The SaaS Academy Revenue & Valuation (2024)

the job of the CEO is not to build the ship even though it is part of that our job is to actually set the sale right now we've been gone through a whole lot of stuff in the economy Banks crashing valuations going to a third and what I want to share with you guys today is how to scale to 10 million but do it in the craziest environments okay if you learn what I'm sharing with you today not only will you get to the 10 million Mark which is absolutely cool and fun but more important importantly you guys are going to transform your relationship with chaos you guys down for that yes or yes perfect you guys are in the right room um I want to start off by sharing my personal story because when I was 28 I thought I was doing everything right I had failed my first company at 17 gave it another try at 19 failed again uh started Consulting writing code for three or four years and when I was 24 I finally decided to read a business book it's crazy that I went so long never reading a business book but I read the email and through that process I decided I need to do this okay I need to create a franchise prototype and I hired a coach named Bob and Bob was this cool dude out of Toronto he was a certified e-myth coach and Bob showed me all the missing pieces around building a business and because of his mentorship I was able to finally find success in my third company called spheric Technologies and what happened is because I got a taste of success I kept pulling on that string I just wanted to win you gotta understand I went from 17 to 24 trying really hard and just failure after failure so once I tasted a little bit of what other people call successful and started generating Revenue I was just all in and that's what I did for four years I was working 100 hours a week I was traveling 250 days a year I was if a customer called on a Sunday I answered the phone I went to my laptop I would go to my friend's birthday parties I remember one time my buddy Nick he had a birthday party and I show up with my laptop and I'm sitting in the living room while there's a full-on party going on to celebrate his birthday and I'm working on contracts and emails it's called Blue facing you guys know what blue facing is when you're in the dark and you got your phone in your face you look blue I was blue facing at his his birthday party and I thought in my head I am one of the best friends in the world because I'm so busy but I still showed up for his party and he thought to himself Dan is the most ridiculous dude in the world why is he sitting there on a laptop that was my mentality I don't know if you guys can relate to this but because I had no success for so long I was worried if I would stop any of that that everything would slide backwards can anybody relate to that where you guys are just doing and doing you're building momentum and volume and you're just worried if you stop well here's what happened to me not only did I build a multi-million dollar company at 27 I became a millionaire I was 27. um but the downside was is one Sunday I was working at the office and I was supposed to be home for dinner I was engaged to a woman we had just bought a new house and I looked down at 6 30 and I go I'm late I jumped in my car and I rushed back and I run up the stairs to our to our uh our home and I walk into the living room that was open to the kitchen and I see her in tears and her name was Amy and she's just sitting there in the kitchen just beside herself like can't even breathe I don't know if you've ever had somebody just emotionally distraught and she just looks at me and just takes the ring off and drops it on the counter and just blurts out I can't do this anymore and leads and walks right past me goes and stays with her parents and it wasn't the first time she had ever shared this with me but I just knew that time it was different and this was three months before our wedding day and it absolutely crushed me because I had been doing everything for us for our future for this family we were going to create to to have success you guys want to hear the craziest part about all this she never asked me for any of it some of you are on this rat race of success and you're using the excuse of my family my community my the people paying attention my employees but none of them have asked you for any of that right and that's where I had to learn these lessons and I went on a journey after she left to just try to find myself because I hadn't figured out how to achieve but I didn't understand how to lead even my team I was successful in my business but I had 30 people reporting directly to me and I was I was explosive I was emotional I didn't I I would just tell everybody what to do and they would do it out of fear I didn't build a team I didn't build a culture and that's what I want to share with you guys today is how do you scale your leadership to 10 million because there's this philosophy called The Law of the lid John Maxwell talks about it in the 21 irrefutable laws of leadership and no business will grow past the the level of the leader so if you're in this room and you want to scale to 10 million in AR go look in the mirror because the only way that's going to happen is if you level up your leadership skills so are you guys down to learn how to do that yes or yes it's wicked let's dive in so this is I know how douchey I look when I put this up here um and it's either gonna inspire you or trigger you and I'm totally fine with that but I share this because this is a picture from a retreat that I do my wife every quarter we take three days off and I wanna hopefully sell you on this concept that you can absolutely live a life that's bigger and actually build a bigger business while I do these quarterly Retreats my company continues to grow my team continues to show up and it doesn't require like stock options and all these incentives a lot of you guys have been hearing about in the valley it just requires you to show up differently as a leader and that's that's the meat of it so I want to share with you