-up (10-25 users), and an enterprise business (100+ users)

– Also consider the average upfront costs, average monthly costs, and average monthly cost per user 

Run pricing experiments

In SaaS, there’s no such thing as finding the right price and sticking with it perpetually. SaaS pricing must adapt as you expand and grow without disrupting your existing customers. A continuous testing approach should be ingrained in a SaaS company’s DNA. 

Surveying and interviewing your customers, validating your data, and experimenting continuously through an A/B testing system de-risks pricing migrations and sets you on a path to higher business growth. 

Reduce friction during payments.

Payment is a churn-sensitive touchpoint. Payment difficulties or failures can cause voluntary or involuntary churn. Ensure a frictionless way to pay by:

• Supporting all familiar and likely payment options from customers, including debit/credit cards, digital wallets, direct debit, and alternative payment methods.

• It readily integrates with popular payment gateways like Stripe, PayPal, Amazon Pay, Authorize.Net, and Braintree. 

Automate invoices and subscription management

You don’t have a full-stack finance team at this stage, but it would help if you considered utilizing financial software that handles subscriptions and recurring billing for early-stage startups. It will allow you to minimize Excel sheet dependency and the consequent manual errors to free up time for more strategic activities.

Chargebee helps SaaS businesses run billing on auto-pilot and generate massive time savings. It provides a unified view of all subscription and customer data in one place and reporting and analytics such as MRR calculations and account summary reports. A free trial is available to help you understand the product’s suitability for your startup. 

Stage 2: Establishing Product-Market Fit (PMF)

The crux of product-market fit is creating a product that readily solves a real problem in your market.

Identify SaaS metrics to establish PMF 

An industry-accepted test of product-market fit is – How disappointed would your customers be if your product ceased to exist tomorrow? 

Before you gain a large enough user base with sufficient product usage to survey this sentiment, some key metrics can act as indicators of product-market fit. Churn rate, organic growth, adoption rate, and customer lifetime value are some metrics that can reveal the state of your financial health and unit economics. 

Chargebee Revenuestory offers 360° business visibility with subscription analytics and insight-driven, interactive dashboards. With a churn management suite, revenue leakage reports, and even a zero code report builder to create your custom reports, Chargebee aims to be a one-stop shop to satisfy all your reporting needs. 

Offer customers the flexibility to manage subscriptions seamlessly

In a sensitive macroeconomic climate like ours, customers will appreciate being able to move quickly and easily from one subscription plan to another. If a customer is looking to downgrade and finds it difficult to do so, they might cancel their subscription entirely. 

When making changes to their existing plan, customers should be able to modify it or remove or include add-ons. Test to see how soon customers would want to see the changes come into effect – immediately, in the next billing cycle, or on a specific date (set by you). 

Build self-serve subscription management for customers.

Recent surveys have found that 81% of consumers expect more self-service options, but 40% of businesses think they have enough. 

Companies with more self-serve experiences provide their customers the much-needed flexibility they desire and reduce the lifecycle time for their buying journeys. 

Customers can change or update a subscription from the customer portal or in-app. Also, allow them to pause their subscription and reactivate it seamlessly. 

Stage 3: Focus on expansion and revenue management

When you transition to the expansion stage, you’ll need different strategies to set your business up for balanced growth. 

Expanding to different markets

Localizing experiences when moving to new markets improves customer experience and satisfaction. The world’s top 10 SaaS companies localize their platform across 17 languages on average. If you neglect localization aspects in this stage, you’ll have a lot of catching up to do when your focus shifts to growing profitability. 

Here are two easy ways to localize: 

• Collect payments in multiple currencies using a payment gateway that allows you to accept payments from international customers easily. 
• Set up multilingual checkout pages for a more personalized customer experience. Communicating in the language of the international customer ensures that information is understood correctly and creates a sense of safety for the customer while transacting with you. 

Minimize involuntary churn

Payment failures can be prevented in different ways, including: 

• Smart dunning, where you proactively engage customers with expired credit/debit cards to recover failed payments. Chargebee Receivables offers an interactive dashboard with real-time AR visibility to help you anticipate, strategize, collect, and recover timely payments. You get detailed information about failed transactions and their reason codes to plan an appropriate recovery strategy.
• Use payment gateways such as Stripe or Braintree that have partnered with card networks like Visa and Mastercard to update the cards in your system without customer intervention automatically.
•  To reduce late or missed payments, set up automated email reminders and offer direct debit to collect payment straight from the source. You can also use in-app reminders.

