I didn’t want to shoot this video. Honestly, I didn’t even think it was necessary. I assumed that all scaling SaaS founders must be doing accrual accounting, right?
If you want to start a new SaaS business in 2021 without tearing your hair out, my advice is: Find a co-founder. You shouldn’t have to do it all on your own… and it’s better that you don’t.
How are angel investors different from venture capitalists? Both invest in businesses. Both can write you big checks. Both have the power to help your business growth with a cash injection you otherwise would never get. Are they the same? Heck no. I found this out the hard way...
In 2009, my mentor Dharmesh Shah (co-founder of Hubspot) sat in my office in San Francisco and casually dropped an acronym I hadn’t heard. “We want to increase our ARPU”, he said. I smiled and nodded… but the blank stare on my face was a giveaway. I was clueless.
Back in 2012, when I raised $1.6M in funding for Clarity.fm, I insisted on squeezing more out of my investors. When I put together the final cap table, I made it clear that I also wanted introductions with other investors and businesses on their portfolio. They told me, “Dan, you’re asking a lot here…” But I put my foot down.
I don’t think a SaaS founder should be their own accountant. I’m not, and I wasn’t for all 5 of my companies. Your job is to get really good at running a business and making money. That’s it. But to do that, there is ONE type of accounting that I believe you NEED to understand: Accrual Accounting.
It’s the thorn in every SaaS founder’s side… The number that keeps you awake at night: Your churn rate. Churn equates to invisible dollars that slip through your fingers. The lower that number, the more successful and exponential your capacity to grow. But how exactly do you measure churn?
When I was 29 years old, I was pitching to investors for funding. I’d breezed through my pitch deck, million-dollar smile on my face despite my shaky nerves when they asked: “What’s your CAC?”
CEOs have it tough. It’s not enough to grow your company into healthy profit margins and then coast along “because it’s working”. I know it’s tempting to kick back and pour the martinis, but comfort is a dangerous position to be in.