Higher Goals x Positive Yields
This week-end, I received the report of two portfolio companies. The first one was announcing $5M of new ARR during the quarter, 35% beyond budget, and the second one had just passed $50M ARR, just a quarter after passing $40M… Both companies are not spending money lavishly to get to those results and they’re actually not too far from profitability.
Those are not isolated cases.
Just last week, we had a call with a company's management team doing close to $100M in volume and generating more than $5M EBITDA, growing 100% year on year. They have only raised a couple of millions to go this far in just 4 years.
Again, on Thursday, I was with a founding team grinding to reach higher sales velocity as fast as possible in order to find a clear path to profitability. And again on Friday with another company looking to reach maximum efficiency for the same purpose.
I often talk about two notions people seem to hear without listening… Are you setting goals that are high enough? Are you yield-positive when going after those objectives?
It’s nearly impossible to reach a business target precisely. Most of the time, we fall short. The reason behind this is that our mental model, once we set a goal, sets the bar right at this goal. Everything beyond or higher is out of the picture, and therefore we program ourselves to attain that objective with a high probability of falling behind. Also, we often set goals in regard to what our peers are doing or achieved previously.
SaaS companies, once they have reached 100k of monthly recurring revenues, the best of them are expected to grow 3x for two consecutive years and then 2x beyond that. Why the fuck would you admit this as an absolute truth without questioning the underlying reasoning behind that.
You’ve got to follow best practices, of course, and they are here to help you find guidance sometimes and be reference points for you to see where you stand. But they are not limitations nor universal truth to follow. Set an initial bar. And then shoot higher. You know what… Push that bar even higher!
Don’t get me wrong, high ambition doesn’t mean that you should pursue them at all costs. There is no point in moving forward without a positive yield. It doesn’t need to be immediate, but you’ve got to be extra intentional about it.
If one action costs more than what it brings in the short term, how is it impactful in the mid to long term, and what is the magnitude or the level of confidence in this action? What action can you take that actually increases the yield or efficiency of a process?
When hiring, very few people ask themselves whether their current team can be more efficient in what they are doing. It doesn’t mean to work more necessarily. It means to work better, to reduce the number and the length of meetings, for instance, or to dispatch tasks differently.
The past few years were fun, people were raising and spending without even thinking how efficiently they would invest that money. The party is over, and regardless if you are in the hype of artificial intelligence, building the next boring SaaS an industry needs, or trying to crack the next social consumer cool thing, your job is to build intentionally with financial independence in sight, whether it’s going to take 1 million or 1 billion.
Higher Goals x Positive Yields on Actions, the rest doesn’t matter if you’re not intentional about that equation.