How to Grow Your Startup to $1 Million (and Beyond) without Funding
It took us 3 ½ years to get Text Request, a business text messaging software, to $1 million in annual recurring revenue. We feel good about that, especially since we’re a profitable company that didn’t take outside funding.
Now the question people ask is:
How do you do it?
The answer’s complicated, so we're not going to tell you everything. But we'll share the 10 things we think are most important.
Below, Matt Holland (Director of Operations) and I (Kenneth Burke, Director of Marketing) discuss growing a startup to $1,000,000 and beyond, what mistakes we made along the way, and how we've learned to tackle some of entrepreneurship's toughest questions.
I’m the director of marketing for Text Request. I got started with Text Request because I was good friends with one of the founding members. I was looking for a career change, and really liked the idea of being able to text businesses like friends and family.
Day-to-day I spend a lot of time on sales enablement, blogging, SEO, and various communications.
I run the operations for Text Request. I was working with another company for Brian and Jamey Elrod (two of our co-founders) when they had the idea for Text Request. I've been part of the team since Day 1. Day-to-day I split my time between customer support and product development.
What is Text Request?
Text Request is a business texting software. Users login online from any device to send and receive texts through their current business phone numbers. We’re a B2B SaaS startup, meaning we sell subscription software to other businesses. Learn more at www.textrequest.com.
Text Request launched in November 2014. We thought, “Wouldn’t it be great if you could just text a business?”
We targeted the hospitality industry, but they weren’t interested in paying for text messaging, even though many of them recognized their customers would rather text.
After talking to lots of people in lots of different industries, we found home service businesses - like moving companies and maid services - could use our product to bring in new revenue.
They used it mostly for appointment scheduling, but also for website lead generation and sales follow-up. Their sales cycle was much shorter than hospitality, too.
In the fall of 2015, we pivoted from a customer service tool for hospitality to a sales and marketing tool for service companies. We’ve grown from there and passed the $1 Million Annual Recurring Revenue (ARR) mark in June of 2018.
As we work through these 10 lessons, remember that we’ve made a lot of mistakes along the way. Our goal is to help you make fewer mistakes while providing actionable tips to get your own business over the million-dollar threshold.
Because startups are often vastly different from each other, we’re going to start high level and then bring it down. Specific questions about problems you’re facing are welcome.
Lesson #1: Don’t quit.
You can’t succeed if you don’t exist. At one point I remember hearing “Folks, I don’t know if we’re going to be here next month.” The trick is to not think about how you’re going to make millions, but just about how to stay alive - to extend your runway.
What is it going to take to get the next sale? Okay, now do that.
Too many startups get caught up in buying cool offices or branded “swag.” You’re bootstrapping - you should only be spending money on things that will bring you revenue.
And because you need revenue, you (probably) don’t have the luxury of spending months or years landing a large account. You need to find targets with a short sales cycle so you can jump start your revenue.
Lesson #2: Give your customers everything*.
You have to create a needed product that solves your target customers’ problems. Determine who your target customers are, talk to them about what they need, and then tailor your solutions for them. Your job is not to tell people what they need, but to give them what they need.
Early on you have an amazing opportunity to literally know every customer. Talk to them and listen to them. What are they saying they need from you? What would add value?
The asterisk is that you don’t need to create a new feature or offering just because one person said they’d like it. When suggestions come up, listen. Are others suggesting the same thing? Do you think this suggestion would also add value to your other customers? If so, build it.
Lesson #3: Try everything you can think of.
The book Traction by Gabriel Weinberg and Justin Mares covers 19 sales and marketing channels for startups to test. We tried all of them. We went to events, we advertised, we started a referral program, and more.
For us, cold emails asking for demos worked really well. As our industry has grown and people care more about business texting, organic search has brought in more and more leads, too.
The key is to try lots of things to see what works at any given stage. For instance, Google Ads failed us the first two times we tried it, but now it’s a reliable source.
If you’ve ever played darts or shot a basketball, you know two things: If you try enough times, you’ll hit your target; and your aim is better after each shot. Your sales and marketing strategies should work the same way.
But don’t try things blindly. Be intentional, and be patient. For instance, we started creating blog posts, and we knew it would take a year before we could tell if it worked. You need to plan for that kind of a test.
Lesson #4: Focus on the basics.
You won’t hit a homerun every time you step up to the plate. But when you focus on doing the basics well, opportunities open up.
When you commit to SEO basics, your targets will find you online. When you provide fantastic customer service, people will leave reviews and tell their friends. When you follow-up with leads until you get a firm no, more of them will become customers.
