Why Your Cost of Sales Often Doubles; Plus Weekly SaaS News and Updates

Hey SaaStr Community,

One of the biggest things first-time founders intuit wrong is how much sales efficiency plummets … just as it is getting good.

That structure often looks something like this around $500k in ARR or so:

Awesome! Look at the final row: your sales team is efficient at $500k – $1m in ARR. Your sales reps are closing 4.0x what they are paid. The model seems to be working at that rate, the reps are happy, and things are good.

And then you go to scale.

And then these numbers break. Why?

So when we first started writing about Bill.com at its IPO, it was a sleepy SMB accounting product.  In fact, it took 14 years to get to this sleepy (but still impressive) IPO.  Things were coming together, but to truly realize repeat founder Rene Lacerte’s vision, the company needed 2 more things:  its network of suppliers to get so big, it created a massive network effect.  And its payments network to roll out.

Well, once they did, boy, Bill.com just exploded.  Fast forward to today, it’s at $800,000,000 in ARR growing a jaw-dropping 158%.  Yes, 158% growth at $800m in ARR.  Yes, that can’t last forever, and half of it was from acquisitions.  But yes, it’s the most incredible SMB growth story in SaaS we’ve ever seen.

First, don’t hide.  Don’t run away from where they are.  You have to be where your competitors are. You have to show up.

Many startups try to avoid the places their larger competitors are. They avoid the same tradeshows. They don’t sponsor the same newsletters and services.

They try to stake out their own marketing white space.

While that’s a good idea, you also usually want to be exactly where your competitors are as well.

This edition of the SaaStr weekly is sponsored in part by Accusoft

So what do you say? Same time next year? 

We'll officially be back next year, Sept 12-14 2023 at the San Mateo County Events Center for an even bigger, more festival-style SaaStr Annual. 

Founders are often guarded toward most VCs.  Perhaps they should be.  That’s a different, and longer conversation.  And one thing founders tend to worry about is — can I be fired by my investors?

In some cases, weirdness wins the race. The lovably off-beat “weird” marketing automation platform Mailchimp was recently acquired by Intuit for $12 billion. At SaaStr Annual 2022, Mailchimp Co-Founder Ben Chestnut sat down with SaaStr Founder Jason Lemkin to answer questions about the two-decade journey to $1 billion in ARR.

This edition of the SaaStr weekly is sponsored in part by Printfection

• ChartMogul is looking for a Senior Lifecycle Marketing Manager to accelerate conversions and owning their customer journey across multiple touch points and channels.

• Strike Graph is seeking an Inside Sales Representative that thrives in a quick sales cycle environment. An inside sales rep will play a fundamental role in achieving their ambitious customer acquisition and revenue growth objectives. 

• SaaStr 593: State of the Cloud 2022: The Centaur Report with Bessemer Venture Partners Sameer Dholakia, Mary D'Onofrio, and Elliott Robinson
• SaaStr 592: Everything that Breaks on the Way to $1B ARR with Mailchimp Co-Founder Ben Chestnut and SaaStr CEO Jason Lemkin
• SaaStr 591: The Key to Successful Scaling Across Markets, From a Founder Turned VC with OMERS Ventures Managing Partner Harry Briggs

Listen on Apple Podcast, Google Podcasts or Spotify

Great founders don’t time the market

Great founders often don’t even check the markets at all

They just start up when they see white space, and are ready to go

So …

Every year is a good year to invest

In the Enterprise, you need to ask if it’s budgeted

If it isn’t, you might still get a deal, but it likely will be smaller to start

With SMBs, you need to find out if they are ready

They don’t have IT, so they have very limited windows of time to deploy or change apps

You: "Our app is only $25,000 a year! It will save you twice that!!"

Customer: "Plus the admin I'll need. Plus hours of team training. Plus 3 months of migration from our prior app. Plus ..."

Figma cost $20B because

(x) It was 2x the last round price

(y) it wasn't for sale

Lots of deals end up getting priced like that in the end

© SaaStr 2022

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