Why ‘your number’ doesn’t matter

How much money are you trying to make?

Hi, it’s Melissa, and welcome to “your founder next door”, a bi-weekly column with relatable stories of my journey bootstrapping eWebinar to $5m ARR. No BS, just straight-up truth bombs on what it’s like to build a company without an abundance of resources or friends in high places.

The Big Aha! 💡

Founders love to focus on “our number” as if it’s something we can control. In reality, building a company is too unpredictable. You can do everything right and still not get to your destination. If success isn’t about hitting a number, then what is it about? What’s the secret to feeling fulfilled while you’re still running the race?

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Backstory: What’s your number? 🤑

Founders love to ask each other, “What’s your number?” (Translation: How much money are you aiming for?) It’s a subtle, or not-so-subtle way of measuring ambition and getting a feel for where the founders’ heads are at…

Back in university, a friend said to me that his goal was to have $100m. That sounded like a good number to me, so I made that my goal too. I was completely delusional.

I grew up in a materialistic culture where you’re judged by what you have. My parents were middle class, they gave me everything they had and more because they wanted me to experience abundance like they never did. I didn’t have to pay my own tuition or get a job until I graduated. I thought money came easy because, for me, it did. I didn’t understand its value and didn’t respect it. I wrote about that here: How much is enough to stop working?

Starting a company taught me that money didn’t grow on trees. I came faced with the effort and dedication it took to earn it, which gave me the much needed newfound respect for financial wealth. “My number” came down with me on my descent back to earth.

Turns out, there’s no money tree.

The trap of reverse engineering success 🪤

Everything we read on the internet makes us believe that we can reverse engineer success. Use 10x revenue as a benchmark and follow readily available playbooks to get to $10m, $100m, or $1B. Choose your poison. ☠️

Plot twist: You can’t control your outcome.

There’s no such thing as playbooks that guarantee outcomes, and certainly no way to guarantee an acquirer for any multiple of revenue.

Yet, we try because we were sold the fallacy that this is the norm (if you do x, you’ll get y) and inevitably end up in disappointment when we realize this thing is really f*cking hard.

I blame the media for creating this trap as they only report on the 0.07% of startups that achieve unicorn status and never on the other 99.93% that end up somewhere between zero and infinity.

“I’m just looking to exit for $10m.” Says every founder. 🙄

Every founder dreams of exiting for a minimum of $10m. It’s a big number that gets thrown around pretty casually in the tech industry. Compared to the billion dollar exits we read about, it’s no wonder 1% of that sounds achievable.

Do you know how hard it is to net $10,000,000? Let’s do the math.👇

A quick Google search will tell you that “4% of SaaS companies reach $1m in revenue, and only 0.04% make it to $10m”.

10x gross revenue (for SaaS) is what most people think they can sell for. Realistically, depending on your revenue and growth rate, it’ll most likely be 3-5x if you’re pretty good and 6-8x if you’re great. The 10-20x multiple that we read about are the exceptions, not the rule, for strategic acquisitions.

If you have a cofounder and no investors, you’d likely own half the company. If you have some friends and family investors, you’d likely own ~40%. If you have VCs, you’d likely end up with 10-20% depending how much you raise.

To net $10m, you’ll need to sell for ~$25m at least, assuming you own 50%. That number goes up as your equity holding goes down.

You first have to be the 4% that gets to $1m ARR. Then be the shrinking percentage that gets to $5m ARR minimum. Then, you have to sell for a reasonable multiple of your revenue and pay tax for those gains. Side note: majority of acquisitions are not all-cash deals. Your deal will likely be a mix of cash, earn out, and stock into the new company. If the acquirer is not a public company, you’ll have to wait for their liquidity event, then pay tax on that.

The market has to be good enough for companies to be buying, your product/company/team has to be compelling enough to add significantly more value than what you’ll be acquired for, and you’ll need to find a company that can see that value so much that they’ll cut a check. Once a company has intention to buy you, you’ll then have to pass all the due diligence requirements. Many deals fall through in that process.

Deriving my number from $10m 💸

I, too, was a victim of “the $10m trap”. I moved to New York to grow my last startup and everyone in that community had a blue sky number that made mine seem doable.

I did everything in my power for years but couldn’t push my company to the level of revenue required to sell for a retirement amount. In all fairness, our product didn’t have that kind of market potential, but I also learned how challenging it was to grow a company from scratch.

After that startup was acquired (because I was ready for a change), I asked myself if there’s an easier way to get to $10m, or the lifestyle that it could afford me. I figured there were two ways to get there:

1. The hard way: Make $10m.

2. The less-hard way: Make the equivalent of what $10m can pay me monthly.

Making $10m in one go is extremely difficult, per above scenario. Most people try their entire lives and never get there.

