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The SaaS Owner’s Guide to Steady Business Growth (2022 Edition)

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Growth is the name of the game in SaaS.  

While bootstrapped companies are often financially stable, they almost always have a hard time growing quickly.  That's ok if you are happy with a small business.

But what if you've got the next Dropbox or Slack on your hands? These companies are built on fast growth.

This means hiring quickly, making new product updates frequently, and relentlessly adding more customers. It's the SaaS equivalent of running a marathon.  And while it's extremely difficult to maintain, this type of growth is what separates the wheat from the chaff.

This guide will walk you through strategies for growing your startup. But, before we get started, let's answer a crucial question.

What is Business Growth?

Growth means different things to different people.   

For some, it means being #1 in their market.  For others, it's a million dollars in ARR.

And for still others, it's simply revenue growth. 

For the sake of this guide, we define business growth as: “A sustainable and measurable increase in a strategically defined metric over time.”

The key word here is “measurable.” 

The reason we need to define growth this way is that it helps us prioritize what to do. We could all “increase revenue,” but that doesn't help us choose which product updates to work on first.

A note about SaaS math: if you're not familiar with the standard metrics used in the industry, check out this guide.

We'll assume you have a good grasp of the math throughout the rest of this guide.

Now that we've defined business growth, let's talk about how to measure it.

How Can You Measure Growth?

Imagine that you have a 3-box system for your company's growth strategy. One box is labeled “quality,” one “quantity,” and the third “new markets.”

The idea is that if you focus on all three boxes, you'll be able to move the needle on your growth.

But you must focus on all three.

The number one growth killer we see is companies who focus too much time and energy on one box. They might spend tons of time on “quality,” but ignore the other two boxes, which end up killing their growth.

You can't have a high-quality product that doesn't find new customers. 

The two go together.

But there's also danger in focusing too much on “quantity,” and ignoring quality and market expansion. We've seen this before: some companies get so obsessed with growth that they hire dozens of junior employees, spend tons on ads, and sacrifice the quality of their product.

It doesn't work, because they lose their most important asset: Their customers.

It's all about balance. You need to find the right ratio of work for each box to grow successfully.

It's also important to think about what the box represents. The “quality” box represents innovation. New features, updates, and improvements are all part of this box.

The “quantity” box is about customer acquisition . It's all about finding new customers, bringing in more revenue, and increasing your net-adding.

And finally, the “new markets” box is about expansion. That's when you start to sell in new geographical regions, expand to new segments, and increase your pricing strategy.

All three boxes are equally important. You can't grow if you ignore any of these.

But the big question is: How do you actually increase your business growth? What should you focus on first? To find out, let's look at three keys to growth.

Essential Strategies For Sustainable Growth

There are really just three levers we can push to keep growing:

  1. Increasing average revenue per customer
  2. Decreasing churn rate
  3. Growing your user base

We're going to go over each one, then talk about how you can use the three boxes framework to grow your SaaS.

1. Make More Per Customer

The first factor is increasing your average revenue per customer (ARPC). There are two ways you can do this: increase your prices, and increase your customers' stickiness and usage.

Raising prices isn't easy, but it's one of the most effective ways to increase ARPC. 

There's a thin line between too much and too little price increases, so be careful how you do this.

We recommend testing price increases on a small group of customers, and constantly measuring the results. 

This will give you insight into how your customers will respond, and how big the price increase can be without hurting your business.

Don't do it overnight. 

Instead, roll out a gradual increase over time, so you can monitor customer retention and usage.

The second way to increase ARPC is by increasing your customers' stickiness. Doing this will make it more difficult for them to switch from your product to a competitor.

Here are some ways to do this:

  • Referral programs: Give current customers a referral incentive, and they'll refer new users to your product, making it easy for them to buy.
  • Get personal: Personalization is key. Make it easy for your customers to see why they should stick around, and how your product will benefit them.
  • Improve your branding: People develop emotional connections to high-quality brands. Build a brand that your customers can see as a trusted resource, and they'll have an easier time justifying the expense.
  • Solve a painful problem: If you can help your customers solve a big pain they're experiencing, they'll thank you for it.

