
Different ways to build a $100M business (2014) - jasim
http://christophjanz.blogspot.com/2014/10/five-ways-to-build-100-million-business.html
======
dalbasal
Re: the animal analogy... If you want to extend the sales-lingo, the term is
"rats and mice" not mice and flies.

Jests aside, I like this kind of abstract strategic thinking process. It
reminds me of the "1000 true fans" writeup from the last decade. _But_ , it's
important to remember this is scaffolding for thinking strategically, not a
blueprint. Often, the winning tactic is to break such "rules." But, thinking
within a framework like this can focus the mind. It's useful to realize you're
breaking a rule when trying to break it.

For example:

" _1,000 enterprise customers paying you $100k+ per year each_ "

There are lots of examples of sub-enterprise sized companies (even small
businesses where everyone can still fit in a jumbo taxi) paying this much...
for _something_.

A big example is advertising. Plenty of businesses spend 10% or more of their
budget on advertising. How many software startups pay google/fb most of the
money they raise from VCs? This applies to lots of businesses from SAAS apps
to dental clinics. There are ad-management apps that charge 5% of ad spending.
Services that charge 15%-20%.

Another example is "franchises." Mcdonalds corporate's business model is to
make $100k+ from small-medium businesses. It's not a very startup-ey example
but an example nonetheless. The uber-of-x business model is kind of a reverse
example of franchising. Uber charges the customer, and cuts the driver their
share. If the customer were to pay drivers and the and the drivers paid
uber... you have the mcdonalds model. It's debateable whether this counts as
"selling to consumers" or "selling to businesses," but there're specific
examples in both camps.

So, it's _possible_ to sell 100k software to a $1m-$10m businesses... But it
is very useful to realize that this _is rulebreaking_. An enterpirse pays
$100k+ for lots of things. A small business will only pay that much if it's
absolutely core to their business model. Usually this means it's absolutely
indispensible to gettng customers.

~~~
notahacker
> So, it's possible* to sell 100k software to a $1m-$10m businesses... But it
> is very useful to realize that this is rulebreaking. An enterpirse pays
> $100k+ for lots of things. A small business will only pay that much if it's
> absolutely core to their business model. Usually this means it's absolutely
> indispensible to gettng customers.

This is a very good point, especially when you force yourself to define
"absolutely core to their business model" (if you're selling franchises it
literally _is_ their business model, but you only sell franchises if you've
worked out how they can make much more revenue from selling to people further
down the chain...). And remember that services like Google Ads only ended up
absolutely core to some businesses because they _didn 't_ start off with the
ambition of getting 100k contracts but let people start as small as they liked
to prove its worth....

Thinking you might get 100k licenses from the $10m per annum businesses
theoretically encompasses a lot more companies than "large enterprises", but
in practice the sort of software and marketing channels companies are willing
to decide to spend 1%-10% of their annual revenue on up front tend to be
either (i) super specialised solutions you've developed to make/save
demonstrable amounts of money or completely run operations in their niche,
which might well be a niche smaller than the "large enterprise" space anyway
or (ii) services where they get the perception they're paying for a lot of
your time to make it work for them, in which case your margins aren't so
impressive. They're probably not expanding their IT budget or dedicating most
of their marketing budget for a generic CRM system or user monitoring service,
even if you have a very good pitch about why yours is better than the ones
with attractively low rates for medium sized enterprises.

~~~
goatherders
My company has multiple $50k/year clients that gross only 5-10million a year.

~~~
moorhosj
You would need 2,000 of those customers to reach $100 million ARR.

~~~
goatherders
Absolutely, and I don't think that's a realistic goal for us. Was just
pointing out a single data point to contribute about lower revenue companies
investing 1%+ of their revenue into a tool.

------
rawmodz
The hardest parts are getting those customers and keeping them. When you are
high functioning like me you can do almost anything in IT, but lack people and
social skills. People and social skills are needed to market and use public
relations to get those customers and you have to emotionally connect to them.
You have to keep them satisfied or else they leave and go somewhere else. You
have to let them know what needs your products and services meet, you have to
find ways your product and services save them money and time. This is why 9
out of 10 startups fail, can't connect to people enough to get them as
customers.

~~~
HenryBemis
> but lack people and social skills

I am curently working with a programme director that is one of the best PMs
that walk this earth. Nothing escapes him. But when he opens his mouth.. oh
that mouth!! Kinda like the Sex Pistols song "Bodies" that sings "f* this and
f* that, f* it all and f* a f*ing brat". He will never be customer facing. He
will never be business (people) facing, he will never be finance (people)
facing. He will always be talking to IT people, because.. well for some reason
they tolerate him (for the time being).

He cannot grow any more, he cannot mature any more, he is stuck in the
position.

> can't connect to people enough to get them as customers

I had the same problem to with my first iOS app. I just couldn't listen to
feedback and criticism. I had a vision for my app, and I just didn't want to
change anything. Until I faced reality and I did change it :)

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omarchowdhury
Much more achievable would be to aim for revenues of $10M-20M, and a $100M
exit value (5-10X multiple).