guys three big ideas but before I get into that I want to talk about the pain line so in the growth phase of any company entrepreneurs will eventually hit What's called the pain line and here's what I've learned about entrepreneurs they will not grow into pain if there is a knife to your throat and walking forward means you're gonna get stabbed in the neck you will not walk forward does that make sense yes or yes perfect usually in these moments I get the call because people want to do one of three things I call them the three s's they either want to stall you know I made more money last year with less headaches anybody resonate with that message we've all been there right where we grew a lot and we made less money and it was a lot more headaches my buddy Matt had an electrical company he's like hey Dan is it okay if I don't want to grow can I just like be the same size and I'm like yeah you can but here's what I know the Market's not going to slow down it grows every year it's called GDP um your customers aren't going to require less of you they're going to expect more So eventually your best customer is going to leave and then the third is your best team members are going to leave because they have a vision for their life that if you can't fulfill they'll find that person to fulfill it right because our goal As Leaders you might want to write this one down is to have a vision big enough for every person on our teams goals and dreams to fit within it if your vision for your business isn't big enough for everybody on your teams goals and dreams to fit within it you're going to lose your best people the second s is sabotage and this one is a funny one so I'm going to give you a few examples my buddy Trevor did this recently and he essentially had an opportunity to 3x his business in a month through a new partnership and instead of replying right away to the opportunity he sat on it and he opened the email and he closed email then he opened the email any closed email he never replied 11 days later he goes to the gym on a Saturday he's feeling good about himself he ate really clean the day before he's got the confidence up so he finally replies that I'd email and the person's response was hey man like appreciate you replying but that opportunity has already left he sabotaged himself from growing some of you don't realize that you hit the pain line and because growth means more pain you sabotage your success and it can show up as simple as not making a key higher out of fear it could show up essentially anytime your calendar will be compromised if growth means your calendar will turn into chaos then you won't grow and then the third s is sell you know my buddy Jason called me probably six months ago because his business wasn't doing well he wanted to exit and I asked him list me the three things that are not going good into business he's like one two and three is it cool if those three things weren't an issue would you sell the business he's like no I go well here's the thing man every entrepreneur will hit their complexity ceiling and you either decide to deal with that complexity ceiling today or you can go to the next business the next Green pasture the next you know we always think the other idea the other markets better you will hit that same complexity ceiling and it's going to stop you so either start today or deal with it later so what I want to share with you guys is the buyback principle which is we don't hire to grow our business we hired to buy back our time because if you do the second you get the first but if you do the first you won't get the second does everybody get this yes or yes perfect buy back principle this is the the philosophy so here's what I learned a long time ago 10 million dollar companies startups were not built off ten dollar tasks mathematically impossible it's a physics thing you don't have enough hours in a week you can't build a 10 million error company doing 10 tasks what I'm going to share with you today specifically about scaling is the leadership side because I feel like that is the the biggest opportunity for all of you is how to show up for your team in a way that can scale you and you don't become the complexity ceiling for your business so three mistakes I see entrepreneurs make all the time number one is holding on too long right how many of you guys start to feel really warm on your chest or kind of like get super anxious if I tell you about delegating to other people you guys a little nervous right the reason why is because a lot of us have a fear of losing control okay my son's like that he has Legos and he considers himself a master builder but he does not like letting anybody else help him because what if they do it wrong and then he's got to fix it many entrepreneurs deal with this they hold on for too long and write this one down your number one strength becomes your Achilles heel as you grow so that's a crazy one for you to wrestle with the thing you're great at as you grow to 10 million will be the number one Achilles heel and stopping you from growing because it's the thing you're going to judge the most you'll be the most critical of and it's the last thing you'll give up and you'll be the bottleneck for your team so I want to share with you the big lesson I learned from Richard Branson which was it's not even just about buying back our time it's about protecting our time okay the the opportunity for you to transform your team and the way you show up as a leader is through protecting your time so I had the fortune I grew up in a small town in Eastern Canada okay like I read Richard's books and if you don't know who Richard Branson is he's technically the billionaire every other billionaire wants to be like okay like literally exactly so so when I get the email in 2017 asking me if I want to spend a week with Richard Branson I was like okay what's the date is this April 1st like what's this makes no sense to my brain okay and the reason why is I was working on this company called Clarity and Richard uh was an investor my friend Dan's company zosi and he