Don’t get caught chasing whales. Whales are hard to land, especially early on. Focus on smaller accounts - on extending your runway. Before launch, we used to say things like:
If we just got all the Marriott hotels in the Southeast, we’d… If Bonnaroo gets Text Request and everyone sends a text in we’ll make…
These are fun to think about but are not a sustainable strategy out of the gate.
Lesson #5: Get the right people on your bus.
If you’re going to take a company from $0 to $1 million, every member of your team has to be dedicated to working together for the long-term benefit of the company over self-interest. That’s not easy! But a few people who care will do more than a large team who doesn’t.
If you’re bootstrapping your startup, the people around you have to be there for more than a paycheck. When people don’t care, all their imaginative and innovative efforts go towards making their lives easier instead of towards making the business better.
Lesson #6: How do you build it fast enough?
The better question is How do you build it right? Customers care about solving their problems quickly, but they care more about something that works. They have to trust that you’ll give them the tools they need to accomplish their goals. Otherwise, they’ll leave.
Listening to your customers should greatly influence what you build and when you build it. Build what people need - not just what you think will be neat. But above all, build it right. Features should work the first time and every time after that. Reliability and consistency are king.
Lesson #7: How do you keep customers longer?
In general, to keep customers from churning, you’ve got to provide a smooth onboarding process that immediately teaches them how to gain value from your product. Always have either a helpful support rep or helpful user guides readily available. Basically, if you don’t help customers quickly, they’ll move on to someone else.
People churn because they aren’t getting the value they need to stay. Sometimes that’s your fault, sometimes it’s not. Usually, people churn for a combination of reasons, like: they didn’t get what they expected from your product; they never implemented your product; their strategy or leadership; or they found a competitor they like better.
To keep people from churning, you need to: set attainable expectations; create an onboarding and follow-up plan; find a way to be a part of their company change; and make your product sticky. Churn is a whole business issue. It’s not just sales or service or product - it’s everyone.
Lesson #8: How do you get people to your website?
For most startups, your website is your billboard. Theoretically the more people you get to your website, the more leads and sales you’ll get. So how do you drive traffic?
Advertising might be a good option, but if targets aren’t already interested and searching for you, your ads won’t work. Instead, focus on creating content that educates viewers and helps them solve their problems.
The more you talk to your customers and learn from them, the more value you can pack into your content and web copy, which will bring you more traffic (and customers).
Early on in a company, your two resources are time and money. There are too many options out there to do everything well, so pick one traffic strategy to do really well, and give it time to work.
Lesson #9: Do you need investment money?
We tried to get funding for a while and never did. Eventually, we decided we needed to make our own money instead of spending time searching for other people’s.
Bootstrapping gives you more control over what decisions you make to grow your company. And - if you’re doing it right - it forces you to build something more valuable and more sustainable.
Not all startups can be bootstrapped, so you might need funding. Starting a business takes time and money, and both of those have to come from somewhere.
It all depends on your timeline and goal. What does success look like? Is it a solid paycheck with benefits, a 100X exit, something in between? Do you want the business to run forever, sell in 10 years, less?
If at some point you need funding to hit those goals, then yeah it might be right for you.
Lesson #10: How do you pursue 10X growth?
You don’t. A growth hack isn’t going to propel you to $1 million overnight. It takes doing a lot of little things well - and a lot of time - to create an engine, a sales funnel, a product, and a sustainable company that can start to snowball.
Most “growth hacks” make one thing a little easier. But if you spend all your time searching for the golden goose, you’re going to wind up empty-handed. Put in the work to do the little things right. It might not look like it at first, but that’s how you get the big things right.
Invest in your website.
Your website should share your value proposition and lead viewers through your sales funnel. That’s not cheap to do, but it’s almost invaluable to your company.
How do you define and keep your company’s identity?
As you grow, you’re going to face choices that can renegotiate your company values. That’s okay, but what you need to do is talk through everything as a team. Do you know how this will affect your trajectory? Is everyone on the same page? If some don’t agree, are they willing to disagree and commit?
What’s standing between you and sales?
Startups are really good at wasting time and money on things that don’t matter. Constantly ask: What barrier is standing between us and sales? Then do what it takes to remove that barrier. The only other thing that matters much is churn.
You are not your users.
What you think is good may not bring any value to your customers. They’re the ones using it daily, and the ones who spend every day in the industry you’re serving. See what they need. Sometimes they’ll be wrong - you’ll need to do things one way for a reason they don’t get. But in general, learn from who’s using it daily.
The spirit of this blog post was inspired by a piece we previously contributed to Addicted2Success, and by presentations we previously gave at Chattanooga's Startup Week and Young Professionals of Chattanooga.