Return-Path: Delivered-To: andrew@sterlingcal.com Received: from reseller401.webserversystems.com by reseller401.webserversystems.com with LMTP id pFfmEiX6YWbBUA8AchKAPA (envelope-from ) for ; Thu, 06 Jun 2024 13:04:21 -0500 Return-path: Envelope-to: andrew@sterlingcal.com Delivery-date: Thu, 06 Jun 2024 13:04:21 -0500 Received: from o31.ptr6229.mail.beehiiv.com ([149.72.184.219]:13694) by reseller401.webserversystems.com with esmtps (TLS1.2) tls TLS_ECDHE_RSA_WITH_AES_128_GCM_SHA256 (Exim 4.96.2) (envelope-from ) id 1sFHTH-004Cz9-1i for andrew@sterlingcal.com; Thu, 06 Jun 2024 13:04:21 -0500 DKIM-Signature: v=1; a=rsa-sha256; c=relaxed/relaxed; d=mail.beehiiv.com; h=content-type:from:mime-version:subject:reply-to:list-unsubscribe-post: list-unsubscribe:to:cc:content-type:from:subject:to; s=s1; bh=Jl1M0ROa6GAfagqJqcX485Cbb2JOx+c3tBnOQwN2giA=; b=eILW2LTPWGaJ+Bf7LWF5PArWij0LQ0ZxqagxMortzZS3jYUTw7BiQXqjuE4DfGUNT9T7 p1NRLxv92s2zQp9+F8iOxW+oQ2rIbahZTphkdcwHTuoDKL8i2/PBDtydZ8Y4/fvV51kJuw B16JDTkXo42BS8LMEiL2NFuZZzi9Yzz5+s3kHnwxrNfCCUCtIRFtR4Imno1vxOssRXWS0n 62vEuzNnL3NsyFvoiUyr8Z0vb9dd2BRM4kUH3IgS8/phyTbB9v+m4B9m3772EW2PEKn42G Nithzcx8HJJoSOV+ojDH3YXdPCx8L93QP7vaP3g6jQ9DynK+BP2WLw6HFYHDhiPw== Received: by filterdrecv-784875cd6c-cfrtg with SMTP id filterdrecv-784875cd6c-cfrtg-1-6661FA11-190 2024-06-06 18:04:01.890323391 +0000 UTC m=+1195524.426140493 Received: from MzczMzExMjU (unknown) by geopod-ismtpd-14 (SG) with HTTP id yPPM39_wTA2l7Pe9tn_L5w Thu, 06 Jun 2024 18:04:01.825 +0000 (UTC) Content-Type: multipart/alternative; boundary=01bf33c237b16f32804189d17ffd5be6a19afa754bfa6ab6eeb9e91dee51 Date: Thu, 06 Jun 2024 18:04:08 +0000 (UTC) From: Ryan Allis Mime-Version: 1.0 Message-ID: Subject: Founderpath Case Study: Using Revenue-Based Financing to Scale Up Customer Acquisition Reply-To: Ryan Allis x-newsletter-signup: https://saasrise.beehiiv.com/subscribe x-newsletter-id: https://saasrise.beehiiv.com/ sId: 8a46fb20-5b78-45e0-ae38-2525b17867ca x-list-id: 8a46fb20-5b78-45e0-ae38-2525b17867ca x-list-owner: Feedback-ID: =?us-ascii?Q?5abdfedc-246f-4546-90c8-c012095c2467=3Anewsletter=3A8a46fb20-5b78-?= =?us-ascii?Q?45e0-ae38-2525b17867ca=3Acfa52acda08d1fe?= x-beehiiv-type: newsletter List-Unsubscribe-Post: List-Unsubscribe=One-Click x-newsletter: https://saasrise.beehiiv.com/p/founderpath-case-study x-beehiiv-ids: =?us-ascii?Q?{=22account=5Fname=22=3A=22https=3A=2F=2Fsaasrise=2Ebeehiiv=2Ecom=2F=22=2C=22campaign=5Fid=22=3A?= =?us-ascii?Q?=225abdfedc-246f-4546-90c8-c012095c2467=22=2C?= =?us-ascii?Q?=22category=22=3A=22newsletter=22=2C=22email=5Fgenerate?= =?us-ascii?Q?d=5Fat=22=3A1717697041=2C=22user=5Fid=22=3A=228a46fb20-5b?= =?us-ascii?Q?78-45e0-ae38-2525b17867ca=22}?= List-Unsubscribe: =?us-ascii?Q?=3Cmailto=3A8a46fb20-5b78-45e0-ae38-2525b17867ca+1d17dc26-c1df-44e?= =?us-ascii?Q?0-812a-883b6ad5b6bc+5abdfedc-246f-4546-?= =?us-ascii?Q?90c8-c012095c2467=40unsub=2Ebeehiiv=2Ecom=3E=2C?= =?us-ascii?Q?_=3Chttps=3A=2F=2Fsaasrise=2Ebeehiiv=2Ecom=2Funsubscribe=2FeyJ0eXAiOiJKV1QiLCJh?= =?us-ascii?Q?bGciOiJIUzI1NiJ9=2EeyJzdWJzY3JpYmVyX2lkIj?= =?us-ascii?Q?oiMWQxN2RjMjYtYzFkZi00NGUwLTgxMmEtODgzY?= =?us-ascii?Q?jZhZDViNmJjIiwicG9zdF9pZCI6IjVhYmRmZWRj?= =?us-ascii?Q?LTI0NmYtNDU0Ni05MGM4LWMwMTIwOTVjMjQ2NyI?= =?us-ascii?Q?sImxhc3RfcmVzb3VyY2VfZ3VpZCI6IlBvc3Q6NW?= =?us-ascii?Q?FiZGZlZGMtMjQ2Zi00NTQ2LTkwYzgtYzAxMjA5N?= =?us-ascii?Q?WMyNDY3In0=2E0ZfArRyHalajEOpxC1c=5FcgGGZEri?= =?us-ascii?Q?n3robRu3t=5F=5FF7gk=3E?= X-SG-EID: =?us-ascii?Q?u001=2Esr+Zi4HchtZiAIrGLItAkqAJLamgo33aet=2FuqlkyaJPf=2Fx4cfuqMKIwYl?= =?us-ascii?Q?dAofkCR68C2a3749fFAiIGPJkwLFWVSLuBo981A?= =?us-ascii?Q?zGryaHcHEcCE8K=2FIW8gzzJGT=2FYQ0O5oDlIFwo8g?= =?us-ascii?Q?htGRC=2FbuK7gpNB207zdTTLbktsCy9kTIzPqYgIf?= =?us-ascii?Q?8GwutjTc8UU4cVge84idLwf42pP5BRPjeqpdJAX?= =?us-ascii?Q?PW6y+4WS=2F0vQwovetsXKVw1ev+ex63vmLSqRsxk?= =?us-ascii?Q?c62HGZbEkIqYEIElRKgjIMiviQ=3D=3D?= X-SG-ID: =?us-ascii?Q?u001=2ESdBcvi+Evd=2FbQef8eZF3BpTL9BgbK5wfSJMJGMsmprAVgeiC8iaV7rEmQ?