10x Business Plan: How to Build a Unicorn Startup
Decoding the DNA for building a unicorn startup doesn’t need to be difficult with a 10x business plan and an expert in your corner. Anthony Nitsos, the founder of SaaS Gurus, has helped numerous companies reach their full potential in business.
Anthony joined the business world after studying medicine. His time in the medical field provided him with a unique view of business. After learning how systems affect the body, he was able to view business development with the same approach.
His experience in the medical field, engineering and business helped craft SaaS Gurus into a company positioned to help companies unlock their full potential using SaaS-specific systems and technology. Today he’s sharing how to build a unicorn startup with a 10x business plan.
The Most Common Struggle for Tech Startups
What I’ve seen companies struggle the most with is figuring out how to get to market. They’ve got a great product and understand what its value proposition is. Yet, these companies struggle to get the word out to their target in a way that the target can realize. The problem of decoding the DNA of the company recurs over and over again. The issue mainly comes down to the fact that many tech startups don’t think of the go-to-market stage.
A lot of tech startups have a great product that an engineer develops. Somebody says, “Hey, wow, that’s a great idea. I’m sure people will buy it.” Yet, these startups don’t figure out how to connect the dots between their people and their target. It’s a cycle that happens time and time again.
On the flip side, the successful companies that I’ve helped, like Duo Security, had that DNA code of their company decoded. They knew what their persona was and which personas they wanted to go after. They knew what their ideal customer profile was. Most importantly, those companies knew what watering holes their target personas went to and could hunt for them. Their marketing wing was beyond belief. We had, at some point, 8000 MQLs coming into the system for Duo Security salespeople to screen through. That takes a machine and somebody who knows how to build the machine and all the key parts.
Decoding the DNA to Develop a 10x Business Plan
When launching a startup, you should figure out the persona or DNA of your company. In order to develop a 10x business plan, you must first answer these questions:
- What is your persona or avatar?
- Who is your target?
- Who do you need to target within your organization?
- What message is your target going to receive?
The most important question is how will you deliver your message? If you do all those other steps and forget to communicate, then you’re not going very far.
Intertwining the Value of Your Company and Go-to-Market Strategy
Make sure that the value of the company is appropriate to the sales that they’re making.
Closing a sale doesn’t mean it will translate into value for your company or investors. You’ve got to pay attention to what your customers signed and what conditions you’ve given them. There are components on the finance side that need to be done correctly. The fact is, the go-to-market strategy and figuring those elements out is where most failures occur.
Closing sales is a big deal and has a huge financial impact because if you can’t close deals, you can’t get the top line. There’s a cash flow impact. You’re not invoicing customers. You’re not getting invoices to help operate your business. Keep in mind that the world I work in is venture capital backed. We receive fairly sizable checks from people who are taking a bet on the company’s success.
In many cases, the cash from customers isn’t the be-all and ends all whether the company will succeed, but it does contribute. Consider Duo Security again. There’s a reason why that particular company exited at $2.35 billion to Cisco. That’s a nice payday for everybody that was involved in it. They achieved those results because they intertwined the value of their company and go-to-market strategy.
Decoding the Revenue Maze
There are people out there that can help you figure out how to decode that revenue maze. In fact, it doesn’t have to be a maze. You’ve got your million dollars and money from your investors. Now, what do you do with it? A lot of startups dive into really developing the product. I have to pause them and ask important questions like:
- How is that product going to translate into sales?
- Is the product going to translate into an upsale?
- Are the features that you’re adding allowing you to upsell existing customers?
- Are you in land and expand mode or a takeover mode when it comes to sales?
Those are just a few questions that can help startups focus on sales in a constructive way with the go-to-market strategy in mind.
The Importance of ARR When Developing a 10x business plan
The other thing is, remembering the importance of annualized recurring revenue (ARR). ARR is like a bathtub, and your faucet bringing the water into the bathtub is your new sales. If you didn’t plug the drain, then you’re letting customers leave on the other end of it. They’re not renewing. Not considering how you’re going to get to market or including ARR into the strategy is a major error that startups make when developing their 10x business plan.
Most SaaS companies are based on some multiple of their ARR, the value of their companies. In the very early stages, that valuation is based almost entirely on the technology and its potential. As you get further invested, investors will look more and more at your numbers. This is where the finance people come into the room and start hemming and hawing. They’ll look at things like if you have contracts:
- With money-back guarantees
- That allow people to cancel after three months
- That are not true SaaS contracts and aren’t paid in advance
If the answer is yes to those questions, those are red flags for investors and finance teams. They’re going to discount the value of your ARR stream and give you a lower valuation.
How Net Dollar Retention Can Help Create Unicorn Startup
Another important metric that investors are going to look at is net dollar retention. Net dollar retention speaks to the quality of your revenue. This is that drain plug on the bathtub. The ideal situation for startups is to keep customers in-house by supporting them, contacting them, and keeping them in the loop. When it’s time for renewal, it’s just the processing of an order. There’s no discussion needed. During that entire process, as development is pushing out more and more features, the renewals team is focused on keeping the customers that you have and upselling them. That total amount is measurable, and we call that net dollar retention.
Then when valuation companies come in, they’re going to pay close attention to your net dollar retention and those renewals. They’re going to ask you for that ARR growth number and for that net dollar retention number. Typically, valuation companies want those numbers at 115% or higher. Below that, they’re going to start discounting your revenue, which means they’re going to start giving you lower valuations. Lower valuations means that you’re going to give up more of your company for the investment, or you’re going to get less investment. Neither one of those is something that an owner really wants to deal with. That’s why it’s imperative that startups home in on all these metrics when developing their 10x business plan to create a unicorn startup.
Contact Anthony Nitsos to Get Started on 10x Business Plan
With a background in medicine, total quality management process re-engineering, IT, and finance, Anthony’s unique professional experience has shaped his professional approach into a disciplined, rigorous, and scientific approach focused on maximum efficiency, minimum cost, and strategic outcomes. He believes treating the symptoms and not root causes is just as big a miss in commerce as it is in medicine. Anthony Founded SaaS Gurus from his years of experience building B2B SaaS finance and admin ecosystems for many companies including Duo Security (exit to Cisco $2.35Bn), LLamasoft (exit to Coupa $1.5Bn), and dozens of other start-ups.