"Unlocking True Revenue Potential and Embracing the Present: A Guide for Founders and Investors"

Glasp

Glasp

Aug 13, 20234 min read

0

"Unlocking True Revenue Potential and Embracing the Present: A Guide for Founders and Investors"

Introduction:

When it comes to making investment decisions, the best investors prioritize growth and growth potential. However, many first-time founders and investors mistakenly believe that reaching a certain revenue milestone will guarantee the next round of funding. In reality, the focus should be on product-market fit and the number of customers who genuinely need and are willing to pay for the product. In this article, we will explore the importance of revenue, revenue growth rate, churn rate, net revenue retention, average revenue per user/customer, and the LTV/CAC ratio. Additionally, we will discuss the dangers of being too busy to pay attention and the significance of embracing the present moment.

The Significance of Revenue and Product-Market Fit:

Investors are primarily interested in evidence of product-market fit. Revenue serves as objective evidence that a company is solving a problem that matters to someone. However, it is crucial to remember that the revenue number alone does not hold significance. Instead, it is the number of customers that the revenue represents that truly matters. Investors want to see that there is a significant demand for the product or service, and customers are willing to pay for it.

Understanding Revenue Growth Rate and Churn Rate:

Apart from revenue, investors also pay close attention to the rate at which revenue is growing. A high revenue growth rate indicates that the company is successfully solving a problem that matters to many people. On the other hand, churn rate serves as a proxy for the quality of a product and its ability to solve customers' problems. A decreasing churn rate demonstrates that the company understands the reasons behind customer churn and can address those issues effectively.

Examining Net Revenue Retention and Average Revenue Per User/Customer:

Net revenue retention provides insights into the leakiness of a company's revenue bucket. If the retention rate is high, it indicates that the business has a sustainable model for repeatedly filling the revenue bucket. Furthermore, average revenue per user/customer is a crucial metric as it determines how much customers are willing to pay each month to solve their problem. This metric helps assess the market size and the sustainability of the business model.

Actionable Advice:

  • 1. Prioritize product-market fit: Instead of solely focusing on revenue, founders should concentrate on understanding the needs of their customers and ensuring that their product or service truly solves a problem. This evidence of product-market fit is more valuable to investors than a high revenue number.
  • 2. Continuously assess churn rate and address customer issues: Regularly analyzing churn rate and making efforts to decrease it showcases an understanding of customers' pain points. By addressing these issues, companies can improve their product and enhance customer satisfaction.
  • 3. Optimize average revenue per user/customer: Finding ways to increase the average revenue per user/customer can significantly impact a company's revenue growth and long-term profitability. By continuously improving the value proposition and addressing customer needs, companies can increase what customers are willing to pay.

The Dangers of Being Too Busy to Pay Attention:

In our fast-paced world, many of us are guilty of burying our awareness of mortality beneath our busyness. We convince ourselves that we will have time to live the lives we desire later on. However, this mindset only takes us further from our ultimate goal. Multitasking and being preoccupied with many things prevent us from truly living and appreciating the present moment. We must learn to focus and prioritize what truly matters in our lives.

Embracing the Present Moment:

Each day that passes brings us closer to our mortality. We must resist the temptation to postpone living and instead seize the present moment. By creating new memories and fully experiencing each day, we can stretch out psychological time and lengthen our perception of our lives. It is never too late to begin living, and we should not postpone our dreams and desires until some future milestone.

Conclusion:

To unlock true revenue potential, founders and investors must prioritize growth and growth potential, focusing on evidence of product-market fit and customer demand. Additionally, it is essential to continuously assess and improve metrics such as churn rate, net revenue retention, and average revenue per user/customer. Moreover, we must resist the temptation to be too busy to pay attention and embrace the present moment, as each day brings us closer to our mortality. By prioritizing what truly matters and living fully, we can create a meaningful and fulfilling journey.

Resource:

  1. "Is Your Revenue Real? — Chris Neumann", https://chrisneumann.com/blog/is-your-revenue-real (Glasp)
  2. "Too Busy to Pay Attention - Farnam Street", https://fs.blog/too-busy/ (Glasp)

Want to hatch new ideas?

Glasp AI allows you to hatch new ideas based on your curated content. Let's curate and create with Glasp AI :)