Milestones that matter on your $0-$1M ARR journey
Here's what *actually* matters, when
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I’ve seen so many startups waste time on stupid goals and LARPy milestones in the 0-1 stage… and I’ve seen more than a few die BECAUSE they focus on the wrong milestones.
In the 0-1 stage, you’re going to be inclined to think like a “real company person”. You might be drawn to OKRs, SMART goals, cascading goals, splitting out goals by department / person, etc.
In theory, this makes sense. In practice, it never seems to work.
In the 0-1 stage, there can only be ONE goal at a time. For the whole COMPANY.
Set one goal, sprint towards it as quickly as possible.
But which goal? When?
Here’s my take on the most-focused, least-BS set of goals/milestones you can set for your startup.
Milestone 1: Scheduling 5+ sales calls per week, every week
Why is this the first milestone? Because without this, you don’t have enough volume of customer interactions to learn fast enough. Every sales conversation is a chance to learn, and the minimum bar seems to be ~5 calls per week.
If this sounds daunting, (1) come to one of my sprints and I’ll help you get there, and (2) don’t think about this as a “scalable cold outbound engine”. This doesn’t have to scale, doesn’t have to be a cold sales pitch, and should leverage unscalable “founder magic.”
And once you get to 5+ sales calls per week, NEVER take your foot off the gas on scheduling sales calls. Even when you get to Milestone 5, or you’re more focused on customer retention than acquisition.
Milestone 2: 1 paying customer
Why is this the next milestone? Because getting one customer to sign a contract and pay is the kind of milestone that SEEMS bigger and scarier than it is, and if you set any other kind of milestone (e.g., get 10 paying customers), you tend to flail around.
So… sprint to ONE paying customer. Ask for the deal. Make it happen.
Milestone 3: 5 paying customers, of which 1 is a “hell yes” post-sale
Why this? In your first 5-10+ customers, you’re going to learn a LOT. For example:
A certain kind of customer is NOT a good fit
A certain kind of good-fit customer needs way different features than you thought they would
A certain kind of good-fit customer needs a totally different onboarding experience
In theory, these are things you could have learned through research and analysis in advance. In practice, the people who think you can learn these things through research and analysis in advance have never built anything.
So… in your first 5 (or maybe 10) customers, you’re trying to figure out:
WHO says hell yes post-sale, such that they will renew? WHY?
Given (1), who should you target, how should you pitch, how should you onboard, etc.?
And you’re going to learn this the old fashioned way - by hitting your head against the wall trying to deliver. By customer 5, don’t be surprised if 3 customers are “meh”, 1 churned HARD, and 1 is nearly a “hell yes”.
(When you realize that only 1 in your first 5 customers will be a “hell yes”, it takes a lot of the pressure off of early customer selection; you just can’t know who your ideal customer is this early on!)
(PS - what does “hell yes” post-sale mean? It means they are going to renew! See Stage 2 Capital’s writing on “leading indicators of retention.”)
Milestone 4: 5 “hell yes” customers post-sale
Why this? Because you’re proving you have a “hell yes” case study that’s worth replicating, and you’re demonstrating that you CAN replicate this “hell yes” case study.
As you replicate your case study, your path to “hell yes” post-sale should go from “janky and artisanal” to “relatively straightforward.”
Obviously you’ll still learn a ton about the SHAPE of your case study as you try (and fail) to get all customers to “hell yes” post-sale.
Milestone 5: 90%+ post-sale conversion to “hell yes” (N>20 customers)
Why this? Because you’re proving that you can CONSISTENTLY replicate your “hell yes” case study; you’re not wasting effort “spraying & praying.” You demonstrate that you are acquiring the RIGHT kind of customer, setting the right expectations, and delivering.
Some will disagree with me on this metric, especially those committed to blitzscaling. (E.g., I assume many of the AI SDR companies are currently justifying their churn numbers by saying it’s a “winner-take-all market” and “we have to go big to compete with the other idiots who are going big”.)
My reasoning is that if you want to build a real business (vs. a lottery ticket), you have to focus on retention early. I am in it to win big with the lowest possible probability of death. Growth at all costs seems fun from the outside, but if you’re not retaining customers the wheels come off. Fast.
Milestone 6: 30%+ close rate of qualified leads for N>30 SQLs
Note that if you are building a PLG startup, you might now start to depart from my milestone journey & focus on website conversion rates, trial-to-paid conversions, etc. as you build your async sales process.
Why this milestone? “30%” and “N>30 SQLs” are somewhat arbitrary; the point is to have a target of a very good close rate from qualified leads with an increasingly standardized sales pitch.
What this tells you is that:
You are still delivering 90%+ hell yes post-sale
Your sales process is largely bringing in the right people
You are standardizing your sales pitch so you can bring in someone to sell without them needing a PhD from Oxford
In short: You are ready to amp up pipeline & start giving away your Legos.
(PS - you might add a timeframe to this, e.g., deals closing within 45 days.)
After you achieve Milestone 6, you can simply set revenue goals and do your best to hold all your other metrics constant. You’ve figured out what the market wants & how to retain customers, you’ve built a revenue engine; you can just ride this to $1M or even $10M ARR.
However, the method above is slow and you might want to scale faster; here are two additional milestones to consider if you REALLY want to put your foot on the gas:
Milestone 7: ONE scalable pipeline source works & is cost-effective
Milestone 8: Sales + CS Metrics held while turning over sales to sales rep(s)
The theory behind these milestones
If you haven’t read my case study method presentation… SHAME!
Kidding, here’s the short answer:
Product-market fit is about replicating a case study
The “Hell Yes case study that only you can deliver” determines your target market, your pricing, your competition, etc.
This case study evolves forever; more violently as you go through Steps 1-4.
Your business is a system to replicate case studies, and bring customers from prospect → actual customer → successful customer.
These milestones look at this *case study replication system* and ask, “what is the system’s bottleneck at each stage of the startup journey?”
PS - If you’re a B2B software company and thinking about getting SOC 2 compliant, I have 3 slots this month for free lifetime access to our product that gets your AWS setup SOC 2 ready in a weekend. Email me at rob@reframeb2b.com / grab time in office hours for more info!
This is a really fantastic set of milestones. Love this!
Superb