2. Decreasing Churn Rate

The next driver of growth is decreasing your churn rate.

By getting customers to stick around longer, you'll keep your revenue steady. And by decreasing the churn rate, you'll increase the lifetime value of each customer. This is a huge boost to your bottom line.

But make no mistake, reducing the churn rate is no small feat. It's a complex process that takes time and effort.

Feedback analysis plays a key role in this. It allows you to find out why customers are leaving, and what you can do to make them stick around longer.

To get this data, you'll need to set up a well-oiled feedback loop.

You need to constantly ask your customers how you're doing, listen to their answers, and act on this information.

We recommend using surveys, support tickets, or even talking to customers directly (in person or by phone) for this.

You should also create a customer success map to identify friction points and trouble areas. 

This will make it easier to solve churn issues before they result in a customer loss.

Customer success maps will also help you find out which channels are causing the most friction. It's not enough to solve issues on your side. You need to fix things on the customer's side as well.

And, don't forget about churn prediction models. You can use them to anticipate when your customers may leave, so you can act before it's too late.

3. Gain More Customers

Growing your customer base is also important.

Customer acquisition and retention are two sides of the same coin. If you're doing a good job with one, you'll likely succeed at the other as well.

That said, each practice requires a different approach.

Acquiring new customers, for example, includes identifying where to find new leads, building relationships with them, and sealing the deal.

The first step to acquiring more customers is determining whether you're ready for it.

That might seem counterintuitive.

Isn't every business ready to acquire customers?

Not necessarily.

You need to take a hard look at your business model, and make sure it can support the additional burden.

For example, if you're running a subscription service, acquiring new customers will increase your costs. Make sure that your revenue model can support the additional expenses.

Even if your business model can support growth, you still need to make sure that it's a good idea.

The best time to expand is when your company's at the top of its game.

This means you need to make sure that you have the resources to do it.

If you don't have enough time, money, and people, growth will likely result in a net loss instead of a net gain.

See, growth is a complicated process that can take many forms.

Growth may not be the right choice for every company.

The Three Pillars of Steady Business Growth

As we've already noted, there's no one-size-fits-all approach to business growth.

And that's part of what makes it so exciting.

No two strategies are alike, and it's up to you to figure out which one is right for your business.

That said, we can still give you a leg up by putting everything in context.

So, without further ado, here are the three pillars of business growth:

Pillar 1: Purpose

The first pillar of growth is purposeful planning.

You can't grow your business without a map. You need to know where you're going, otherwise you risk wasting time and money.

If you don't have a plan in place, how will you know when you've succeeded? And, if you don't know what success looks like, how will you know when to cut your losses and move on to something else?

You need to know what you're trying to accomplish with your growth strategy before you start.

More specifically, you need to look at three elements:

  1. Identity
  2. USP
  3. Ideal customer persona

Let's dive into each one.

1. Identity

To begin with, you need to know who you are and what makes your company unique.

This is your identity.

  • What makes you better than the competition?
  • Why should someone do business with you instead of them?
  • Why does your business exist other than to make money?
  • How are you redefining the industry or solving a problem?

When you know who you are and what makes your business special, then you can start thinking about how to communicate that message to your customers.

2. USP

So, now that you know who you are and why you're unique, the next step is to figure out how to tell people about it.

This is your USP — your unique selling proposition.

It's the little thing that makes you different from everyone else.

Let's look at an example:

Crate and Barrel is a furniture company that sells everything from sofas to bookshelves to kitchen accessories.

However, they're different from other furniture stores in one key way:

They offer free design services that help you find a look that's uniquely yours.

Crate and Barrel helps customers discover their own personal style. Instead of just selling furniture, they help you define who you are and how you want to express that through your home.

So, even though the company sells home goods, they've differentiated themselves by focusing on a specific customer's needs.

This strategy has allowed them to earn a dedicated following of customers who come back again and again to discover their own personal style.

By identifying your USP, you're establishing a unique relationship with your customers.

And that makes it easier to grow your business by attracting more people who are interested in what you have to say.

