- If you are building a SaaS business,
and you are navigating what I call the shawshank crawl,
to get to that promised land,
to get to the product market fit,
and get to that next stage of growth,
I've been there.
In this video, I'm gonna walk you through
the exact framework I've used
in every SaaS business I've worked on, or advised,
to actually navigate that path,
and accelerate your path to product market fit.
Intro.
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What's up everybody, welcome to Unstoppable, I'm TK.
On this channel, I help startup founders like you
navigate the path to getting to product market fit,
getting to that next stage of growth,
with an unstoppable strategy.
I drop a video like this every single Sunday,
so if you're new, welcome.
Be sure to hit the subscribe button and the bell icon
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so you get notified when I drop a video like this
every single Sunday.
Now, if you're a startup founder,
and you're navigating that path to product market fit,
I call it the shawshank crawl.
It's the worst thing to go through, but also the best thing,
because it makes or breaks your startup.
Having done this a few times, I took Tout App,
my last company, from zero to seven million ARR,
and having actually advised other SaaS companies
to actually navigate this path,
I follow a very specific framework,
to actually navigate it in the right way.
So on this video, I'm gonna do three things for you.
Number one, I'm going to explain
the origins of this framework, how this came together.
Number two, I'm going to explain the five key SaaS metrics,
that actually drive it.
And number three, I'm going to explain
how you can actually adopt this.
If you're excited to dig in,
go ahead and hit that like button,
smash it if you like, helps us out, helps you out,
spreads the word, and let's get started.
Now, the origins on this framework
actually comes from two very important ideas.
The first idea was popularized by a guy named Jim Collins.
He calls it the flywheel effect.
He says that every single business,
whether it's a SaaS business or not,
has a natural flywheel, they have a certain flywheel.
And every successful one identifies that flywheel,
identifies the core components in that flywheel,
and optimizes for it, so that it goes faster,
and faster, and faster, and faster, and faster.
Jim Collins first wrote the book "Good To Great",
which you can check out by following the link below,
and then he wrote the followup to that,
it's not quite a book, he calls it a monogram,
it's called "Turning The Flywheel".
You can check that out also, I'll link to it below.
In this book, he highlights
that if you can actually identify
what is the flywheel that drives your business,
and you can identify the key components
that really, really drives it,
and makes it go faster and faster,
and you make decisions to actually optimize for it,
then you can build a successful, fast growing business.
This idea is so powerful, Jim Collins personally coached
the executive team at Amazon,
to develop their flywheel very early on.
And he saw how they took that idea and ran with it.
And it's pretty self explanatory
on how successful Amazon is today.
The second idea was introduced
nearly 12, maybe 13 years ago,
on this video, I'll link to it below,
by a guy named Dave McClure.
He started 500 Startups, he was one of my first investors,
and he introduced this idea of pirate metrics.
He said that they're a very specific set of metrics
that you really wanna optimize for,
if you're looking to grow your startup.
Instead of starting to trying to think like oh,
we need to get to product market fit,
and it being this very nebulous thing,
he said here are the five key metrics
that you actually need to follow
that will allow you to measure
and focus on the right areas of this business.
And that I kinda ran with.
I took those two ideas, and I said all right,
every business has a natural flywheel,
and there are components to that flywheel
that you need to identify.
And if I'm working on a SaaS business,
Dave McClure says these are the five metrics.
And so when you combine the two,
you get the most powerful framework that you'll ever find
in driving and navigating the path
to the next stage of growth,
and of product market fit for your SaaS business.
So at this point you might be wondering,
all right, those are the origins,
that's how you came up with the idea.
What are the metrics, how do I use it,
how does this flywheel work?
Let's dig in.
So when you think about flywheel, and your SaaS business,
the best way to think about it obviously
is you've got your flywheel right here,
and at the core of it, you have your ICP.
That's your ideal customer profile.
