Reverse Engineering - Achieve your revenue goal with clarity
Bonus: The 1-sentence Value Proposition + ARR per FTE
Hey - it’s Alex!
Today we cover:
1️⃣ Reverse Engineering: Know what it takes to achieve your revenue goals
2️⃣ The 1-sentence Value Proposition
3️⃣ ARR per FTE: Healthy SaaS growth
Bonus material if you read till the end - Matteo Tittarelli’s Ultimate Guide to AI-powered Programmatic SEO.
If you’re new to the newsletter: I share with you bi-weekly 3 actionable growth tactics that will help you quickly grow your SaaS business from €0 to €1 million ARR 🚀.
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1. Achieve your revenue goals - Reverse Engineering plan
I’m sure you set goals for your SaaS- mostly revenue goals.
I want to achieve 1€ million ARR in the next 18 months.
But then most SaaS founders stop.
Setting (ambitious) goals is just step 1.
Step 2 is to calculate backward to know HOW to achieve these goals. Knowing what you need to achieve every month, week (or even per day).
That’s where reverse engineering comes in place.
Reverse Engineering your Revenue Goals
The reverse engineering works the following:
You set ‘top-down’ goals
You define ‘assumptions’ - ACV, conversion rates and sales cycle.
Then you can calculate backward to know every step of your funnel (website impressions, leads contacted, demos, customers)
You need to modify the plan for your business and feel free to adapt it (e.g. include churn rate, add a product-led motion).
But that’s not the point here.
The power of reverse engineering is breaking a hard-to-grasp goal into very specific short-term goals. Something you can work on within your daily operation.
Hard to grasp
❌ We need to close 800k€ in the next 12 months
vs.
Easy to work within your day-to-day business
💪 We need to contact 200 leads per month and have 10 demos per month
Of course, you can break it down even further…
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2. Elevator Pitch - The 1-sentence Value Proposition
You need an easy and compelling way to explain what your SaaS does.
Because you need it all the time….
…whether you are on a cold call with a prospect
…or a networking event meeting potential investors
…or writing your next outbound email sequences
…or working on your website
…or crafting your sales deck
…or writing your next LinkedIn post
…or being in an elevator with a potential client 🥳
The list goes on.
But if you don’t train your 1-sentence elevator pitch, you start improvising, which usually leads to becoming the ‘in-depth’ person or the ‘unspecific’ person.
The solution?
Create your version of the 1-sentence value proposition and then ‘use’ it as often as possible and iterate on it. Every conversation with potential clients is a chance to train.
Do this until you feel comfortable with it and you can pitch it in a very natural way.
If you see potential customers, investors, and partners telling you that they fully understand your product and its value, then you’ve found your powerful elevator pitch.
I recommend a 3-sentence value proposition template that follows a 3-step storyline👇
𝗦𝘁𝗲𝗽 𝟭: 𝗦𝗲𝘁𝘁𝗶𝗻𝗴 𝘁𝗵𝗲 𝗰𝗼𝗻𝘁𝗲𝘅𝘁
-> Who (ICP) wants to do what (usecase)
-> How do they primarily do it today (current solution)
1️⃣ (Persona) of/working in (company type) need/try to doing (usecase) usually use (current solution).
𝗦𝘁𝗲𝗽 𝟮: 𝗘𝘅𝗽𝗹𝗮𝗶𝗻 𝘁𝗵𝗲 𝗽𝗿𝗼𝗯𝗹𝗲𝗺
-> What is wrong about the current way?
-> And what is the negative implication of this?
2️⃣ But the (current solution) comes with a few limitations, like (limitation1) and (limitation2), leading to (pain point 1/ problem 1) and (pain point 2 / problem 2).
𝗦𝘁𝗲𝗽 𝟯: 𝗜𝗻𝘁𝗿𝗼𝗱𝘂𝗰𝗲 𝗮 𝘀𝗼𝗹𝘂𝘁𝗶𝗼𝗻 (𝗳𝗼𝗿 𝘁𝗵𝗲 𝗽𝗿𝗼𝗯𝗹𝗲𝗺)
-> What is it that you offer (product category)
-> What can they do with it (product capability)
-> What are the benefits/results for them
3️⃣ That's why we are building (product name), a (product category), that enables (ICP) to do (capability 1), (capability 2) and (capability 3), leading to (benefit 1) and (benefit 2).
Example: Canva
Here’s an example of how this could sound for a product like Canva.
(Non design-savvy) Solopreneurs try creating nice visual LinkedIn carousels & cheatsheets using Photoshop.
But using Photoshop as a non-designer comes with a few limitations, like it's hard to learn and it does not provide any ready-to-use templates, leading to low-quality content and huge time invested to produce good content.
That's why we are building Canva, an online design software, that enables non-designers to create visual content without design skills with templates, leverage AI to start from scratch, and collaborate with others on your designs, leading high-quality content in minutes.
P.S. It’s the result of the simple Value Proposition Canvas. that I shared in my previous episode👇
3. Healthy Growth - ARR per FTE metric
ARR per FTE is a great metric to know how you're doing. It’s revenue (ARR) per full-time employee (FTE).
Kyle Poyar wrote a great guide on ARR per employee.
For you, it means keeping a close eye on your efficiency. Is your growth to 1€ million ARR healthy?
Track the following 2 metrics to be sure you’re on the right way:
ARR per FTE
CAC payback period
It tells you how long it takes you (in months) to recover from the customer acquisition costs and start making profits.
CAC Payback Period Formula (€) CAC / [ (€) ARPA x (%) Gross Margin ] = Months to Recover
Average benchmark: You should stay below 12 months. If you have very low churn and high LTVs your payback period can also be 12-18 months. But ideally, you aim for a 4-6 month payback period.
If you see that your growth is rather unhealthy, few things to consider to optimize your payback period:
Do you have too many FTE (in sales/marketing) compared to revenue?
—> Follow founder-led sales and don’t hire too early in your GTM team.
Analyze your customers and make sure you focus on your ideal customers
—> Identify segments that show better numbers (e.g. higher ACV, lower churn, faster sales cycle)
Pricing - do you charge enough?
—> Lots of startups undercharge for their product, leading to unhealthy CAC:LTV, making it hard to invest in the right channels. (—> Ultimate Pricing Guide)
Growth Channels - Do you bet on the right channels?
—> Not all channels show the same success. They all come with different CACs.
Experiment with Upselling, Annual payments & Set-Up Fees
—> Depending on your target market, there’s a chance you can optimize your payback period by upselling (increase ACVs), asking for guaranteed upfront yearly payments, and also charging additional set-up fees (who can cover the CACs).
💪 Bonus material (software, content, news)
—> Matteo Tittarelli (Hypergrowthpartners): Ultimate Guide to AI-powered Programmatic SEO
—> 12 LinkedIn post templates that drive Inbound leads
—> The Do’s and Dont's of a SaaS affiliate program
Happy growth 🚀.
🚀 3 ways I can help you grow your SaaS to €1 million ARR:
GTM advisory for early-stage SaaS founders on their way to hitting the first €1 million ARR - Work with me 1-on-1 in weekly or bi-weekly deep-dive working sessions to build and execute your powerful GTM strategy.
List of 90+ actionable SaaS Growth Tactics and Free SaaS GTM Strategy Worksheet.
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