As founder, it’s easy to say, “Of course we’re going to run!” But it’s not easy to take a spindle off. How do you prepare yourself for success in this new world? Which levers should you pull first? How do you ensure that you can secure capital when it is needed or that your business is undeniably financeable?
At this point, undeniably financeable would become any founder’s north star. It indicates that you have built an efficient business that will no doubt garner venture capital attention and funding when the time is right.
Take a closer look at efficiency KPIs
As you embark on the road to undeniably fundable, you must prioritize KPIs that represent efficiency. Vanity stats have taken the back seat in this new world, and there will be few roads ahead of you if you don’t prove you’re efficient.
There are five key efficiency metrics that matter:
In this new chapter, CEOs need to think like a CFO.
- Growth rate: The rate at which your annual recurring revenue (ARR) scales. Can you still grow 2x or 3x year on year? How should your product change?
- Customer Acquisition Cost (CAC): The amount you need to spend on sales and marketing to acquire a single customer.
- CAC payback period: The time it takes to recoup the cost of acquiring a customer. Shoot for a span of less than 20 months.
- Gross margins: The cost of serving customers with both your technology and your people. The industry standard is about 75%.
- Multiple fires: The amount you spend to generate incremental ARR. 1x is great, but less than that is even better. This stat, popularized by David Sacks, has guided my current business because this stat doesn’t lie. You cannot hide expenses or stash expenses in other departments. It reveals the cold hard truth about your spending, growth and fundraising.
Research your business and change your priorities
Once you’ve mastered your efficiency metrics, it’s time to take action. Regardless of your segment, industry, or customer type, I think there’s the following that you need to do.
Examine your budget and narrow it down to the essentials
As a founder, you have to dig deep into each department’s budget – don’t leave it to others. There is no room for fluff.