the core ideas behind our next book

Good morning Predictable Revenue community,

Thank you to everyone who replied back with feedback and advice on my positioning statement, the replies were overwhelmingly helpful. This week I’m sharing the core ideas behind the new book and where they came from.

My goal is to share what I’ve learned from spending the last 12 years helping entrepreneurs build their first growth channel. I’m sharing to solicit feedback from the community so if you think this is nonsense then I’d love to hear from you.

First and most importantly, Product Market Fit is a multiplier of your revenue efforts. I felt this clearly in 2015 when we helped a very large and recognizable startup scale from a small test market to a full US launch. Previous to working with this company, an average rep of ours was booking 60 meetings a month (across 5-6 clients, all cold email). When this customer came on board, we booked 327 meetings with them in the first month and somewhere around there every month we worked together. Did my rep suddenly get 6x better or was the strength of their PMF get them a better output than our next best customer? We’ve seen this pattern repeated multiple times, the stronger the PMF, the more they’ll get out of any investment in revenue.

A related learning from these experiences is that Product Market Fit is not binary, it exists on a scale. If a company has customers/revenue then they clearly have something real but they’re not getting the same output per dollar as companies with really strong PMF. The biggest killer of companies is pre-mature scale, that is investing in building out the company before you have nailed PMF. Companies in this situation have real customers, have raised real dollars, but aren’t getting the returns/growth they need to see to hit their next milestone. I’ve met too many companies in this situation that blame their revenue teams for the lack of results, they might be right but it also could be PMF. This insight led me to the idea of the formula for Predictable Revenue:

Product Market Fit x Revenue Execution = Predictable Revenue

This formula represents the strength of your PMF multiplied by the strength of your revenue team’s execution. It’s not a perfect formula but I think it gets the general idea across. I don’t know the best way to show the idea that PMF has a significantly stronger impact than revenue execution so if anyone has ideas I’d love to hear from you.

I remember building this huge spreadsheet a few years ago to model out what it would take to get PR to a certain revenue milestone. I spent hours on this thing and it was beautiful. When I started to play with the model, it very quickly showed me the very simple formula that I wish I knew ahead of time, your theoretical maximum revenue can be very quickly worked out by multiplying the number of new customers you add each month by the average revenue by your average lifetime. Multiply by 12 to get your theoretical maximum ARR. I expect you’ve seen something similar many times and it’s definitely an oversimplification of a complex idea. However, it can be useful to help us understand which lever to pull on in order to grow our companies, sales, price, or lifetime. Next week, I’ll share a little bit about the Four Funnels and how each of them maps to each variable. My hope is this poorly sketched out formula will help a few founders see the impact of each revenue system on their overall growth number. Stay tuned for more.

Thanks for reading. Please let me know what you think, good and bad. Especially bad! I’m planning on putting these ideas onto paper this year so I’d rather make adjustments now when I’m still working from a Google Doc.

Collin Stewart
—
ceo, predictable revenue
author of a big google doc that will be printed later this year one way or another