3. Ideal customer persona

Now that you know who you are and why you're special, the next step is to think about your ideal customer.

  • Who are they?
  • Where do they live?
  • What problems are they facing?
  • What are their hopes and dreams?

By knowing who you're trying to reach (and how to reach them), you'll be able to make smarter decisions about where to invest your marketing dollars.

For example, let's say you're starting a SaaS business that offers productivity software for freelancers.

In that case, your ideal customer is someone who works from home full-time and doesn't have a lot of money to spend on office equipment.

So, you should choose a marketing mix that reaches this specific group of people.

For example, you could advertise on a freelancing site or during a morning talk show for stay-at-home parents.

You could also run a targeted Facebook ad campaign about managing your time.

Now, this process of defining who you are, what makes you unique, and who you're trying to reach is a recurring process.

It should happen at the beginning of every new stage in your business' development.

Every 6 months or so, you should go through this exercise again to make sure you're staying on track.

And as you grow, your business identity will also evolve and change as new opportunities come up.

Pillar 2: People

The second pillar of growth is your people.

To grow your business, you first need to think about how you can attract the best talent.

Then, you need to figure out how to develop and retain that talent.

Growth is always a collaborative effort.

Without the right people, you won't get far.

So it's worth investing in finding, hiring and developing people who fit your company culture and help your team reach its full potential.

There are two things you need to get in place to find the right people:

Culture fit

  • Do they believe in your mission?
  • Is their personal style compatible with your company's values?
  • It's worth putting time and effort into finding people who share these values.

By hiring the right people, you'll not only save yourself a lot of time and energy in the long run. 

You'll also build up your customer base because people are more likely to buy from companies they trust.

Performance

  • Do they have what it takes?
  • Can they handle the challenges that will come up as you grow?
  • Is their background relevant to the kind of work they'll be doing for you?

It's important to look at a candidate's previous experience and education.

Usually, you'll have to train them for certain tasks, so make sure they're willing to learn.

Pillar 3: Process

To grow your business, you need predefined processes and systems to guide the work of your team.

It's important that everyone knows exactly what their tasks are and how they contribute to the company's overall mission.

You need to create a process for everything from customer service and hiring to financial management and lead generation.

The purpose of this is twofold.

First, you'll be able to scale your company by delegating tasks effectively.

Second, you'll be able to track the progress of your business by measuring the efficiency of these processes.

By doing so, you'll be able to make adjustments quickly and stay on top of everything your company is doing.

There are three things you should know about processes:

  1. Standardization
  2. Long term thinking
  3. Metrics

Let's cover each of them in more depth:

Standardization

When you standardize a process , it means you create the same model for every person who completes that task.

For example, every time a customer writes to your team about an issue, you might create a standard reply with the problem and its solution.

This way, the customer only has to read one answer and can apply it without contacting your team again.

Standardizing your processes allows you to take shortcuts because your team knows what to do already.

Standardization will help you save time and resources as your business grows.

Long term thinking

When you have clearly defined processes, it's easier to understand how your business is doing.

You can use this data to make adjustments quickly and pinpoint problems early on.

Processes help you make better, more informed decisions about your business activities.

And it's a lot easier to know where problems lie when you've got metrics to refer to.

Metrics

Processes help you measure your progress by giving you specific numbers to track.

As you define your processes, work on finding the metrics that are relevant to each of them.

For example, if you're processing customer support requests, your metrics might include response times and the number of errors made.

You can use these metrics to make informed decisions about how your business is performing.

Remember; you can't grow what you don't measure.

It All Starts With the Vision and the Goal

At the end of the day, a business' success, or lack thereof, begins with a goal. 

And when you have a clear vision of where your organization is going and how you'll get there, your customers will follow.

This isn't guaranteed to work for all companies, but it's certainly true if you're building a product that's focused on growth.

As Morgan Brown said:

“It all starts with the vision and the goal.”

If you're ready to strengthen your vision and achieve your growth goals, take a look at Executive Navigation — our proprietary process for growing SaaS businesses to $10M fast.

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