Now if you don't have an ICP yet,
if you don't have, haven't honed in
on an ideal customer profile,
you should check out this video that I did on it,
I'll link to it below, let's keep going
and you can check it out after this.
Once you have your ICP, that's your customer,
you start to build out the components of your flywheel.
The components of your flywheel will actually determine
what areas you wanna focus on and tweak,
and if you tweak those things,
they'll lead from one thing to another,
and one thing to another,
and it'll make the whole flywheel
go faster and faster and faster.
And if you can optimize for that,
then you've got a massively successful business.
In your case, you've got
a massively successful SaaS business.
This is where part two comes in.
Part one is the flywheel, which Jim Collins came up with,
and then part two are the core metrics
of every SaaS business that you just gotta monitor,
when you're thinking about marketing it, and growing it.
What are those metrics, well let's find put 'em down.
So basically we're gonna have one,
two,
three,
four,
five metrics.
And when you think about those five metrics,
the most important metric is you have your ideal customers.
These are your ideal customers
and they don't know about you at this state.
And the flywheel, the first part, is acquisition.
The second part is activation,
and I'll explain what each of these are.
The third one is revenue.
Fourth one is retention.
And the fifth one is referral.
And that's how you get A-A-R-R-R.
And the beauty of this,
and the beauty of these five metrics
is they all build on one another.
Meaning you can go and acquire a person
to come into your SaaS app,
but that doesn't necessarily mean they'll activate.
So when you actually acquire someone,
that means they become a user.
They become a user and they're like all right,
I actually wanna use this application,
put me in the demo, let's like jump into it.
Then you measure activation.
Activation means they take a meaningful set of steps
to actually move forward in the process.
Meaning, if they just register and then they leave,
and they never come back, they never activated.
But, for example, for Tout App, activation for us
was they did three things.
One, they actually sent a test email,
number two, they installed
our Chrome plugin to plug into Gmail,
and number three, they actually opened up our live feed.
If they did those three things,
then we considered themselves activated,
because we're like all right,
we got a hook in there, they got a full experience.
So, you got acquisition, and then you've got activation.
From activation, you then have revenue.
Now there are different types of SaaS businesses,
sometimes they'll do premium
so they start using the product for free,
and then you upsell them.
Other times they do a trial.
But the whole point is you wanna see
how many people you acquire,
how many of them actually get activated,
and out of those how many people
actually convert to revenue.
Once you've done that, obviously the next one is retention.
There's a reason why SaaS businesses command
such a high premium for investors,
and also even in the public markets.
It's because of this retention piece.
Most businesses sell a customer a widget,
and then say thank you,
and then hope that they'll get business again.
With SaaS businesses, they know they're gonna get
a predictable amount of revenue,
hopefully, if churn is not high,
all the time, forever.
And that's really powerful,
because now you have a consistent relationship
with the customer, getting a predictable flow
of revenue coming in.
And so you really wanna figure out what your retention is.
And then finally, if you actually acquire
a user or a customer, or a client, whatever you call them,
and then they activate, and then they convert to revenue,
and then they keep using it,
and then they love it so much
they start telling other people about it,
either through word of mouth,
or through some referral system
or through some invitation system,
whatever it may go, they invite a team member in,
that is referral.
And when you do that, something magical happens.
Because they're referring,
if the other person that's being referred
actually says yes, then it goes back into your ICP,
and goes back into acquisition.
What this means is that now you've got a flywheel.
And these five metrics, if you optimize for them,
it means that you've got an optimized flywheel,
that will go faster, and faster, and faster.
Let me explain, the power in this
is the fact that you're gonna track
each of these metrics separately.
You're gonna track what percentage of people
actually go from being acquired,
to actually being activated.
You're gonna track what percentage of people
that activate, actually convert to revenue.
And you're gonna track out of the people
that convert to revenue, what percentage of them
actually go to retain themselves.
And from retention, you're gonna track
what percentage of them actually go to refer people.
And out of that, you're gonna track,
how many of those referrals
actually turn back into acquisition.