= =?us-ascii?Q?+cYi2k7d4UnnZDSBTZ1DbCq1u63Ncs3x2XyVENR?= =?us-ascii?Q?nRWuGBVmtpWOxQm7d+ntzNH9uf=2FxvNb1Vh=2Fhh+9?= =?us-ascii?Q?QWdwcl9GhPchehxa+W905TCkFkS7CJhQkr6A63t?= =?us-ascii?Q?wNpp3ZrySBWywU3IO9NJBqCyvOp2Mm+QTeQN1oc?= =?us-ascii?Q?rO8RHHA6Vr81nMQwa2hoDF1iCG6Q7HinfUIhf8c?= =?us-ascii?Q?raDX8Gwpzw+Mv6WI70DW6Bl5hw=3D=3D?= To: "andrew@sterlingcal.com" X-Entity-ID: u001.sWV69YT6CipfOgvvxr5vQg== X-Spam-Status: No, score=-2.6 X-Spam-Score: -25 X-Spam-Bar: -- X-Spam-Flag: NO --01bf33c237b16f32804189d17ffd5be6a19afa754bfa6ab6eeb9e91dee51 Content-Transfer-Encoding: quoted-printable Content-Type: text/plain; charset=utf-8 Mime-Version: 1.0 Hi Andrew, Today we have a new **case study** on how we took a **revenue-based financi= ng loan** from Founderpath to invest more aggressively in sales and marketi= ng, resulting in substantially increased MRR. If you like in-depth quality growth content like this, [apply to join](http= s://www.saasrise.com) our mastermind community for SaaS CEOs and Founders w= ith $1M to $100M in ARR.=20 Apply to Join SaasRise =F0=9F=94=A5 (https://www.saasrise.com) View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/e5df841d-80a1-4= 01d-b9ae-a477a3758e63/casestudycover.jpg?t=3D1717696656) Caption:=20 ## **Case Study: Using Revenue-Based Financing to Scale Up Customer Acquisi= tion** _By Ryan Allis, CEO & Founder of SaasRise_ =E2=80=9C**About the Article: **This article is by Ryan Allis, the co-found= er and former CEO of iContact. This article will walk you through how to us= e non-dilutive debt capital to scale up customer acquisition when your unit= economics are profitable. We=E2=80=99ve used the real metrics from our own= business to provide a detailed case study that you can apply to your own f= irm. If you want more killer SaaS scaling content like this =E2=80=93 [appl= y to join SaasRise](https://saasrise.com/) and [review our member informati= on deck here](https://docs.google.com/presentation/d/1MAD30lIg79Hjsx483CXZ_= NeMlwUMwqKkiDNt_LRZUG0/edit#slide=3Did.g2baa09bd22e_0_3).=E2=80=9C =E2=80= =94=20 On May 2, [SaasRise](https://saasrise.com/), took a $170,000 revenue-based = finance (RBF) loan from [Founderpath](https://founderpath.com/partners/saas= rise) in order to invest in scaling up our own customer acquisition.=20 So far, it=E2=80=99s working, and we added a record 62 new members last mon= th into our [SaaS CEO/Founder community](https://saasrise.com/). View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/fd8f5caa-9720-4= de7-8a8c-5a3a5ff7f538/Screenshot_2024-06-06_at_1.38.42_PM.png?t=3D171769553= 7) Caption:=20 [Founderpath](https://founderpath.com/partners/saasrise) provides 2-3 year = loans for up to 50% of your ARR. So if you have $2M in ARR you could get ap= proved for up to a $1M loan, for example =E2=80=93 a great alternative or a= ddition to a Series A round =E2=80=93 especially if you=E2=80=99ve figured = out your business model and are now ready to really scale up customer acqui= sition. This type of growth capital can be very helpful if you=E2=80=99ve figured o= ut your Lifetime Value (LTV) and Customer Acquisition Cost (CAC) and are se= eing a 6:1 LTV:CAC ratio or better, which means you=E2=80=99re getting a go= od payback for your sales and marketing investments and are ready to go big= ger. =E2=80=9CIf you=E2=80=99ve built a good engine and are ready to put fuel in= to it =E2=80=94 revenue-based financing can be an excellent non-dilutive al= ternative to venture capital.=E2=80=9C =E2=80=94 - Ryan Allis To explore getting an RBF loan for your company, [create a Founderpath acco= unt ](https://founderpath.com/partners/saasrise)and sync your billing syste= m (Stripe, Chargebee, csv file, etc.) to see all your key SaaS metrics and = how much capital they=E2=80=99ll provide. They work with all types of recur= ring revenue companies all over the world, as long as you have at least $50= k in ARR. ## **The Process of Working With FounderPath** From start to finish it was a very quick 96 hour process working with Found= erPath from application to capital receipt.