January 28, 2023

By Alexandru Stan, serial entrepreneur and CEO of tekpona one-stop platform for all software needs.

No one will tell you at the beginning of your entrepreneurial career that you will encounter many impossible things that others say should be the main goal of your business. But let me tell you from my experience that if you build your startup after what the market promotes as a true success, you will fail. The first thing that comes to mind is the misconception that a startup is not a business. And let me tell you, future CEO of a startup, it’s real and harder to manage than a company that’s already growing. But there are other myths about this industry worth mentioning.

Is there a ‘magic formula’ for $1 million ARR?

This is one of the fairytales most startup owners believe in. Most of them believe that there would be a magic formula like Excel’s that will help them reach $1 million in annual recurring revenue (ARR). And we can’t blame anyone for believing in such fine goals, except for the people who supposedly know the secret steps to achieve this in an impossible timeline. But I would also like to tell you that it is possible. However, if your startup’s main goal is to reach this milestone, then you’ve forgotten some important steps along the way.

Is it still an important indicator for your startup?

It is not an important indicator of your success, marketing and sales. However, this is what I have learned over the past two years leading a team and a startup and creating a suitable product for the SaaS and software industry. Of course it is now easier to realize this at an early stage with fewer customers than it was 10 to 15 years ago. But again, this is optional for the success of your idea and startup. Still, it’s easier to get into the A/B round funding once you hit the $1 million ARR.

Even if you don’t reach this milestone in six or nine months, you still need to work hard and understand your product and your customers’ needs. And after that milestone, you need to work and understand how to move forward – not only to keep your customers who brought you the $1 million, but also to find new customers.

What should your focus be on?

Instead of obsessing over this number, you and your team should focus on the product or service you are creating. Put yourself in the shoes of your customers and ask how the service you create can help. Essentially, the service should be able to sell itself without a sales team having to push people or companies. So the product should be your focus, and the customers can come up with the sales they want without even knowing if you are doing a great job.

Pay attention to your customers’ needs.

Unfortunately, I do not agree that our customers always determine what we do, but I can say that we pay attention to their needs. Ultimately, we want to help people improve their work and life and spend money smartly. So if you make your customers happy, they can be your voice further down the pipeline. They can be the ones to advocate for you. Again, I don’t have a magic formula for this, but the best advice I can give is to try many times. Even if you run out of ideas, keep going. You might discover something new that could change the game for your startup.

I don’t want to bust any myths, but I’m just sharing what my team and I have learned over the past two years. We were stolen by the wonderful myth of reaching an ARR of $1 million in a short period of time because we thought we had a great idea. And yes, our idea is great, but first we had to build the product from that idea and put our focus on how we can help people. Remember, the better you do, the faster your customers will take you to that desired milestone.

The reality is that more startups reach that point after at least two years. And those are the lucky ones, because in that period you need money to exist in order to develop your idea. But I do believe that luck is on the same part of the road as those who are dedicated and work hard to give back to the industry. May the holy ARR be with you!

Leave a Reply

Your email address will not be published. Required fields are marked *