~~~
dalbasal
And more achievable than that is 1m-2m in sales for a $10m exit value.

$100m is just a number he picked to focus the thought.

~~~
soneca
Well, I would actually do be very happy if my bootstrapping business do
$200k/year in revenue and a $1m exit value

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SamLicious
funny because I'm actually in the selling mice business, and doing the
business of selling mice... and it gets funnier because my mouse is called the
RBT mouse, or rabbit mouse... coincidence is so wonderful

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chii
I really like the fly analogy - eating flies is disgusting, but will make do
if nothing else works.

Also, why can't you have a $100mil business selling a service to 10 million
users for $10/year?

~~~
genbit
see updates at the bottom, there are updates to his post where he covers extra
ways, including one you mentioned.

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lazyjones
Perhaps this reflects what VCs want to see in your pitch (one of these), but
an entrepreneur will hopefully not set out to "build a $100m business" but try
to solve real problems.

Amazon gets > $500 from normal customers and > $2500 from Prime members per
year according to Morgan Stanley, FWIW. Aiming for $10/user from ads is aiming
too low (and was already shunned as a business model soon after 2000).

~~~
manigandham
It doesn't have to be a complete dichotomy. Knowing your market size and
customer profile is a good thing, and often key to building a successful sales
team.

------
EGreg
What about hunting hunters?

~~~
goatherders
This is the business I am in and the sector us exploding. The tools that come
to market every week in the biz dev space are mindblowing but increasingly
hard to connect for optimal results.

~~~
EGreg
Indeed! We are building one right now, Track Email for iOS / Android, so you
can track the emails you send and the links that were clicked. Know anything
like this right now, that doesn't require a server? Maybe Newton Mail?

~~~
goatherders
Yesware and many (most?) CRMs have tools to track opens, forwards and link
clicks.

~~~
EGreg
Talking about iOS

~~~
goatherders
A Google search reveals lots of options.

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wayoverthecloud
Have anyone of you built a Enterprise web company alone? Or is it just a
fantasy?

~~~
manigandham
This is basically impossible.

Enterprises do not buy from a single person companies and the sales cycle
alone usually takes multiple people even if you could build a product that
they would use by yourself.

That being said, there are several examples of single-person businesses that
have gotten around the 1-2k/month price range.

~~~
wayoverthecloud
Could you give some example?

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freshcatch_
1) Exploit labor.

------
ganeshkrishnan
From 2014 by Nine Point Capital. Their tagline is "We invest all over the
world" but when I reached out they said "they don't invest in India".

I am in Canada. smh

~~~
csomar
Wait a second. Reading
[https://news.ycombinator.com/item?id=19540773](https://news.ycombinator.com/item?id=19540773)
Does that mean they excluded you based just on name before figuring out where
you are based? That would be more like "They don't invest in people from
India" and I think it'd be good to red-flag them for that.

~~~
chrija
Christoph here from Point Nine.

No, we didn’t do that. I can confirm that with certainty even without having
asked everyone on my team.

I’m trying to find out what was going on and will post more details ASAP.

~~~
ganeshkrishnan
Hey Christoph, here is a screencap of the email :
[https://screenshots.firefox.com/DCsDhXwfTXv0hsls/mail.google...](https://screenshots.firefox.com/DCsDhXwfTXv0hsls/mail.google.com)

Sorry I don't want to come off as offensive and I didn't expect so much
reaction to a simple denial. VCs have passed us on for far absurd reasons.

~~~
leadgeneration
Hi Ganesh,

I would be interested in hearing the conclusion to this interaction. Do you
have a point of contact where I could reach you at the end of this week?

-Tom

~~~
ganeshkrishnan
Tom, that was the end of the email trail; I didn't hear back anything.

It's no big deal really. A miscommunication between their tag line and my
expectation. My email is ganesh @ aihello.com

------
virgakwolfw
A well conceived article about building your business and giving novice
entrepreneurs a chance to think about earning millions of dollars in revenue.
The reference given to animals here in accordance to customers makes it a bit
weird but otherwise the whole post is quite informative and interactive to
read.

------
Invictus0
(2014)

------
carusooneliner
Interesting point but it's unnecessary and irrelevant to compare startup
scaling to hunting animals. Why hunt? As though we hunt customers. And why
animals? Who in their right mind would hunt any of these animals. Could use a
better analogy to communicate the point. Startup scaling is an act of
persuasion rather than condescension.

~~~
dalbasal
It's sales lingo, especially stock brokerage.

Whales, fish, mice, elephants. SV VCs added unicorns.... I wonder what they
call their LPs.

~~~
bitCromwell
Sir