=C2=A0 We first applied on Monday April 29. Because FounderPath already was connec= ted to our Stripe, all we had to do was upload a CSV of our non-stripe tran= sactions, upload our P&L and Balance sheet for the prior 12 months, and cre= ate an org chart. We were approved two-days later on Wednesday May 1. The capital was wired a= nd arrived on Thursday May 2.=C2=A0 View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXeoYga_rR8Uekd= REiUdjsopLitsWPcQRmb8BIEHA-D5An2olUL8XMW3y-FbGJKmXv5W7nG8ac-Q1rolJdYmEg2htB= BZ_zEJrKFR7UlnQtRjheXlAMzYWaSBhjhPwOClfhrRmy7jYEyK-FhArsV7JlbAJg24?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 Below you can see the actual emails received from FounderPath. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXfjAGta1U4RRms= zy-qeK4Ca6SYw3NVHjY0gr8dcAQfnowhEnoKsuDPZJmIEQky6bJ0eOBAXsYkfH2O9CvZYqHQtUS= 4B3d9FRVs4OsjnZ6VGc1eC8c1AHvF4E8MNIFp0S2y0hzVmk88AXfPFzv4F2LjdupGI?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 Then 48 hours later, presto we were approved. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXcXyt132EXV_Ed= -llwYt_It1oWd0x_WQpjC9fKDekrbrKrDdmTziYyWh_k43XMEe0zZS-KCF68cisqfUAs2eIw8CY= NMnM23teDfOSi2GobopqJxQPFNYqKZQZ3GZS6EjujOBoHzsVzuSF1IqQNezyuRFCaJ?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 ## **When to Take The Money and When Not To** If your LTV:CAC ratio is strong, it will likely increase your enterprise va= lue to take on capital to invest more in sales and marketing. Here=E2=80=99= s [a payback calculation sheet we used](https://docs.google.com/spreadsheet= s/d/1zfAEBbnI8BPN18kjBnkpOGUOOwgrhOAu5a0enY_cjPc/edit#gid=3D0) to show that= we expected to grow our Enterprise Value by $1.5M over time by taking the = $170k loan and putting the capital into our growth engine. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXeZ3I7LSwups4t= jXxEhVXZqhkl_V9H5vYYTzLpZN8qbJe0gfr-scgDTShl5-ok8qY4s_Sh-eafg0hJUh82ASkKL_T= 2HFkvi7XyaYO1bRk74WTd629-q2g9pNsJsE0LN38dnA0bbKj9yqDmqUpc1nhF3eJGS?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption: A flowchart to determine whether revenue-based financing is right = for you ## **Our Rationale for Taking the Financing** Why did we take the money? It was simple. We wanted to grow faster and had = determined mathematically through careful testing that we could scale custo= mer acquisition faster by investing more in advertising. In short, **our unit economics were positive** and we wanted to invest more= money in positive ROI sales & marketing without taking on any equity dilut= ion.=20 We are acquiring customers for about $500 each (CAC =3D $500) that are wort= h on average $8500 in lifetime revenue to us (LTV=3D $8500) =E2=80=93 so it= =E2=80=99s a no-brainer for us to invest as much as we can in sales and mar= keting if we want to scale our revenue and enterprise value. This 17:1 LTV:CAC ratio was a **no-brainer** to scale up (anything above 6:= 1 is good, anything above 12:1 is great!). Our customer LTV is $8698 and our CAC is $504, so it was an absolute no bra= iner to take the money to put fuel into the engine. Here=E2=80=99s our actu= al lifetime value chart from [BareMetrics](https://baremetrics.com/?via=3Ds= aasrise).=C2=A0 View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXeGU0UjBTccmAY= tgjuXeajui_3zoyjy02BYis717LI5PVFuTfii3jG4MXF3pzuAxe9RVcUFDGA8_dnlYMcSEO9gtl= _933lkKHVB64He_pFvn6A0TQWQY--NVmn4-6pIGY6YdxjGD3BL_y6VWcmq7kO-ZiOG?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 The average LTV of a customer is estimated by taking our ARPA ($946/month p= er customer) and multiplying it by the average lifespan of a customer (9.17= months), which is calculated in [Baremetrics](https://baremetrics.com/?via= =3Dsaasrise) with the formula of Lifespan =3D (1/Monthly Account Churn Rate= ). View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXe_mG37HNzdmUy= gN5gmob7HBLd54URuEu3jKv_U-b8bzQFcg0VfMk6P9bCkjrYAhmIiIVLgkx_R4eHtr-NgmusF1P= GPEj65IhUNW9XRgr80yyg7A8hS1lu0I_2XA0PG1dJcn1gaEjYBlgPRcadxFLd9AvjB?