This is the flywheel of every SaaS business.
And these five metrics are what governs that flywheel.
If you can start to tether yourself to this flywheel,
and these five metrics,
if you start to make decisions
on how you actually optimize each of these core metrics,
and if you start to actually move these metrics
in the right direction,
then you can optimize the flywheel,
and you can navigate that path to product market fit,
and that means you can accelerate that path,
to that next stage of growth.
If you're starting to see the brilliance of this,
so instead of just willy nilly
doing all kinds of crazy things,
and thinking that you're just one feature away
from product market fit,
but instead you tether yourself to this framework,
and these set of metrics, and keep optimizing,
then you get to operate the two levers that matter most
for you, as a startup founder.
You either ship code, or close deals.
I even made a tee shirt about it.
Ship code, close deals.
Because you'll actually look at these key metrics,
you'll be able to say all right,
are we closing more deals, or do we need to ship code,
to actually impact one of these metrics.
And you get out of that deathtrap
of thinking you're just that one extra feature away,
from really making everything work.
But instead, you can say well,
we need to improve acquisition,
or we need to improve activation,
or we need to improve revenue.
You can actually hone in on those areas,
and operate the lever appropriately,
whether you need to close deals, or ship code,
based on every client interaction.
If you're starting to see the brilliance in this,
can I just get a yes in the comments below?
I wanna make sure you're with me on this.
So, this is the framework that I've used
for nearly a decade and a half,
in being in SaaS businesses.
It has never failed me, and I've used it in multiple stages.
I used it in the early stages of Tout App,
I used it in the middle days of Tout App.
I used it in the late days of Tout App.
It always helped me really get visibility into where we are,
and what we needed to improve.
It is incredibly powerful.
And I hope you start to adopt it.
Now, you may have questions, and are well,
how do I track acquisition?
And what is activation really mean?
And how do you think about revenue verses a lead?
I'm gonna do a video
where I dig into each of these SaaS metrics,
as my next video.
I'm gonna dig deeper into how to really implement this,
and how to actually measure this,
and what the right benchmarks are for this.
So, be sure to hit the subscribe button
and the bell icon now,
so you get notified when I drop that episode
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Now you know how to navigate
this whole crazy shawshank crawl, to product market fit.
Figuring out the SaaS metrics for your SaaS business model
is just one part of it.
To get to product market fit, you also have to figure out
your ICP, you have to figure out your sales process,
your marketing process, your market strategy,
your go-to market strategy.
As technical founders,
which I work with a lot of startup founders
that are more technical than sales oriented,
we tend to over index, I'm like that too, or I used to be,
we tend to over index on product strategy,
and we don't put as much effort on market strategy,
and go-to market strategy.
And if you start to level off on all three of those,
you can actually accelerate your path,
and actually increase the likelihood
of getting product market fit.
This is why, if you wanna dig into this,
this is why I created
my "Unstoppable Product Market Fit Guide".
In my "Unstoppable Product Market Fit Guide",
I actually go into detail
on how to actually incorporate these metrics,
and how to actually incorporate a market strategy,
and product strategy, and a go-to market strategy,
so you can actually take this to market,
and accelerate your path to product market fit,
and to the next stage of growth.
So be sure to download that, and the link is below,
you can download it for free, and you can check it out.
And it'll also include a special link
to talk to me, one-on-one,
if you wanna dig into your startup more.
Lastly, if you like this video, and got value from it,
please, hit the like button.
It really means the world to me, and my team.
We put a lot of effort into this.
And it also helps us spread our message,
here at Unstoppable.
If you are part of a Slack group, a private mailing list,
whatever collaboration platform you're on
with other startup founders,
that can get value from this video, please share it.
It would mean the world to us as well.
And if not, just share it with your favorite founder,
that you just love.
And lastly, remember everyone needs a strategy,
but when you're with us, yours is gonna be unstoppable.
I'm TK, and I'll see you next Sunday.
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