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Grow Your Startup to $1,000,000 ARR 🤑
Stephen Moore
October 17, 2023
Welcome to EH Weekly, the new newsletter from the team behind Medium’s biggest entrepreneur-focused publication.
You can look forward to insightful lessons and practical takeaways delivered to your inbox every week.
In this week’s edition, we discuss:
The problem behind the free product + paid media startup model
How to grow your startup to $1,000,000 annual revenue
Free Product + Paid Media = Death 💀
The most common business plan Dan Layfield (ex Codecademy) sees for subscription products is:
Figure out the product
Add a free tier
Raise a big round to “scale marketing.”
Make a lot of money
The big problem is that many companies die between steps 3 & 4. Here's why:
Free products are hard — Free products are not free for you to build or maintain. Also, freemium products typically convert much worse than trial or direct purchase-based products, costing you money upfront.
Paid media is hard — The best case scenario is that you are underspending on acquisition to acquire users, which means that you are growing slower than you could. A worse scenario is that you overspend on these users and don’t realize you’re losing money for ten months.
Both are very capital-intensive — Free products require more engineers, designers, product managers, and infrastructure. Paid media teams need resources from marketing and creative departments and a lot of money to iterate on ads until they find a winner.
Both are very labor-intensive — You’ll need to staff a team focused on that channel, which means they need to be recruited, managed, compensated, etc. Additionally, the company needs to stay committed to that path until you’re really good at it, which means attrition on that team might send you back to step 0.
Free products lower and delay conversion — The biggest driver on the ROI of your ad spend is how well the website you’re sending people converts to a sale. Because the Freemium model converts at a worse rate than a trial or direct sale model, your ads aren’t going to be as effective as competitors without a free product.
👉️ Learn more about building free products here: Why Free Product + Paid Media = Death for Subscription Companies
Grow your startup to $1,000,000 ARR 🤑
“It’s about not just playing the game but changing it, about not just being in the race but setting the pace.”
Justin Ferriman’s eight-year journey from startup to sale wasn’t a walk in the park. Hitting the million-dollar sales mark in a single year didn’t happen overnight. It took years of sweat, grit, and relentless persistence.
He shared some of the factors that contributed to that success, including;
Unwavering customer focus — To build something of value, listen to the people using it. Customer feedback guides product development, shaping customer service and helping to tailor the product to what the customers truly want.
Meeting the competitors on their turf — Many entrepreneurs say they don't pay attention to competition. That's reckless. You owe it to your customers to pay attention because they sure as heck are.
Being a Porsche in a world of Fords — There's no point in setting your bar at being as good as the competition. Aim to be the premier brand. This requires more than a state-of-the-art product; it's how you communicate your value and present yourself to the world.
Luck and timing play a role — Every successful person is lucky on some level. Luck isn't just about waiting for the stars to align, though. You have to be constantly putting in the work, persisting through the highs and lows, and being ready when opportunity knocks.
👉️ Learn more about How to Grow Your Startup to $1,000,000 ARR