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 Since we have a 10.9% monthly account churn rate, for us the math is Lifesp= an =3D 1/.109 =3D 9.17 months. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXeNPUSE1FacT_q= cZoca8Zz9XWFbtma562JEtgwnqYVwyOAJ8omaEhGwF_d-kAqb7ZA-g7XzYp0vMFDEvYzBXqYhVA= jIsNjYN50ZhGNjd9mmBd5GMmMsQQrYDlTYZSVRtAxKNwvkiTf6RVch3gZRBpdBI4A?key=3DMGv= iGdCHfSubvewFI2ZSGA) Caption:=20 This means an average SaasRise community member stays 9.17 months before ca= nceling. So $946x9.17 months =3D a lifetime value of $8698. Kaboom=E2=80=A6= now you understand the LTV formula. So now that we know how much a customer is worth to us ($8698 in revenue), = how much does it cost to acquire an incremental customer in upfront sales a= nd marketing costs? Once we know LTV and CAC, we can determine if it makes sense to scale up in= vestments in customer acquisition =E2=80=93 and even take a loan to do that= . As long as CAC is lower than 1/6th of LTV, you generally want to ramp up cu= stomer acquisition investments.=C2=A0 So we want to invest more in S&M as long as our CAC is lower than $1400. Ri= ght now it=E2=80=99s at $504 so we=E2=80=99re scaling up. ## **Landing & Expanding: How We Grow Our ARPA Over Time** If our membership is $197/month, how exactly did we get our Average Revenue= Per Account to $946 per month? That=E2=80=99s from our three upsell offeri= ngs including our group coaching, ads setup and scaling, and growth and exi= t consulting.=20 View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXfdSqMwoA8Fr-O= U05XCMzxvi_bPyOhLfNJXgKGqZveMPjyUcR6fROdsKe0pdQzNzLVT6eWyMs3SANtyykDeLcjE2K= 5EHnCeTbkuTzAJqh83EMey06p7d2O171FFEehUSEzXgFyglt6mPvbsZ-rU7raw9itS?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption: If you=E2=80=99re interested in any of the above services, please = [apply to join our community here first](https://saasrise.com/), become a m= ember, and then reach out to us above what you need. The above is a nice ascension model that takes the entry ARPA of the member= ship and =E2=80=9Clands and expands=E2=80=9D it over time to 5x the initial= entry point on average, through trust building and add-on services. You ca= n do the same for your software customers via your Account Management team.= =20 What is your customer ascension model? At iContact, we grew our monthly ARPA over time for our 70,000 paying custo= mers from an average of $33 to an average of $56. And we could have probabl= y done even more had I known what I know now about building community and o= ffering managed services within a high-trust environment.=C2=A0 Our first salesperson at SaasRise starts later this month, and their job wi= ll be to both follow-up with our approved applicants to convert them into m= embers, and follow-up with our members to offer them additional packages, i= ncreasing ARPA and LTV =E2=80=93 and increasing what we can profitably pay = to acquire a new customer. Using this customer ascension model, even though our account retention is o= nly 89% per month, our revenue retention is 108% per month (meaning the gro= wth in revenue from existing customers outweighs the loss in revenue from c= anceling members, a strong signal of company health). View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXcXkWGb0LXjQwe= Nl4oO-E1y5dnPOm4IlpDl_XVA2TVq3qrmLP3_SDHI6K8IbknJETKqhqeD_7r2J9vX8KrwFKJMOL= oC9U4kt-IkEEm0r1P61U5QYthKBgnfPKeUCXWV1YY-BSrs5VtLaruyjGLTsFNKEz97?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 ## **Breaking Down Our CAC Calculation** Here=E2=80=99s a table of our actual customer acquisition cost (CAC) for Ma= rch-May 2024. Our CAC has averaged $291 over the last 3 months, when we sta= rted doing paid advertising. This is ad spend divided by customers influenc= ed by ads (either post-click or post-view within 24 hours), as tracked by o= ur ad tracking platform [Cometly](https://www.cometly.com/get-started?fpr= =3Dsaasrise).