Whether you choose to bootstrap or raise money, aim for 10% month over month growth in revenue.
That’s really all you need because compounding growth is the most powerful thing you’ve never really understood2.
For easy math, let’s pretend that you’re making $100/month through your business today and you grow that revenue at 10% each month. Here’s what that looks like:
- Month 1: $100
- Month 2: $110
- Month 3: $121
- Month 4: $133.10
- Month 5: $146.41
- Month 6: $161.05
- Month 7: $177.16
- Month 8: $194.87
- Month 9: $214.36
- Month 10: $235.79
- Month 11: $259.37
- Month 12: $285.31
- Month 13: $313.84
- Month 14: $345.23
- Month 15: $379.74
- Month 16: $417.72
- Month 17: $459.50
- Month 18: $505.45
You see what’s happening, don’t you? The business is doubling just about every 8 months… and it just gets faster and faster. (And just imagine how much bigger the numbers get when you’re at $1,000/monthor more.)
One of my biggest regrets around the tech tour is that it isn’t about techat all. It’s about entrepreneurship.
My personal goal is to meet as many entrepreneurs around North America, I don’t really care whether they consider themselves “tech” people or not.
I tweeted something yesterday that got me thinking about this:
At the early stage, so many entrepreneurs get hung up on things that just don’t matter. (i.e., patents, business plans, logos, NDAs, etc.)
The reality is that the default state of any company is failure and the #1 reason why it will likely fail is because there wasn’t enough money coming in the door.1
The good news, however, is that sales fixes everything and that’s entirely in the founding team’s control.
If we could get more people all over the world to be thinking about how to make their first $1,000/month — even if it’s on the side while they hold a full time job — just imagine how much better off they would be.1
Some of those side gigs would turn into a nice cash stream for themselves. Some of those could turn into $10,000/month businesses that support the founder full-time. Some could turn into $100,000/month businesses that support entirely new jobs for others.
Entrepreneurs sometimes get lost and it’s the community’s job to make sure they stay focused on the goal: get to $1,000/month in revenue and then worry about everything else.
Now, before you crucify me for not discussing churn or anything else — you’re missing the point.
In the early days, investing in a startup is an emotional decision for an investor. If you can show that you’re focused on building and growing a business, you’ve already set yourself up to look like a better investment than anything else that the investor has probably seen lately.
If, on top of that, you can show a 10% month over month growth rate, you’re basically killing it.
When someone asks you how much traction you’ve got, you should always have a line ready. Maybe it’s something like “we’re making money and we’re growing at X% month over month at this point.”
Stay focused on sales and growth — not the idea.