10 years ago, Christoph Janz wrote one of the most important articles I’ve ever read titled ‘Five Ways to Build a $100 Million Business’.
Thing is, most people I meet are still struggling to get to 10 million.
So, just like Christoph originally expanded Boris Wertz’s article, we’ve further developed the framework at RevFixr. We’ve converted it to 10M annual recurring revenue (ARR), localised it for Europe, and introduced new metrics.
So, it’s about time I share with you: Five Ways to Build a €10M Software Business
What you can expect:
New perspective to look at your SaaS or AI company. You’ll thank me later.
Common language to unite your go-to-market (GTM), finance, and your leadership team. I’ve never seen teams align more easily.
Benchmark metrics: annual churn rate; customer lifetime value (LTV), customer acquisition cost (CAC), net retention revenue (NRR), and more. You’ll finally know how you’re doing.
The Five Ways
The idea is simple: there are five types of animals you can hunt as a software company and each animal represents a certain contract size.
To reach €10,000,000 in ARR, you need:
100,000 customers paying you €100 per year (Mice); or
10,000 customers paying you €1,000 per year (Rabbits); or
1,000 customers paying you €10,000 per year (Deer); or
100 customers paying you €100,000 per year (Elephants); or
10 customers paying you €1,000,000 per year (Whales).
Before we move on, it’s important to note that the animals refer to the contract size rather than the size of the client.
Deal size frequently correlates with customer size, but not always. Dropbox sells €100 contracts to consumers, but also to employees at multinationals. AWS closes €100,000 deals with Enterprises, but also with startups.
The key message here is this: in order to reach €10M ARR, you need to find a scalable GTM motion.
You’re not going to catch many deer with mousetraps nor will you catch any whales with a hunting rifle. Your GTM strategy needs to be focussed and suitable for the game you’re hunting.
So, let’s take a closer look at how you actually hunt 100,000 mice, 10,000 rabbits, 1,000 deer, 100 elephants, or 10 whales.
Hunting: Go-to-Market
Before we start tracking footprints and laying traps, let’s get a feel for the lay of the land. You don’t walk into the wild without a game plan.
First up: average contract value (ACV). There are fat deer and skinny elephants out there. They require the same gear, but different rewards.
Next: annual churn rate. In SaaS, we don’t kill the animal right away. We rope it in, fatten it up, and keep it fenced. The bigger the game, the more effort to catch, the more it hurts when it escapes.
Then: lifetime value (LTV). Mice walk right into your traps, but they don’t live very long. Whales require a whole harpoon team to capture, but they’ll feed you for years. (Translation: small contracts are easier to close, but churn fast; big ones take time to close but tend to last.)
Finally: customer acquisition cost (CAC). You don’t blow €2,000 on a bullet to bag a $500 rabbit. As a rule of thumb: keep CAC below 25% of LTV or under 18 months of gross profit, whichever bleeds less.
So before you lock and load, ask yourself: What are you hunting? How long will it live? How much meat is on its bones? And how much are you willing to spend?
Hunting Mice 🐭 (ARPA €100/year)
Hunting mice is the ultimate numbers game. If you’re looking to acquire 100,000 customers paying you €100 per year, scalability becomes necessity. Especially when you realise 5–10% (considered high) conversion rates means you need to get in front of 1–2 million people.
With an LTV of €200 and acquisition budget of €50 (see benchmark), we can immediately rule out any human involvement when hunting for mice. Instead, you’ll need to rely on product-led growth (PLG).
Meaning, you’ll want to build a platform that’s completely self-serve like Netflix, Dropbox, Duolingo, ChatGPT Personal, or Figma. Anyone can visit their website, swipe a credit card, and start using these tools without ever talking to another human being.
The most successful of these cases have a high viral coefficient and a social aspect to them. You can share Dropbox storage with others. ChatGPT results are easily shared. Duolingo introduced friend challenges. And Figma allows users to create and share templates with the community.
Luckily, mice multiply very rapidly. Successful mice hunting, therefore, relies heavily on whether the mice tell other mice where to find the cheese. 🧀
Hunting Rabbits 🐰 (ARPA €1K/year)
Not looking forward to hosting a mice infestation? Perhaps chasing 10,000 bunnies around the forest is more your speed.
Just like mice hunting, hiring a sales army is still off the table with an LTV of €3,200 and CAC of €800 (see benchmark). But unlike hunting mice, the LTV does unlock marketing-led growth (MLG)–think SEO, advertisement, and branding–and human involvement in the onboarding.
You still want to invest in a self-serve experience, but this time you can consider offering human-assisted onboarding at a one-time fee to extend the customer lifetime. For example, purchasing Hubspot Sales Hub Pro (starting at 1K/year) requires you to pay a €1,500 onboarding fee.
Other examples of successful rabbit hunters are Slack, Notion, Loom, and Webflow. These tools let anybody onboard themselves. However, as soon as you meet a certain team size, these companies will have a sales agent reach out immediately.
Hunting rabbits works best with a hybrid GTM motion. Leverage marketing to create awareness and consideration, while investing in self-serve to keep operational cost at a minimum.
Hunting Deer 🦌 (ARPA €10K/year)
Joe Rogan isn’t the only one who loves hunting deer. It’s the SaaS industry’s most popular game. And for good reason. But whereas Rogan just needs one to get fed, you’ll need 1,000 to get to 10M ARR.
With an LTV of €65,000 and an average hunting budget of €16,250 (see benchmark), your marketing team can track them down and have sales take the shot. You’re now past completely self-serve, but since deer stick around for years you can invest in customer success.