=20 View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXc3GNBZhkNy8Q0= 54z1GpNpvtAl0GeeDRwpznwva77BfDmzdaUwctY-1r-i6mWExMF9E9Yg-rdosbFJ0KM0fRtBznp= b-QooxspiAQY3Hp8uOdYpQHDEYdErs3GT181P4-S_Lijqh__7qKfTxQFCX_v9otBfF?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 Of course to look at the full-cost of customer acquisition, you=E2=80=99ll = also want to add in any sales expenses. After adding in the cost of our sin= gle sales rep who follow-ups with leads (so far we have 1 outsourced SDR fr= om [RooCruit](https://roocruit.com/) with 5 years of software sales experie= nce for $2700/month), it averages out to $504 per customer. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXeMVHx0lTlZHYc= ozWhO3oDaslcQF4TdnEeeX_CF-Xo1MwWM_nKmqRp2c1-CSft8cXLYgyfBlPrzF2FxuKldb2LOLg= x4lECqXMXk6tT2iGqYPs-oBTNAt-Rvvj-oxPksqCmJ1kENc97-JnwvxoppbPA6HOk?key=3DMGv= iGdCHfSubvewFI2ZSGA) Caption:=20 This means that we have created a system that consistently is converting $5= 00 in upfront S&M investment into $950 per month in revenue and $8500 in li= fetime value. That=E2=80=99s a <1 month payback on S&M investment. And an i= mpressive 17x LTV:CAC ratio! Green light! Time to invest! =E2=9C=85 **In SaaS, anytime you=E2=80=99re getting your Sales & Marketing investment= s back in less than 6 months, it makes rational sense to SCALE UP your inve= stments =E2=80=93 even if it means taking on outside capital to do so.** So you can see why using non-dilutive revenue-based financing at a cost of = 16-18% per year is actually a wise decision if you=E2=80=99re going to make= $17 back in revenue for every $1 spent on sales and marketing =E2=80=93 an= d if you don=E2=80=99t want to give up ownership. And this is why we took the FounderPath capital =E2=80=93 and will continue= to do so as long as we keep getting fast payback periods and high LTV:CAC = ratios.=C2=A0 At iContact, we invested $500 in upfront customer acquisition costs to get = $1848 in lifetime value ($56 ARPA x 33 average months of life). We were ven= ture-backed, weren=E2=80=99t concerned with profitability in the short-term= , and wanted to grow as much as possible, so we were fine with a 3.5:1 LTV = to CAC ratio. We ramped up our ad spend at iContact (the email marketing software company= I co-founded in 2002 and led as CEO for ten years) to $2M/month by 2011 an= d were consistently acquiring 4000 new paying customers per month. The mode= l worked, and in Q1 2012 we were acquired for $169 million by a public comp= any. You can see the [42 slides I put together documenting how we did this]= (https://founderpath.com/resources/ryan-allis-saasrise-keynote). The difference was at iContact we were funded by equity capital and by the = time we sold we=E2=80=99d given up 55% of the equity of the firm to the inv= estors. This time around, we=E2=80=99re scaling up using revenue-based fina= ncing capital rather than even more costly equity capital.=C2=A0 ## **The Types of Ads We=E2=80=99re Investing the Money Into** Where do we show our ads? We run digital ads across on five networks includ= ing: Meta, LinkedIn, Google Search, Bing Search, Google Display, and Adroll= using these four different type of ads: 1. Search ads (Google/Bing) - Ads that show up based on the keywords a user= types into a search engine 2. Lookalike ads (Meta) - Ads that show up on Facebook and Instagram to aud= iences that are very similar by location, interest, and job title as to you= r current list of paying customers. 