The “equivalent” of $10m however, is much easier:

If $10m gets you 5% interest a year = $500k/year

$500k/year ÷ 12 months = $42k/month

Building a business that can pay you $42k is within reach. Since my life partner is my cofounder, I cut that number in half to $21k, assuming equal income. When I broke it down like that, the big “$10m” became much more achievable.

My (new) number therefore, was $21k/month. I figured when I got there, selling the company would be the cherry on top. 🍒

When I founded eWebinar in 2019, my only intention and purpose was to build a company that could pay me $21k/month. It seemed like a realistic salary that my peers would be making in corporate…and an amount that could give me a pretty good lifestyle. Having never made nearly as much before, I became laser focused on that goal.

Nothing was more important than hitting that goal…

I know what you’re thinking. Having $10m in the bank at your disposal is not the same as being able to spend only the interest that $10m can hypothetically generate.

I agree! That was just the practical story I told myself to avoid the disappointment of perhaps never getting there.

But then, something happened…

I became so fixated on doing anything to cross the finish line that I forgot to stop and smell the flowers. I wanted to feel successful so badly in the future that I lost sight of what’s most important: Feeling successful now.

What’s worse, was that my destination morphed into an impossible moving target as my expectations evolved. What was $21k/month turned back into $10m, then $30m, then $50k/month…there was no rhyme or reason, only how I felt at which point in time.

The pitfalls of chasing only financial goals 😰

All this got me thinking about the pitfalls of being hyperfocused on money, “your number”, as an end goal.

People (me included) tend to think about success only in terms of numbers: revenue, profit, sale price…

They choose a final destination and work backwards to determine the series of actions they need to take in order to get there. They try to reverse engineer a meaningful outcome by coming up with meaningless, textbook tasks they need to do day-to-day as a means to an end. They tell themselves things like I don’t do what I love, I do what is required to justify the numbness of doing the things they don’t care about. They do what they’re supposed to instead of what they want to and suck the love out of something they used to be passionate about. They trick themselves into believing that immediate pain equals eventual success.

This vicious cycle of being obsessed with one’s number becomes the hamster wheel and prison we create for ourselves.

We focus so much on the destination that we convince ourselves the journey doesn’t matter.

Here’s the thing:

Since you can’t control the destination, the journey is all there is.

It’s true that building a business is hard, but what makes it insufferable is repeatedly doing things you don’t enjoy for a success that may never come.

Feeling successful every day 🤩

Somewhere along the way, I stopped celebrating progress and started measuring everything against an everchanging outcome I couldn’t control. I started following playbooks and advice that weren’t mine, doing tasks to check a box in exchange for growth rate instead of doing things that made me feel alive.

I used to feel proud of the effort I put in every day. Whether it was making 50 cold calls or nailing a key meeting. I used to go to bed feeling content; the act of showing up fully was enough for me to feel successful. I can’t remember the last time I lived that way and it’s a place I want to get back to.

Truth is, I can’t control my outcome, but I can control what I do every day.

I can choose to work on things that light me up instead of drain me. I can choose to live in alignment with what feels good and true for me. I can choose to engage with opportunities in front of me rather than reject them based on doubt and fear. I can choose the path presented that excites me most, without expectation and judgement of where it’ll take me.

That is success.

Success is not a revenue milestone or an exit price. It’s what you feel from doing things that nourish your soul. It’s the feeling you get from doing things that unleash your power, the things that help you become the person you aspire to be.

Success is the flow that comes to you because you’re at your most powerful.

Success is a state of mind that gives you instant gratification along your journey to somewhere.

What’s more important than any number is creating success every single day, and the outcome will present itself.

Reflections 🪞

When you live for a number, you’ll rationalize doing things you don’t want to do, justifying it as the necessary pain for future gain. You’ll mortgage today for a tomorrow that may not arrive.

The only thing you can count on is the day in front of you. The work you choose. The way you show up. And of course, the people you surround yourself with.

The biggest lesson I learned through all of this is:

Enjoying the journey means feeling successful every day.

It’s the only way to be happy regardless of where you are.

Forget your number.

Instead, ask yourself, “What would make me feel successful today?”

Stuff mentioned in this article 👇

• Article: How much is enough to stop working?

  
  Thank you for reading!

— Melissa ✌️

Newsletters I follow (and think you should too) 🗞️

• Dr. Julie Gurner: Ultra Successful - Insightful, easy to digest advice & executable strategies that makes you think, by a nationally recognized executive performance coach.

• Greg Head: PracticalFounders - Weekly interviews with founders who have built valuable software companies without big funding.

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