#55: The Fastest Way To Achieving 1 Million In ARR

#55: The Fastest Way To Achieving 1 Million In ARR


Read Time: 3.5 min

🤝 Announcement

We now offer a self-service model that gives you lifetime access to our playbook. The same playbook that all of our clients scaled up on. The playbook has 8 folders with 30 modules, which include templates, videos, and all the software, and shows you step-by-step how to build a fully fleshed-out, repeatable sales process. If you’re a bootstrapped early-stage founder with little to no revenue and lean on economic resources, then this direction is a no-brainer. Here’s a video of me walking through the playbook.

Today, I will discuss the only two metrics that early-stage founders should optimize for founder-led sales.

If you focus on these two, it will solve many of your problems. Why? You need to sell before you build, And you do that through consistent leads coming in and a predictable process to close those opportunities.

You can have the best product on the planet, but if you are missing one or both of these, establishing PMF and scaling to 1 million in founder-led sales will be more difficult than it needs to be.

 
“Superior sales and distribution by itself can create a monopoly, even with no product differentiation.”

~ Peter Thiel

To further illustrate what I mean. Look at the model Amazon used to dominate and grow.

The Amazon flywheel has 5 key ingredients.

1. Sellers. The more that join, the better the selection.

2. Selection. The bigger the selection, the better the CX.

3. Traffic. The better the CX, the more traffic it drives.

4. The more traffic, the lower the cost (economies of scale).

5. The lower the cost, the better the CX.

The two important metrics here are sellers and selection. Without that, nothing exists.

The same flywheel exists with sales.

1. Process. The stronger the processes, the better the training.

2. Training. The better the training, the quicker you find PMF.

3. Traffic. The quicker you find PMF, the faster you achieve 1M ARR.

4. ARR. The faster you achieve 1M ARR, the higher your valuation.

5. The higher your valuation, the better access to capital and success

What does this tell you? The only two metrics you want to optimize for are meetings booked and meetings held. Do not confuse these with product discovery calls or user interviews, as these do not count toward these metrics.

Let’s say you want to scale to 1 Million in ARR within 12 months. You get there by reversing engineering the math. Here’s what I mean.

For this example, let’s say your win/close rate from opportunity —> close is 20%. This means you close 1 out of 5 qualified opportunities.

Let’s say your annual contract value (ACV) is $25k. To achieve a rev run rate of 1 million in 12 months, you must close $84k monthly in new business (3.5 deals a month).

How you get there is by understanding these metrics.

• How much outbound do I need to generate to schedule a call?

• How many scheduled calls convert to opportunities/demos?

• How many demos move to a scoping call?

• How many scopes convert to POCs?

• How many POCs close?

Let’s say you have a 2% scheduled call rate on cold emails. You have to send out 2,000 emails to schedule 20 meetings. Conversions can be a lot better on LI outbound. The metrics improve or worsen depending on your close rate and the content you put in your outbound messaging.

• 2k emails = 20 meetings

• 20 meetings at an 80% lead —> opp conversion rate = 16 demos

• 16 demos at a 20% close rate = 3.2 new deals closed

• 3.2 closed deals at a $25k ACV = $80k in ARR every month (contingent on your sales cycle)

You need to have a baseline understanding of your numbers at the top of the funnel (TOFU), such as how much outbound do I need to schedule a call? What percentage of these calls become qualified? How many qualified opportunities do I need to pitch before closing a deal? This is very hard to do without consistent TOFU and a defined sales process, which is why the flywheel is so powerful.

Get a baseline understanding of your numbers and reverse engineer the math from there. Work on these 2 things, and you will become unstoppable; even if your product sucks, you’ll figure it out as long as there are people to sell to consistently and you have a process. You will use the money coming in to fund iterations and find stronger indications of PMF. We can help you here.

That’s it for today!

See you all next week.


Darren

P.S. If you’re ready to level up, you can book a call with me here

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