3. Retargeting ads (Google/Meta/LinkedIn/Adroll) - Ads that show up to anyo= ne who has visited your website in the last 180 days. 4. Matched audience ads (Google/Meta/LinkedIn/Adroll) - Matched audience ad= s are where you upload a list of prospects either from your CRM tool or a l= ead prospecting platform like [Apollo.io](http://Apollo.io) and show ads to= exactly those people). I recommend testing the CPL and CPA for all four types of ads, across all f= ive networks, to see which work for you. I also suggest testing the CPL and= CPA on the review sites (G2, Capterra, Software Advice, GetApp, etc.) and = also from direct mail, outbound email, and postcards. Once you know what wo= rks, take the RBF financing to scale it up! ## **Rapidly Scaling Your SaaS Revenue Through CAC-Based Scientific Adverti= sing** So what does all this mean for your business? And how can you apply this ma= thematical CAC-based model to scaling your revenue.=C2=A0 There are three steps. 1. **Run test spend across every major ad channel - **First, do a test to d= etermine the Cost Per Lead (CPL) and Customer Acquisition Cost (CAC) from e= very major ad channel including Facebook, Instagram, Google Search, Google = Display, Adroll, Bing Search, G2, Capterra, SoftwareAdvice, GetApp, etc. No= te that you should invest enough of a test budget to acquire at least 2-3 n= ew customers per channel. If that isn=E2=80=99t possible due to budgetary c= onstraints or sales cycle length, focus first on establishing the CPL and t= hen later on the CAC. 2. **Determine CPL & CPA for every channel **- Second, after running the te= sts, calculate the CPL and CAC for every major type of paid advertising inc= luding: search ads, display ads, retargeting ads, matched audience ads, loo= kalike audience ads, review site ads, tradeshows, outbound, direct mail, po= dcast ads, affiliates, etc. Calculate for each channel and each type of adv= ertising how long it takes to get your money back on the sales and marketin= g spend. [Create a sheet like this to compare the channel ROI](https://docs= .google.com/spreadsheets/d/1gS8L0R2c4h3koG6V8YWNIbzIFbFfSRkXxQ_AjVaCNKU/edi= t). 3. **Scale Up Where LTV:CAC is 6:1** - Then, you ramp up investments in the= channels paying back in <6 months, or where the LTV:CAC ratio is at least = 6:1 or better, and focus on optimizing/scaling back any investments in chan= nels where the payback window is more than 12 months. You can use a spreads= heet like this to review the results of your marketing channels and ramp up= what works. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXc3-oEpbicatQI= SxYxpY56BPjbUpkP8jx9iXN0uEI0R0Po63cFVzC0_GPZS7Em0sghcaPUnTOkQWCKz3MifVo8OWH= 5XkHI6jduWe_ADxftj75WJYYNFjiPiA-g3jZVQvru3UdWnQJ9MOCbWHQam_vmMj1gG?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 And that is how you rapidly scale up customer acquisition in a recurring re= venue business (and how we grew iContact from $1M ARR to $50M ARR in six ye= ars). ## **Sources of Capital: Debt vs. Equity** In SaaS, you earn your revenue over time. Where are you supposed to get the= money from to afford a 6-12 months of payback time? Well you have two choices for capital of course: debt or equity. The downside of equity (aka venture capital) of course is that it dilutes y= our stake in the firm and reduces your control.=C2=A0 And traditional banks simply won=E2=80=99t provide loans to software compan= ies where the payback is over time (at least until you are a large, establi= shed, and profitable firm with collateral). Most banks like SVB do "Venture= Lending" or "Sponsor Lending" which means you have to raise VC to take deb= t from the bank. The bank is underwriting the cash from the Sponsor (VC inv= estor), not your SaaS business. So more and more recurring revenue software firms are turning to a new form= of capital called revenue-based financing (RBF) where you give up a right = to some of your future revenue in exchange for getting the capital you need= now to scale up. This is what [FounderPath](https://founderpath.com/partners/saasrise) excel= s at. As mentioned earlier, they will finance recurring revenue software fi= rms up to 50% of their current ARR (and are geography agnostic). Then you= =E2=80=99ll pay this up to 6 months of revenue advance back over 24-36 mont= hs, with around 16-20% interest depending on your numbers (growth rate, chu= rn rate, revenue concentration etc.).