21. Eventually, you need marketing and sales
The danger of the product CEO is that when you love product, every solution is a product solution. Dropbox is one of the very, very, very few companies where this worked out – a group of MIT grads sitting in a room, building great product and viral loops.
However, in the more common world, word of mouth only gets you so far. Marketing, Sales and BD are what make companies grow. Great product just makes it easier.
I met with someone who buys startup companies at low prices that are running out of money. He then implements very standard tactics to make them grow revenue. None of these things are rocket science. These companies then turn into revenue machines. His impact is immediate and mind-blowing.
It’s unfortunate that the founders missed the chance to drive it themselves. Founders will often wait for a natural lift in growth and will keep changing their product until it gets there – even when changing the product no longer make sense.
22. Small variances in churn can have a massive impact on revenue growth over time
This is the best graph on churn I’ve seen. Small differences in churn has an exponential impact on your MRR over time. See below.
Unless you get control of churn, your growth will eventually stop, since churn will cancel out any new upgrades. It’ll become more and more difficult to replace churned users over time.
Image credit: dskok
Read more about this here.
23. Annual plans are amazing. Implement them ASAP.
You offer your users a discount for the year and in exchange, you get approximately ten months worth of revenue right away (depending on how you discount), rather than one month of revenue each month. That can easily make the difference between being cash flow positive and burning money. It can also reduce churn and many of your customers prefer them. Win, win. Plus, when those renewals hit after one year, your revenue takes a big jump. If I were you, I’d implement annual plans ASAP.
24. Engagement is a leading indicator for revenue
Engagement is flat, but revenue growth steady? That probably won’t last. There’s only so much you can do before paid upgrades decrease.
25. Focus on a limited number of metrics
As much as I love metrics, focus your attention on just a few. I’d pick one revenue growth metric, one churn metric and one engagement metric to start. Then, grow your metrics dashboard over time. When you do, implement this one.
We started out with a metrics setup that was really complex and all we got was a lot of wasted time and an important lesson.