Reverse Engineering - Achieve your revenue goal with clarity
Bonus: The 1-sentence Value Proposition + ARR per FTE
Hey - itās Alex!
Today we cover:
1ļøā£Ā Reverse Engineering: Know what it takes to achieve your revenue goals
2ļøā£Ā The 1-sentence Value Proposition
3ļøā£Ā ARR per FTE: Healthy SaaS growth
Bonus material if you read till the end - Matteo Tittarelliās Ultimate Guide to AI-powered Programmatic SEO.
If youāre new to the newsletter: I share with you bi-weekly 3 actionable growth tactics that will help you quickly grow your SaaS business from ā¬0 to ā¬1 million ARR š.
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1. Achieve your revenue goals - Reverse Engineering plan
Iām sure you set goals for your SaaS- mostly revenue goals.
I want to achieve 1ā¬ 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).
Thatās where reverse engineering comes in place.
Reverse Engineering your Revenue Goals
The reverse engineering works the following:
You set ātop-downā goals
You define āassumptionsā - 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 thatās 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
āĀ We need to close 800kā¬ in the next 12 months
vs.
Easy to work within your day-to-day business
šŖĀ We need to contact 200 leads per month and have 10 demos per month
Of course, you can break it down even furtherā¦
šØĀ Before you read on:
š Build your GTM strategy with my free SaaS GTM Strategy WorkbookĀ (helped 3000+ SaaS leaders)
š Get access toĀ 90+ actionable SaaS growth tacticsĀ (helped 200+ SaaS leaders) - 100% positive ROI guarantee.
šĀ Work 1-on-1 with me -Ā GTM AdvisoryĀ for early-stage SaaS founders on their way to hitting the first ā¬1 million ARR (1 free spot - limited to 8 founders).
ā¤ļøĀ GetĀ exclusive benefitsĀ for sharing my newsletter with your SaaS network.
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 timeā¦.
ā¦whether you are on a cold call with a prospect
ā¦or a networking event meeting potential investors
ā¦or writing your next outbound email sequences
ā¦or working on your website
ā¦or crafting your sales deck
ā¦or writing your next LinkedIn post
ā¦or being in an elevator with a potential client š„³
The list goes on.
But if you donāt train your 1-sentence elevator pitch, you start improvising, which usually leads to becoming the āin-depthā person or the āunspecificā person.
The solution?
Create your version of the 1-sentence value proposition and then āuseā 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 youāve found your powerful elevator pitch.
I recommend a 3-sentence value proposition template that follows a 3-step storylineš
š¦šš²š½ š: š¦š²ššš¶š»š“ ššµš² š°š¼š»šš²š
š
-> Who (ICP) wants to do what (usecase)
-> How do they primarily do it today (current solution)
1ļøā£ (Persona) of/working in (company type) need/try to doing (usecase) usually use (current solution).
š¦šš²š½ š®: šš
š½š¹š®š¶š» ššµš² š½šæš¼šÆš¹š²šŗ
-> What is wrong about the current way?
-> And what is the negative implication of this?
2ļøā£ 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).
š¦šš²š½ šÆ: šš»ššæš¼š±šš°š² š® šš¼š¹ššš¶š¼š» (š³š¼šæ ššµš² š½šæš¼šÆš¹š²šŗ)
-> What is it that you offer (product category)
-> What can they do with it (product capability)
-> What are the benefits/results for them
3ļøā£ 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
Hereās 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. Itās the result of the simple Value Proposition Canvas. that I shared in my previous episodeš
3. Healthy Growth - ARR per FTE metric
ARR per FTE is a great metric to know how you're doing. Itās 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 1ā¬ million ARR healthy?
Track the following 2 metrics to be sure youāre 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 (ā¬) CACĀ /Ā [Ā (ā¬) ARPAĀ xĀ (%) Gross MarginĀ ]Ā =Ā 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?
ā> Follow founder-led sales and donāt hire too early in your GTM team.
Analyze your customers and make sure you focus on your ideal customers
ā> Identify segments that show better numbers (e.g. higher ACV, lower churn, faster sales cycle)
Pricing - do you charge enough?
ā> Lots of startups undercharge for their product, leading to unhealthy CAC:LTV, making it hard to invest in the right channels. (ā> Ultimate Pricing Guide)
Growth Channels - Do you bet on the right channels?
ā> Not all channels show the same success. They all come with different CACs.
Experiment with Upselling, Annual payments & Set-Up Fees
ā> Depending on your target market, thereās 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).
šŖĀ Bonus material (software, content, news)
ā> Matteo Tittarelli (Hypergrowthpartners): Ultimate Guide to AI-powered Programmatic SEO
ā> 12 LinkedIn post templates that drive Inbound leads
ā> The Doās and Dont's of a SaaS affiliate program
Happy growth š.
š 3 ways I can help you grow your SaaS to ā¬1 million ARR:
GTM advisory for early-stage SaaS founders on their way to hitting the first ā¬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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