=C2=A0 For our deal ($170k financing over 24 months, we=E2=80=99ll have to pay bac= k $8480 per month to total $204k). View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXfiM-Vj3pNyNFg= hXlN-2WXt-1AwE3H27FxHM-uSK1yhEN42bepI9scRiEkXdQ-ycFYuvueZ9MRi7gp2tdojxNq2vQ= 8ORzDYEnjbsQ_LPWHO_T0hzBwECp51InbHDKhOOIoWVTrdyfkm7O7r0E24CGzpEq8P?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption: Our actual financing details within the FounderPath interface This is definitely NOT free capital. But it=E2=80=99s highly profitable for= us because we have an engine in place that turns $1 in S&M spend into $17 = in revenue over time. And it=E2=80=99s better than losing 20-40% of the com= pany to venture capital firms. ## **Determining Whether It=E2=80=99s Profitable To Take a RBF Loan** Here is a [simple payback model of the expected economics](https://docs.goo= gle.com/spreadsheets/d/1zfAEBbnI8BPN18kjBnkpOGUOOwgrhOAu5a0enY_cjPc/edit#gi= d=3D0) on my side from taking a $170k loan from them that I then use to inv= est in additional sales and marketing. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXfA5yyLBNx6jKW= 2WVs9nG_Flwkzf-EH8X_bkF_8kKKkytNE29p34kKRiDlo_1h41rsbkdVWLT0tSwWdHzzSywvH7c= 2O0lTcxSaVP-JWciRc5AVqok0KIHYBhkGwbXbHlp8TZ4sE2gZ2qrUKBtNr6p5WWFb_?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption: We estimated the $170k loan would generate $1.5M in new enterprise= value You can see above that if we generate 5 incremental new customers per month= over the next 24 months because of this $170,000 (for a total of 120 addit= ional customers due to the additional capital), taking this capital will ad= d $1.57M in enterprise value to our business assuming a 3x revenue multiple= .=C2=A0 The analysis is rather conservative as we=E2=80=99re acquiring customers fo= r $504 per customer and the above chart assumes a $1416 CAC. We=E2=80=99re = currently adding around 30-40 new customers per month, so I think we=E2=80= =99ll be able to ramp up more than 5 new customers per month with this adde= d capital.=C2=A0 _**So why wouldn=E2=80=99t you take an RBF financing?**_ The only reason I could think of NOT to take financing like this is if you = don=E2=80=99t have a productive place to put it to work, haven=E2=80=99t pr= operly tested ads yet, or if you already have a big balance sheet.=C2=A0 If you have a productive place to put capital to work (R&D or new customer = acquisition) and have already completed the tests needed to determine how m= uch capital it costs to acquire a new customer =E2=80=93 then go get the ca= pital, put it to work, ramp up slowly, reinvest, and then when needed go ge= t more to ramp up even faster. ## **FounderPath=E2=80=99s Free SaaS Metrics Dashboard** [FounderPath](https://founderpath.com/partners/saasrise) also provides free= metrics dashboards for your SaaS company that look like this. You just syn= c your billing too and/or accounting platform, add in a custom CSV for any = accounts that pay by wire, and a few hours later have some beautiful charts= (I=E2=80=99m still helping them get the data exactly right, but it=E2=80= =99s a good start and goes nicely along with Profitwell, Baremetrics, SaasG= rid, or ChartMogul). View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXdCeR85-asBi_t= dmrXYC5iVz_Bb5L15do86zWdtFKRg1PgNF0BnolVzJzlo_ZpzO7K09T46jqrgs2fY-vQgLpTSL5= D3668mk7-vqV8D7X6hs9Fs_1XMSO0aKcre6HQvlxblvo_PvWdUuEQ8nwYLPuGSi2gV?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 ## **What Other Options Exist For Revenue Based Financing?