Eat what you kill

Ways to make $100 million dollars per year in SaaS

Support for Mostly metrics comes from Mercury, the fintech startups use for banking and all their financial workflows.

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

A word from our sponsor Mercury

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Mercury shares the five steps to establishing a strong financial foundation in your first 90 days. The article covers navigating existing processes, aligning with the CEO on key priorities, crafting a financial strategy at scale, and building relationships across the company to make better decisions.

Read the article to learn the art of simplifying complex financial operations, so you and the company can perform at your highest level.

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