said hey Dan I'm going to Switzerland for a ski week you should invite some friends I'd love to meet some of the people in the valley doing cool stuff whatever reason he thought what I was doing was interesting so I get to go spend a week at Richard Branson's Ferris is there um uh Brian who just sold his company Braintree for I think 650 Millions there there's literally it's like imposter syndrome on my part out the Wazoo like I'm thinking somebody's gonna discover quickly I'm not supposed to be there and I'm gonna get pulled out of this house and brought back to you know back home and here's the thing that resonated the most with me um was watching how Richard spent his time it was fascinating and I think this is the opportunity for everybody in this room to understand is here's a guy that runs 400 companies technically he owns 400 companies virgin group of companies is like this big conglomerate each one has CEOs and he has two CEOs that runs a virgin group it's it's amazing and he's skiing all day with us he's coming out with us for apres ski and I was obviously really excited to finally get to meet him and talk to him and we had dinner every night it was amazing but the thing that impressed me the most was how he protected his time and the way he did that is every message coming into his life went through a person named Helen and Helen was his executive assistant and when you hear things like he doesn't do email and he doesn't have a laptop or a smartphone it's true he might today but at the time literally every Demand on his time went through Helen and the way he processed it was they would have breakfast and for 90 minutes she would bring to him only the things she didn't know how to handle and they would talk about it and I remember talking to Helen on the third day and I was like tell me about your relationship with Richard if you don't mind like how does it work and she walks me through this process and I go that's completely different than the way I'm working right now and and what I believe is where you're at today if you want to get to 10 million you're at a million it requires a completely different paradigm shift in how you think about your time when I was younger I had all the time in the world so guess what I didn't value it what I've discovered is when people get into their 40s and 50s all of a sudden it becomes really valuable and they start looking at these opportunities to buy it back and I learned that from Richard he literally said I do these things better than most people in the world I love doing this everything else has to go through Helen and she knows what I prefer so I want to teach you the framework called the replacement ladder okay so if I was starting today from scratch this is the sequence if you don't have something to write down take photos but I'm going to go through it and you're going to want to remember this stuff the first level of replacement is your admin this is somebody that can do all the administrative stuff in your in your your life and specifically I talk about inbox and calendar again if you're building a 10 million dollar a year company where you're doing 10 tasks the math doesn't work out so even from day one which will be counterintuitive to what you've heard from everybody else I will actually encourage you and my portfolio companies that's what I do is to hire an executive assistant and have them manage your email in your calendar okay my brother hired an assistant and I was asking him how he's going he's like well I don't understand the big ideas and I'm like dude it's like transformational he's like yeah I'm not really getting a lot of value and when I ask them if he delegated his inbox to his assistant he said no what I do is I just send her stuff or him and CC CC them on task and I was like no dude all the stuff that's coming into your world needs to be processed by somebody else and then you guys talk about what they don't know how to handle so level one is an admin level two is customer success if you're not there you're going to feel stalled and the key roles they have to take over is all onboarding and all support okay so far so good yes or yes perfect level three is marketing okay because if you're still the one dependent on generating leads then as soon as you go on vacation or get busy with a new hire go on a fundraising process your business slows down it's a dangerous place but the key is is they gotta own the traffic in the campaigns they got to own the creativity and make sure the traffic's coming through the fourth level is sales and this is freedom and the reason why it's freedom is because of this and these are only four hires in your business you now can sleep and have somebody generate leads talk to those opportunities close them as a customer and somebody can onboard them and bring them into your software okay four hires and you're now at a level of freedom and the favorite one is leadership which is the top level this is where you have to hire people that lead but you got to give them this you got to ask them to own strategy and outcomes okay we'll talk about this in a bit but if you hire somebody and tell them what to do you're doing it wrong okay so this is level one or this is the first mistake I see Founders make okay it's that they hold on for too long and they don't know how to replace themselves this is the model to follow here's the deal and guess what you suck at it and you're overpaid let's be honest you're not good at it and you're making way too much money okay so find a partner that can support you second mistake heads not hands a lot of you are in software so you guys think to yourself I just need to automate this I need to Outsource this to a another part of the world I need to have just a bunch of of hands doing stuff falling Sops and automations what you need to do is understand how to get leverage with your people that's why I call it heads not hands too often I meet Founders and they're like oh yeah I got 26 people in the Philippines it's like yeah but are they just following scripts blindly are you actually hiring