Invest in robust analytics

When you scale, you must move quickly and decisively with strategic, data-driven decisions. And for that, you need robust, dependable data. 

Analyzing customer journeys and product usage patterns can give you crucial insights to inform and shape your product roadmap. A high-growth business can be chaotic, with several pistons firing simultaneously and a couple of other engines getting ready to launch. Having a single source of truth to make sense of it all – can be an invaluable catalyst in your growth journey.

Chargebee gives you a holistic view of your customers across payments, invoices, and subscription metrics. You can understand your customers’ lifecycle better and be able to forecast cash flow accurately.

Chargebee gives you a 360° view of your subscription business; churn reports, deferred revenue reports, subscription analytics, billing and revenue leakage reports, transaction analytics – the whole nine yards with your own zero-code report builder. More importantly, it centralizes all the different data streams from your subscription business, allowing you to identify patterns and relationships between core metrics. 

Sales tax automation

Sales tax on SaaS applies not only to your company’s geographical location but also to the location of your customers. Sales tax rates vary across geographies, with some countries, like the US, having different tax jurisdictions in individual states, counties, and cities. 

Automated tax collection across geographies makes ensuring tax compliance more manageable. Many tools do the job, including Avalara, Anrok, and TaxJar. 

A revenue growth management platform like Chargebee integrates with all major tax solutions making it seamless to align your tax and subscription processes from a single platform. 

Stage 4: Focus on sustainable growth and security

At this stage, where you have established a customer base, you will likely focus on retaining your existing customers and making each more valuable to your company. You must concentrate on voluntary retention, rationalizing SG&As, and enhancing security. 

Focus on net retention ratio (NRR)

A healthy NRR ratio indicates your ability to retain customers and build long-term relationships successfully. An NRR of over 100% suggests massive potential for growth and customers’ willingness to pay more for your product. 

Some tactics for improving NRR are: 

• Leverage upsells, cross-sells, and marketing improvements
• Tie incentives for customer success teams with account expansion and improvement in customer satisfaction scores. 

Solve for voluntary retention.

Reducing voluntary churn is a continuous effort. You want to understand the reasons for cancellation and solve them. 

• Make retention more personalized with customized educational resources and customer service tailored to individual customer needs. You can customize your cancellation page to show users what they’ve achieved with your solution and what they stand to miss out on by canceling. A direct line to the customer success manager on this page to talk things out is also effective. 

• Allow customers to pause their subscriptions and resume through the self-service portal.

Rationalize SG&As

SaaS companies report Selling, General, and Administratie (SG&A) expenses between 12-20%, and sometimes more, of revenue. Some ways to tackle the costs include: 

• Lower your tech-debt

Your development team’s backed up with ad-hoc billing requests and tangled billing codes, perpetually trying to catch up with the product team’s requirements. The cost of reversing a tech decision you’ve already invested hours in building can be substantial. Invest in a robust platform like Chargebee that has a comprehensive integration ecosystem and processes changes without making things complex. You also need to ensure your chosen platform’s API is effective and well-documented. 

• Reduce your dependency on legacy systems

Legacy systems offer limited flexibility for customizations, scalability, and integrations. Create a migration plan to move away from legacy systems and upgrade your tech stack sooner. 

• Make your revenue operations more scale-friendly

At this stage of business growth, previously siloed functions come together to execute cross-functional initiatives such as market expansion, geo expansion, and revenue model changes. A FinOps infrastructure layer that integrates with the tech stack across business functions and provides a 360-degree view of the business through analytics, as Chargebee does, can ensure high scalability. 

Strong eye on security

Data security is a shared responsibility of the SaaS provider and your company’s IT team. The former ensures baseline controls are in place, while the latter evaluates the provider’s security policies. Ensure your partners/vendors comply with regulations across all your serviceable geographies, such as GDPR, HIPAA, SOX, etc. 

Final thoughts

The journey to your first $10M is an incredibly exciting one. This SaaS scaling-up checklist provides a beginner-friendly list you can use to guide your strategies. We’ve helped over 6500+ businesses scale their recurring revenue operations across different industries. If you’d like to automate your recurring revenue lifecycle, get in touch with us, and we’ll take it forward from there.