Eat what you kill
Ways to make $100 million dollars per year in SaaS
There are a million ways to make a buck in this world, some harder than others.
I moved stones as a mason’s hand for seven summers. For ~40 hours a week, I would lift things up and put them down.
That was a hard way to make a buck; sweating my ass off in the summer sun, learning to lift with my legs, not my back.
That’s why I chose SaaS as my muse. And it just so happens, there are about a million ways to make a buck in this world as well.
You’ve probably heard it before - the concept of hunting flies vs mice vs elephants - cute analogies for all the different ways to cobble together a $100 million dollar revenue business based on your average customer size.
Why $100 million in revenue? That’s the proverbial “measuring stick” for “scale” or large enough to IPO (at least it was in, like, 2010).
I’m going to take a new spin on that hunting analogy today… a remix of sorts.
What I’ve found missing from the analysis is enough chatter regarding the respective Customer Acquisition Costs, CAC Payback Periods, and Lifetime Values associated with each type of SaaS “animal”.
Yes, you can certainly hunt 500,000,000 mice worth $2 a head, but you can’t do it by spending $5 bucks a pop (CAC) if they only live until they’re 2 years old (I know, a morbid analogy for all the big mice lovers out there).
Let’s go hunting.
(Oh, and we’ll reference some real companies along the way.)
Flies: 10,000,000 Consumers @ $10
Rate: Earn $10+ per year on each reader or user
Monetization: Eyeballs or microtransactions
GTM Motion: Inherent virality or operating system ubiquity
Customer Support: None - in advertising models you ARE the product, duh
Typical Lifetime: Under six months
CAC Payback: Under a month
Risks: Sufficient top of funnel
Mice: 1,000,000 Prosumers @ $100
Rate: Prosumers pay you $100+ per year each
Monetization: Small monthly subscriptions (also, please upgrade to my paid newsletter for $150 a year… I only need ~999 thousand (and some change) more of you to make a $100M business)
GTM Motion: Self Serve on credit card
Customer Support: Written FAQs or a hallucinating chat bot
Typical Lifetime: Under a year
CAC Payback: Under 3 months
Risks: Fickle consumers; churn; leaky bucket
Rabbit: 100,000 Small Businesses @ $1,000
Rate: SMBs pay you $1k+ per year each
Monetization: Small monthly subscriptions on credit cards
GTM Motion: Self Serve on credit card
Customer Support: Might pick up the phone, but English will not be first language
Typical Lifetime: A year or two
CAC Payback: Under 6 months
Risks: Maintaining order velocity - you gotta do deals FAST
Deer: 10,000 Mid-Sized Companies @ $10,000
Rate: SMBs / Mid Market businesses pay you $10k+ per year each
Monetization: Small annual prepaid subscriptions or monthly subscriptions through sales team
GTM Motion: High velocity inside sales
Customer Support: Pooled resources from a crowded bullpen in Omaha, Nebraska
Typical Lifetime: Two or three years
CAC Payback: 8 to 12 months
Risks: Keeping sales and support costs low without churning customers
Elephant: 1,000 Enterprise Customers @ $100,000
Rate: Enterprise customers pay you $100k+ per year each
Monetization: Large annual subscriptions through sales team
GTM Motion: Field (outside) sales
Customer Support: Assigned customer success rep who upsells you more stuff and smiles and is nice and probably named Connor.
Typical Lifetime: Three to five years
CAC Payback: 18 months
Risks: Originally successful acquisition channels get too saturated
Whales: 100 Multinationals @ $1,000,000
Rate: Massive corporations pay you +$1 million per year each
Monetization: Extremely large annual subscriptions through sales team
GTM Motion: Field sales and Biz Dev (and prob your CEO)
Customer Support: Dedicated, white glove, we’ll make you breakfast and drop off your kids at school and remember your wife’s birthday and get you Celtics playoff tickets level service
Typical Lifetime: Plus five years
CAC Payback: 24 months (or more)
Risks: TAM / Market saturation / Platform Risk / Churning out the top
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Run the Numbers
Available on Apple | Spotify | YouTube
I interviewed the CFO of Calendly. On this episode we cover
What he learned working for Frank Slootman at ServiceNow, and a few funny stories from their interactions
The concept of businesses being a team, not a family
The value of brand equity, and how the Calendly name helps drive the company’s viral coefficient
How to track a product led growth motion in your metrics
Why benchmarks can be overrated, misleading, and a tool for misjudgement
Why M&A rarely seems to work out well for private tech companies
And how the CFO needs to take responsibility for total company performance
Quote I’ve Been Pondering
“Work expands so as to fill up the time available for its completion.”
-Parkinson’s Law
Good job,CJ, you explains the corresponding business development approaches for the customers in different size under such a humorous expression.
This is great CJ thanks. I know the focus here is how do you get to your first $100M and focus is key.
One thing I was thinking is many great companies have figured out how to do two of these really well (i.e. Rabbits and Whales) sometimes the company will IPO with efficiency in Whales and then as they scale build up efficiencies in Rabbits.