It takes how much to win a customer?
October 26, 2024
September 04, 2024 | Read Online
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The Middle from GrowthCurve.io
Three ideas to level up your week.
Hey Reader,
Welcome to The Middle, your midweek rundown of the most interesting things we've read this week.
Is summer officially over now? That’s sad, but it’s Football season (Go Cornhuskers and Go Bills). Plus, the weather down here in Charleston has changed (for the better).
Enough small talk, let’s get into it.
Jeff
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Sammy’s an investor and just met with a top-performing SaaS business. He shared insights into what they’re doing well.
This stood out to me:
To make CS’ life easier, the company has figured out exactly who their customer is and sells only to those customers who have a deep need for the product. They have a laser focus on the ideal customer profile.
As a result the company enjoys fantastic net dollar retention rates with upgrades far outpacing downgrades and churn.
All you hear about is the need for a bigger market (or TAM). But why have we accepted the spreadsheet funnel reality?
Narrow the focus, hone the message and build for a single ICP. That sounds like the dream. But it’s merely an outlier in today’s world.
BUSINESS OPS It takes how much to win a customer?
SaaS companies spend ~$1.71 to acquire $1 in ARR. Yes, they spend more than the first year ARR.
The subscription model has become so sexy, but it still ultimately relies on proper unit economics.
TLDR: Subscriptions businesses start making money on a customer in month 18. So better hope you get that first year renewal.
Credit to Ray Rike for his Benchmarkit data
CULTURE Founder Mode
Paul Graham, the famed Y-Combinator leader, wrote an essay that has taken the tech world by storm the last few days.
His whole thesis states that Founders shouldn’t listen to Professional Managers when scaling their companies. (You know: Founders are special, etc.)
An example quote:
The way managers are taught to run companies seems to be like modular design in the sense that you treat subtrees of the org chart as black boxes. You tell your direct reports what to do, and it's up to them to figure out how. But you don't get involved in the details of what they do. That would be micromanaging them, which is bad.
As I read the piece, I reiterated the same question softly “why do they keep listening to other people then?”
But, alas, I guess that’s Graham’s point - Founder Mode isn’t well documented and polished. It doesn’t have a branding firm behind it, so it’s ideas are more underground.
Maybe his essay is just the start it needs to become more mainstream.
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