EXTRA EXTRA

A newsletter about early sales from The Extra Group

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I went to a panel discussion with some investors last week, and one said something that perked my ears up. He said, "When we're evaluating deals, we have to look at the revenue — but more importantly, we have to look at the quality of the revenue."

Most founders are working tirelessly on the first part. Too few of them are thinking about the second.

Before you have product-market fit, the quality of your revenue matters more than the amount. The higher the quality of your revenue, the more you’re positioned for long-lasting, sustainable growth.

Picture a founder who's worked incredibly hard to get to $30K MRR. On the surface, that's a clear win. But if that $30K is low-quality revenue, it's a more complicated story.

Low-quality revenue is often composed of customers who aren’t satisfied or are a churn risk. But beyond that obvious red flag, it isn’t coming from one clear buyer type. It’s revenue that represents multiple, disparate customer types who have bought for different reasons, or perhaps have even bought different variations of the product.

To be clear, getting to $30K MRR is no small feat. The hustle and sales skills that made that MRR possible are real assets. But low-quality revenue is also an honest signal that product-market fit is still a ways off.

Product-market fit is all about creating a repeatable go-to-market process -- a process where one specific buyer buys one product, for the same reason, over and over again. High-quality revenue is the most undeniable signal that you’re on the path to real PMF.

So let’s picture a different founder now – one who isn’t doing $30K MRR. Instead, they’re doing $8K a month, but that revenue is coming from eight solid customers who are satisfied and bullish on the product. They’re all satisfied for the same general reason, and they all believe, for the same general reason, that they really need this product in their life.

I’d prefer you have $8K MRR in this kind of high-quality revenue, instead of $30K in piecemeal revenue, ten out of ten times.

This kind of revenue is way more likely to lead to long-term success, in part because the revenue provides you insights that will accelerate your momentum towards true product-market fit. It tells you things like:

• What kind of sales cycle you need to run
• Who the common economic buyer, champion, and stakeholders are in a standard deal
• What kind of messaging and positioning will resonate with those kinds of buyers
• What kind of go-to-market activities and channels are the best fit to attract those kinds of buyers

With these insights, you are able to build and iterate on a repeatable sales and GTM playbook. And that playbook is how ever-elusive hockey-stick growth becomes possible. It’s how $8K MRR can become $100K in a single quarter.

Conversely, when you have $30K of low-quality revenue from all different kinds of buyers, you’ve got $30K today… but a set of compounding problems to contend with down the road. For example:

• You’ll have to design successful sales cycles for multiple different buyer types, when doing so for one buyer is already incredibly tough
• You’ll have to manage and iterate on multiple different messages and positionings
• You’ll have a disjointed brand story, because your website and external presence will be trying to communicate different things at the same time
• You’ll struggle to stay within your limited marketing budget because your different buyers may require different go-to-market activities and content
• You’ll receive conflicting product feedback, causing your product team to make only the most critical changes to the product for each buyer type, instead of building a best-in-class tool for one buyer
• Because your product will be unable to please all your different buyer types, churn will rise, ultimately lowering your recurring revenue and leaving you in a more confused place than you started

I don’t want you to face any of these challenges.

The best way to avoid them is to strive for winning high-quality revenue, and to use each and every day to build towards one ironclad repeatable sales playbook.

In my upcoming Revenue Intensive, you'll start building towards this repeatable sales playbook.

It starts this coming Tuesday, May 19th.

You can get 15% off with the code FIRSTMOVER. If you've got questions, reply or book 15 with me. I hope to see you there.

This is Extra Extra, a newsletter about the tactics and mindsets that drive early sales. I’m Caroline Fay, an exited founder who’s spent my career launching and selling new products. I help founders build sustainable, recurring revenue.

Caroline Fay

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