First, you want marketing to generate leads. If we deduct the cost of sales and take into account sales conversion rates, that still leaves €500–€1,500 per deal closed. You can invest this in advertisement, conferences, white-papers, and email campaigns.
Next, it’s up to sales to take prospects from discovery through product demos and negotiations. When hunting deer, it’s necessity to split this process between junior sales development reps (SDRs) for discovery and demo and senior account executives (AEs) to negotiate and close deals.
Great examples of successful deer hunters are Hubspot, Spendesk, Monday.com, and Intercom. These companies are very efficient at separating rabbits from deers or elephants.
What sets deer hunting apart is the fact that deal cycles are still relatively short and you can quickly generate revenue to reinvest in your company. This is especially great for bootstrappers.
Hunting Elephants 🐘 (ARPA €100K/year)
SaaS Founders deserve a spot in the history books next to the Carthaginians as the most successful elephant hunters. Probably because you only need 100 to get to 10M ARR. That’s only 3 times as much as Hannibal brought with him when crossing the Alps.
Elephant hunting is incredibly similar to deer hunting. However, with your acquisition budget exceeding €100K and LTV ~€1M, customer expectations and requirements are more serious.
This means more meetings with more stakeholders. Luckily, with the increased hunting budget you can hire more senior sales and marketing staff. This is generally more sales-led growth (SLG) as sales will take a bigger role in generating leads themselves.
A pretty cool development of the last 5 years: companies like Miro have figured out how to combine SLG with self-serve motions. By letting individual users sign up, sales can target enterprises with multiple users on these individual plans and offer company-wide licenses instead.
Workday and Salesforce might be the best examples of elephant hunters. Both these companies cater to a large portion of the Fortune 1000.
Elephant hunting is great, because you only need to close a few customers per year. The biggest downside is the upfront investment. Most elephants expect perfect uptime, compliance checks (SOC2, ISO, etc.), SLAs and other high standards.
Hunting Whales 🐋 (ARPA €1M/year)
Whaling (the practice of hunting whales) is banned in most countries, but some manage to get a license to operate. In SaaS, this license is usually attained through an existing network. A proven track-record or an ex-employee. That’s why you’ll see few first-time Founders on the seas.
With an ACV of €1M, you only need 10 customers to build a €10M software company. But that doesn’t mean it’s easy. There are few sales people in this world who can close such contracts.
Successful whale hunters generally rely on Founder-led sales. It’s often a second or third-time founder or someone from a large consultancy firm with an exhaustive network. Deals can take years to close and are generally part of strategic initiatives of a client.
The best examples of whale hunters are probably AWS, Palantir, and ServiceNow.
Unfortunately, there is not much else I can share on whaling. Then again, if you’re closing whales you probably don’t care about my Substack anyway…
Additional Metrics
As stated in the intro, we added several metrics to the original framework. For now, I want to stick to net retention revenue (NRR), the inbound vs outbound ratio, and professional services–as each of these deserve extra attention.
Net Retention Revenue (NRR)
The NRR tells the story of customer expansion. Are you only able to land new customers? Or are you also expanding them?
NRR = (Starting ARR + Upsell & Cross-sell - Churn) / Starting ARR
As you move upmarket, your CAC is rapidly rising while churn is actually going down. At the bottom of the market, it’s all about landing new customers. All the way at the top, customer expansion actually becomes more rewarding than landing a new one.
When hunting mice or rabbits, you may consider focussing entirely on customer acquisition and perhaps offering a premium plan or some add-ons.
When you start hunting deer, elephants, and whales it becomes economically viable–and even critical–that you expand those customers. That means you’ll have to invest in customer success, product broadening, and monetising the roadmap.
Inbound vs Outbound
We already discussed the different hunting styles (GTM strategies), but it’s still worth distilling it all down to one single metric: the ratio between inbound leads and outbound leads.
When hunting mice and rabbits, you want them to walk into your trap. You need to create the perfect self-serve motion to convert and onboard customers. Then all that’s left to do is to get them to your pricing page.
It’s only when chasing deer, elephants, and whales that you have the budget to bring the hunt to their habitat. You can go to conferences, cold-call, email, and undertake other activities to get face-time with individual prospects. But even then, the most profitable clients are the ones that find you.
Professional Services
Finally, so many companies wonder whether they should offer professional services or not. And if they do, how much?
There are two key drivers here:
1. Customer relationship
If you’re relying on completely self-serve GTM strategies: don’t offer professional services. In that case, it’s all about optimising conversion rates and you should look at segments rather than individual customers. Only once you start having conversations and face-time with customers should you offer professional services.
2. Budgets
Do your clients have consultancy budgets? Most enterprises have budgets dedicated to consultancy services. You cannot convert these to software budgets. So, the only way to maximise your contract value will be by offering professional services.
Closing Remarks
First off, I hope this article is helpful. We personally use it during every pricing project we do at RevFixr and I’m glad if we can help somebody by sharing it here.
Second, you might wonder whether you can hunt multiple animals. Short answer: yes. Long answer: yes, but… some combinations work better than others. It mainly depends on your GTM strategy.
Third, most SaaS companies move upmarket over time. Few go chasing elephants from day one. They start with deer and work their way up as their capabilities improve. Companies like Dropbox started with a consumer product and have now collected every animal.
Finally, it’s worth mentioning that our benchmark is based on some of the most successful SaaS companies to cross the 10M ARR milestone. It’s supposed to provide guidance, but don’t be alarmed when your metrics are off. Just investigate why it is and whether that’s fine for your situation.
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