The SECRET to $1M ARR in 6 Months is 9 Customers

It’s easier than you think to get to $1M in annual revenue with your SaaS app.

the million dollar secret for saas web apps 150x150 The SECRET to $1M ARR in 6 Months is 9 Customers

To have a $1,000,000 per year run rate, you need to bring in $2740 per day… roughly.

Pardon me if my math is off a bit… this is just one of those posts to get you thinking… your mileage will vary!

I prefer to plan from the bottom up most of the time, especially when looking to employ a short-term strategy and the tactics to execute on that strategy.

Bottom-up in this case simply means we figure out a goal for the business… let’s say $1M in annual recurring revenue… and figure out what it would take to get there.

Rather than the top-down approach of saying there are 12 Billion people in that country and if we could just get 1% of the market we’d have a $7 Trillion business.

So, for our goal today we’ll set it at $1M in Annual Recurring Revenue (ARR). I know… a Million isn’t as cool as a Billion anymore (thanks Hollywood’s version of Facebook) but its better than a slap in the face.

Even cooler than a slap in the face, is that getting to $1M ARR isn’t as daunting as it might seem initially.

First of all, the cool thing is you don’t have to sell $1,000,000 worth of subscriptions, only $83,000!

Yep, because it is monthly RECURRING – or continuity – revenue, you only need to get to $83,000 in monthly recurring revenue to equal $1M ARR!

Once you reach $83k/mo in recurring revenue, the next 12 months will equal $1M without making another sale!

And this is clearly without figuring in churn, expansion revenue, etc.

Okay, so $83k in sales is a lot less daunting than $1M, isn’t it?

So what would it take for your company to get to $83k in monthly recurring revenue (MRR)?

If you have $50 Average Revenue Per Customer (ARPC) then you need to get 1660 customers on board.

Hmmm… 1660 might seem like a lot of customers if you are just starting out and in a smaller B2B niche.

So this is where you ask yourself the very real and pointed question of “are there actually 1660 customers in my target market that I can land?”

If you want to build a $1M/year business, you need to have a market that will support you at the price point you’ve chosen.

If that isn’t the case, find a bigger market (segment) or work to increase the perceived value of your offering so you can charge more.

But, if you set a goal to reach $83k in MRR in 6 months (180 days), then that would only be 9 new customers per day for the next 6 months.

WOW!

Seriously, only 9 new customers per day for the next 6 months will get you to $1M in annual sales!

Just 9…

That is pretty cool, and would seem to be totally realistic… that is of course with zero context about your business/market here.

These numbers are for illustrative purposes only, cool?

Now… here’s a secret that will speed things up for you if you use a Free Trial.

Convert customers faster and at a higher-price point!

Uh, okay… but how? Well, here’s an example.

For the first 6 months, give everyone that signs-up for a Free Trial a crazy-awesome deal – call it an “introductory” offer or something and do it behind the scenes (not on your public Pricing Page).

But the catch is that the special isn’t a discount on the entry-level bundle or even the bundle they selected when they signed-up for the trial… it is for the next level up in price – or even an unadvertised bundle.

This way you aren’t lowering the price on the version that they were going to buy! This is main part of the secret.

So if we go with the example price of $50, and the next level up is the $99 plan, then you’d offer say a 40% off deal on the $99 plan, which would be $59/mo.

This would ONLY be a $9/mo bump from where they were GOING TO sign-up, but that is an extra $108/year for you.

Clearly the deal has to be presented properly with a clear value proposition… but you get the picture.

Now here’s the great part… while you’d need 1660 customers to reach $83k/mo at $50/mo ARPC, at $59/mo ARPC you’d only need 1407 customers… 253 LESS customers needed to reach your goal!

Instead of 9 customers per day, you’d only need 8.

That means you need less traffic to your site, which takes some of the burden off of your traffic-generating resources and reduces some of the customer acquisition expense.

OR…

You could get the same number of customers and simply get to $83k/MRR or $1M/ARR that much faster… in this example it would be nearly a month faster to get to a $1,000,000 ARR!

Of course not everyone will take you up on the offer, and a more realistic option might be to only offer the upgrade temporarily and/or to limit it to 6-months, but this exercise is simply meant to get you thinking.

But I hope you see why this is so important to consider!

Either way, 8 or 9 new customers, that is all you need each day for the next 6 months to get to $1,000,000 in Annual Recurring Revenue.

Pretty cool, huh?

Let’s Grow Your SaaS Business

For immediate consultation and advice on optimizing your growth strategy, schedule at least a 15-minute meeting with me via Clarity. If you feel a more involved engagement is required for me to help you, email me with the specifics of your situation (as much detail as you’re comfortable giving) and we’ll setup a meeting to work through the particulars.

Lincoln

Comments

  1. Lincoln,

    pretty cool mathematical deduction of what a CSP need to have to get one Mio.

    However, I am missing the consideration of churn, especially those who do not buy the full version.

    Regards,
    Dietmar

    • My example was quite simple… on purpose. But you’re right… churn and even time-to-conversion must be taken into consideration. Unfortunately beyond churn factors outside of your control – customers dying, going out of business, etc. – it is entirely up to you to keep that number low and retention rates high. But maybe what I wrote is a good jumping off point for people… maybe.

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