Once you have established your 2-year and 1-year strategic themes, you’ll need to evaluate your projected expenditures against your expected revenue and existing funding. This will help you determine the viability of your two-year vision and identify potential problem areas.
For instance, imagine that your startup closed last year with $2 million in annual recurring revenue (ARR), and fueled by fresh funding in January, you set an aspirational goal to triple your ARR within a year. First, you’ll need to calculate your net retention—for this example, let’s say it’s 110%, which brings your $2 million up to $2.2 million. You’ll need to focus on acquiring new customers to make up the remaining $3.8 million needed to hit the target.
This planning phase often unveils the stark realities of customer acquisition costs, which might not have been previously defined. Industry norms suggest $1 spent on sales and marketing should generate $1 in net new ARR, but for many SaaS startups, this cost can escalate to $1.5 or even $2 for each new ARR dollar. In our example above, this would leave you seriously short, requiring as much as $7 million to achieve that $3.8 million in new revenue—and if you haven’t yet raised enough to cover the difference, you’ll need to reassess your goals.
The good news is that this kind of bottom-up planning will give you a realistic picture of where you stand in relation to your objectives. Completing this financial review now will provide the insight to set achievable goals and allocate your resources wisely to meet them.
Companyon has developed a simple modeling tool to support this process. Contact us to learn more:
https://app.calculatorstudio.co/embed/growth-planner-guidelines-mku57zcIQ7W:kmIyuA8v1Q
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