Building a successful startup is a daunting task. Say $2 million in recurring revenue is the initial goal for a sustainable business, and the business model is $30/user/month, you have to sell 5,555 seats (assumes $360/user/year). Over five thousand seats!
Instead of looking at it and saying, “I need to sign up over five thousand customers to meet my goal” a better way to do it is to break it down:
- Quarter 1 = 0 paying users (just getting started)
- Quarter 2 = 24 new paying users (2 per week)
- Quarter 3 = 48 new paying users (4 per week)
- Quarter 4 = 96 new paying users (8 per week)
- — End Year 1 —
- Quarter 5 = 192 new paying users (16 per week)
- Quarter 6 = 288 new paying users (24 per week)
- Quarter 7 = 384 new paying users (32 per week)
- Quarter 8 = 480 new paying users (40 per week)
- — End Year 2 —
- Quarter 9 = 576 new paying users (48 per week)
- Quarter 10 = 672 new paying users (56 per week)
- Quarter 11 = 768 new paying users (64 per week)
- Quarter 12 = 864 new paying users (72 per week)
- — End Year 3 —
- Quarter 13 = 960 new paying users (80 per week)
Total: 5,352 users (assuming no churn).
With this model it’ll take slightly more than three years to build a ~$2 million/year run-rate business with each quarter being incrementally better than that previous quarter. These quarterly numbers are much more manageable and understandable, especially when rallying the team around a goal.
Incremental progress is powerful, especially in recurring revenue businesses.
What else? What are some other examples of incremental progress that add up over time?
David Cummings on Startups 
Hi David,
This is a great post and a very instructive one. The one thing one must add is that assuming 12m payback on the $30 ARR, this will still take at least $2M in sales and marketing to work! Running lean and with very little R&D investment, you’re still looking at least at an additional $1M to build out the product. If you factor in even 1% churn, the timeframe goes from 3 years to 3.5 years to get to the $2M Run-Rate, extending the total burn from $3M to approx $4M… so even if you can pull it off using the power of incremental progress, growing a SaaS company takes a great product + discipline + time + money!
Thanks,
Max