A practical example by a startup using YC SUS
We are not a new startup as we launched 4 years ago in the Middle East as a services marketplace. Back in July 2020, I relocated to the United States to launch the business here. However, In the US, we pivoted to a different business model which is an SAAS-based subscription (You can check the footnotes to learn what LeadCenter.ai is about and what we are trying to do. But it doesn’t matter. The methodology applies to any startup).
As we are new to the US market, we were trying to get help from multiple places. I enrolled in YC Startup school around the end of June but was too busy to do anything with it as I was occupied with the relocation and settling down. I visited the website again around August 25th, 2020; I gave the material a quality 2-3 hours review and I was stunned and marveled. This is exactly the help we are looking for and we are getting it for free! We had our fair share of mistakes in the first 4 years, and that made the curriculum and content very relevant. So, we can relate easily to the lessons and our experience. While watching the videos or attending office hours sessions, we realized the value of the information.
However, doing the weekly updates can be a bit tricky at the beginning. Also, making an execution plan can be trickier. So, I am sharing how are we doing it: the execution plan for the first six months and the things we scrapped out based on what we learned in SUS.
So here we go:
Objective: Reach to $100 Million ARR in 7 years
Our primary metric in SUS weekly update is Annual Recurring Revenue (ARR). We selected ARR vs. MRR because in the first 6 months we are focusing on customers that will pay the subscription charge upfront annually. So, when we look at ARR at any point in time, this is the actual cash we collected in our stripe or bank accounts.
Grow ARR at an average of 24% WEEKLY! for the first 6 months
It took just a couple of hours to build a 6-month weekly forecast vs. wasting days or weeks in building a complex full financial forecast (we said we will deal with that later).
You will notice that there are four critical KPI’s missing: Churn rate, LTV, CAC, and Days to Close. I have added a footnote at the end of this article for those. Our North Star is to grow ARR to $76,000 in 6 months by maintaining an average of 24% weekly growth. We did other changes based on what we learned from SUS. For example:
we split the weekly activities load to 60%-40%:
However, we agreed that this week’s target is the top priority and we will do
anything to achieve it. If there is time left, we will work on next week.
For an SAAS, this is the most critical component to establish early on to measure the conversion at various points. You will need to settle on a CRM to manage your pipeline (you can start with a simple excel sheet). For us, the CRM is integrated into our platform. So, we used our tool.
Again, we are doing things that don’t scale to manage this pipeline; but with time, we will be applying more automation to optimize the conversion process.
For the last 4 weeks, the entire team got together every Monday morning to do the following
Below is the latest update. We review the pipeline together, then we launch a new weekly sprint and create the tasks for the week to achieve the primary KPI and weekly objectives.
The last four years taught us that 500 things may go wrong: The assumptions we are making now may be wrong at the next scaling point, there may be changes in the market or innovations that may make our platform irrelevant, we may fail to raise funding, etc. However, two things matter the most for survivability:
Perseverance is that you are in it for the long run. Regardless of the pain and failures, you will endure in the first few years. If you are persistent, you will figure it out eventually. Whether it will take 1 month or 1 year.
Fiscally responsible: if you are in business, startup, lifestyle, or a large corporation, it comes down to one simple formula: Z = X – Y. A company is a Profit = Revenue – Cost.
I am not sure if the first can be taught, but you can definitely learn the second. It took us 4 years to figure out how to operate a profitable service marketplace company. Our branch in the Middle East is generating now Multi-Million Dollars in GMV annually. Our revenue reached hundred of thousands of dollars per year, and we are growing at an average of 15% monthly for the last 7 months, so we are on a path to reach the $1 Million Revenue Magic Mark very soon. Frankly, I have no clue how we got there while making every mistake we should’ve avoided. The only explanation is Perseverance.
Recently, I came across this quote by Noah Kagan. I love it. Not the point about getting rich. Actually, a lot of entrepreneurs don’t give a shit about money, rather pursuing their passion and building things. The ones that are doing it for the money can’t handle the pain; they quit and get back to jobs with salaries. The point is it takes many many years of hard work with little rewards to build something meaningful.
We are carrying on for the next 7 years. We may fail to reach a $100 Million in Revenue. We may reach it at later date. However, if we are persistent and fiscally responsible, the worst-case scenario could be a lifestyle SAAS business with $8Million to $10Million in revenue, paying the 4 founders as well, and leaving us with marginally good profit.
Good luck to all of you. One last thing: Thank you YC Startup School team. Amazing work! and highly recommended to all new founders.
For more about our journey you can read:
July 2020: The 15 things we did to avoid closing down our startup because of COVID19!
June 2018: The top ten 10 mistakes we did launching an Internet Startup and how we survived so far.
July 2017: My first year anniversary after leaving a secure job at Microsoft to start my own business. What is it like?.
Dec 2016: The 6 things you have to forget when you leave your job to open your own business.