people training them and having them come up with solutions to problems so I learned this move into San Francisco when I was 28 after I sold my first company um I moved there and within a few months I meet Naval at a at this this entrepreneurial dinner and Naval ravacon is arguably like our modern day philosopher and startup world right how many you guys know who Nevada is perfect so I met Naval before he was I think even before Angelus was a thing and it was literally after going through so much pain in my previous company and asking myself well how do I create in the world but still do it in a way that um doesn't sacrifice my relationships I I didn't have an answer to that question but I wanted to figure it out and I'm eating a ball and Naval shared with me this really really important framework okay and if you write this down you will now have the four Master skills of an entrepreneur there's only four ways to get leverage and leverages everything right because if you want to increase your output time is a constant The Leverage is a variable a multiplication of Leverage and then the output is you know dependent on how well you have leverage and there's only four ways to create leverage the first one is capital A lot of us know this we're in the software World raise Capital to hire people to generate Revenue that's more efficient right and then we return the capital and we keep the balance the second one is content okay that's why James said you know Dan's the guy he's sharing content I realized a long time ago when I was building standard operating procedures or playbooks for my businesses that's content content has incredible Leverage right creating videos media all this stuff incredible leverage if I record a podcast it doesn't cost me anything more to have 10 million people listen to it than the first ten does that make sense huge Leverage the third which is like hot and heavy right now in the market is code right think about automation software it's what all you guys do if you're in B2B SAS um and then ai ai is one of the coolest if you haven't been playing with gpt4 it's blowing my mind what it can do right so the third area is finding leverage with code the fourth one and what I want to talk about today is collaboration okay those are the four C's Capital content code collaboration and when he explained to me collaboration I was like I'm I'm thinking about it completely wrong because if I keep telling people what they have to do then I'm not getting any leverage does everybody get that like truly listen to that if you have to tell people what to do then you're not getting any Leverage so Naval shares this with me and I take it to another level and I built this framework called transformational leadership okay this is the solution to the second biggest problem transformational leadership is completely different than what I was taught or taught myself when I started in business which is transactional management transactional management is you tell them what to do you tell them what to do next and then or you tell them you check that it got done then you tell them what to do next okay which sounds like what I I did for the first three companies literally I showed up I told people what to do I checked they got it done and then I told them what to do next the challenge with that is that as you add people there's this natural bottleneck of being able to do that it usually is about 11 to 12 people about a million and a half an ARR where you just can't manage has anybody ever woken up in the morning with like a project list and then you get in your inbox and then you get phone calls then you get text messages and then by like four o'clock in the afternoon and you put out all the fires and you told people what to do and you checked it they got it done you told them what to do next that you finally have five six seven o'clock at night get a chance to do the work you're supposed to do does that sound familiar to anybody yeah I'm not going to call you out but that's because you're doing transactional leadership or management what you want to do is do transformational leadership which is you start with the outcome if I was trying to climb a mountain I would be clear as day on what we're trying to accomplish we will get to the top of this mountain when we get there it's going to look like this you're gonna have these resources here's how it's going to feel right think of it this way if you're asking somebody to revamp your website tell them the success criteria that you're going to use to evaluate if they did a good job outcomes okay then you give them the measurement that you're going to use to measure their progress if we're climbing a mountain I'm going to say hey the core metric we're going to measure is feet of elevation per day if I know how many feet of elevation per day you've been doing every day you just text me then I can do the third part which is coach to success because maybe day one you got a thousand feet of elevation and then the second day you only got 50. and I'm gonna check in with you hey dude what happened and you're gonna be like yeah I got lost then I'd say well what are ways to avoid getting lost and then you the person hopefully will reply and say well it'd be good if I had a map I go well where would you get a map he's like well there's these other hikers maybe I could ask them sounds like a good idea try that see what I'm saying that's what coaching to success looks like and then you just keep measuring you set the outcome here's why this strategy is so powerful if you get this it will change the game on your rise to 10 million an hour essentially over time you build people to a point where they no longer have to come to you for the answers because you're building a pattern where they they learn how to self-lead does that make sense that's why it's transformational leadership they'll eventually get to a point where they will start with the outcomes they will Define the measurement for success and then they will come to you only when they need coaching but for the most part they're going to self-coach themselves or find the resources online and this is how you remove yourself from having to be the person and the day you remove yourself from having to be the person is the day your business will grow it's the law of the lid in full effect so here's the big idea delegate the outcome not the task okay delegate the outcome not the task and really ask yourself when you're writing that email reply you're getting on that Zoom call and you're about to say something let's go am I am I about to tell somebody what to do or am I talking about the outcome and just and and watch your team Elevate through this process it's a beautiful thing it's why I love the work I get to do so much is because I know helping the CEOs in this room is going to allow you to show up for your team in a way that's going to transform your culture it's going to transform your people and it's going to build them to become the people that I'm sure you saw in them when they started with you but you know maybe after a few months they start to frustrate you you know those people you're like I saw potential but why is he pissing me off so much it's because of the way you're showing up the third big mistake is the genius bottleneck the genius bottleneck most entrepreneurs run around the world as the genius with a thousand helpers okay and the problem is that you're never going to build the people around you if you look at the most successful people the Richer brands of the Mark Cubans you know you name it Naval ravacant and you look at their leadership team you look at Bezos each one of his direct reports CEOs of his divisions or whatever you want to call it they're world-class leaders individually I heard if AWS was a public company it would be bigger than Salesforce so he hires talent that is able to grow and Elevate businesses at a level that like you know not even a CEO but just like from a leader point of view running these divisions in the company and the reason why is because Bezos got rid of being the bottleneck okay and this is the strategy to do it Adam used to work for me in HR and one day he comes to me and he's like hey man I'm stressed and I go what what about he goes well we got to hire 12 people in the next quarter and I go cool he goes I don't know how to do that and I go okay well what what should I do I don't know well I mean there's a problem what's the problem I need to hire 12 people in the next quarter sounds like you have a problem he's like yeah I go so like I love you man but are you asking me to do your job because I think you're the HR Director well I'm not asking him to do my job I said well it sure sounds like it if I have to tell you the answer to the test it sounds like I'm taking the test yes or yes perfect stop telling the people the answer to the test so instead I taught Adam this simple rule it's called the one three one rule I learned it from my buddy Brad a long time ago and it's transformed the way I show up okay I shared it with Adam and I said you know here's the way it works come back to me tomorrow in the morning he texted me and he just says I'm good he didn't need to talk to me here's how it works okay the one three run rule follows these three principles first off is you have to come to me with one problem the amount of times people come to me with place like very broad thing that's not specific it blows my mind defining a problem a well-defined problem is the first challenge so step one one specific problem number two is three viable options tell me what are your three options to solving this problem but viable ones not like baloney ones that make no sense like one of our options is to do nothing well yeah duh like I could do that job that's not a hard one but like come to me with three viable options so I share this with them and then number three is what's your one recommendation now here's what happened is I share this with Adam and he and I go how much time do you need to put together some option he said how about till tomorrow I said perfect let's talk same time tomorrow Circle back by the morning when he did the research it was obvious to him what he needed to do he didn't even need to talk to me ever again here's why the 131 rule is a game changer for the genius bottleneck is that when you implement this into your team over time you get to push all problems down to the front line workers who have the most context to solve your problem in the first place some of you are solving problems with imperfect information but the team has it the context is down at the front line individual contributor level and anytime somebody comes to you with a problem and you say what's your one three one that's the language you literally if you're on my team I will say that to you very often they go oh this is a problem what's your one three one well I don't know yet perfect how long do you need to research it all right I get it cool and see it's not because I don't want to do work it's just my happy place is arguing around the sequencing and the ideation right and that's what you love to do as a CEO you don't want to actually tell people what to do you want to know that they did the research to come up with options and then help them craft it and change it and tweak it and then say what's your recommendation and they go this way and you go totally agree let's do that that is how you build a company that is not dependent on the CEO and it can scale and it is one of the most beautiful things to watch here's my philosophy is we build the people and the people build the business you want to go from two to ten million three to ten million in ARR I'm telling you it's a very simple recipe look at your team and invest in them the same way you invest in your marketing if you invest in your people to a similar degree as you do in your Marketing in your sales you will build the team that can execute that Vision if you keep investing in every other area of your business right customer success and marketing all that stuff but you don't invest in your people personally with your time if you don't pour into...