** We like [FounderPath](https://founderpath.com/partners/saasrise) because th= ey are easy to work with, provide a quick 3-5 day process from start to fin= ish, have free metrics dashboards, say yes to founders in many countries, a= nd I=E2=80=99ve known their CEO Nathan for about 15 years, but if you want = to look around at other options, see this article I wrote a few months ago = [comparing all the competition in the revenue-based financing space](https:= //saasrise.beehiiv.com/p/non-dilutive-saas-growth-capital-debt) including C= apChase, Pipe, and many others. View image: (https://lh7-us.googleusercontent.com/docsz/AD_4nXdiNYCINM--8pY= yByfg4i6CZBZPRIV8-hfm2msy0Bu5mkEnuMUpia39Q4M2LGsuVODDKW2-6VrK861AgwUOgIo9FU= ahdbRBy4cNHL48HxHdDBwWO91d-T-tpHE9ZmSDuvFVNxQoiUk6u8NxDwUk8X8MRdZM?key=3DMG= viGdCHfSubvewFI2ZSGA) Caption:=20 We hope you enjoyed this case study. If you want more killer SaaS scaling c= ontent like this =E2=80=93 [apply to join SaasRise](https://saasrise.com/),= our community of software CEOs/Founders with $1M-$100M in ARR. =E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2= =80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80= =94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94= =E2=80=94=E2=80=94 ## **Join Our Wednesday SaaS CEO & Founder Mastermind Calls** View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/e7fb0ccb-27e0-4= a05-9e52-6234dd437f34/image.png?t=3D1716047200) Caption: A recent SaasRise CEO mastermind If you like in-depth quality SaaS growth content like this, apply to join o= ur community of SaaS CEOs and Founders with $1M to $100M in ARR. Apply at [= www.saasrise.com](http://www.saasrise.com). We do 3 weekly mastermind calls= for our members and also have a private Slack channel and WhatsApp group a= nd provide an in-depth library of SaaS growth, fundraising, and exit resour= ces. We offer a free two week trial then it=E2=80=99s $197/month if you sta= y. We also offer 1:1 CEO Coaching, group coaching, digital ad management, a= nd exit prep consulting services. You can [apply here](https://www.saasrise.com/). View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/47a248ba-6af7-4= 926-8e4d-19dd874e15ae/Members2.jpg?t=3D1716046767) Caption:=20 Apply to Join SaasRise Here (https://saasrise.com/) See you next week with more killer SaaS scaling content! =E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2= =80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80= =94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94= =E2=80=94=E2=80=94 _**About the Author: **__Ryan Allis is the founder of _[SaasRise](https://w= ww.saasrise.com/)_, a community for SaaS CEOs with $1M to $100M in ARR. Rya= n previously led iContact as CEO and Co-Founder to $50M ARR and a $169M exi= t, raised $47M in equity capital and $6M in venture debt, and earned an MBA= from Harvard Business School. Today, Ryan advises B2B SaaS CEOs on scaling= up and helping them prepare for nine figure exits._ P.S. - Below are six valuable SaaS growth resources we=E2=80=99ve put out. = I hope they are useful to you!=20 =E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2= =80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80= =94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94= =E2=80=94=E2=80=94 ## _**Six Helpful Free SaaS Growth Resources from SaasRise**_ View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/39f7169c-c0e6-4= c32-a0c3-3a9fe5a402c7/Screen_Shot_2023-12-06_at_4.01.59_PM.png?t=3D17019001= 25) Follow image link: (https://docs.google.com/presentation/d/1eu4eCtnpUzYNSRl= wADzKhRdVFPg2jUtrCL4P1X9jh0w/edit#slide=3Did.p) Caption:=20 _The most in-depth guide for scaling up SaaS companies from $0 to $50M in A= RR. Including over 1,200 slides on every aspect of SaaS scaling._ View Google Slides (https://docs.google.com/presentation/d/1eu4eCtnpUzYNSRl= wADzKhRdVFPg2jUtrCL4P1X9jh0w/edit#slide=3Did.p) View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/861ac953-0d2e-4= b3e-9e8e-8c582132325e/Screen_Shot_2023-12-06_at_4.17.29_PM.png?t=3D17019010= 54) Follow image link: (https://docs.google.com/spreadsheets/d/1gS8L0R2c4h3koG6= V8YWNIbzIFbFfSRkXxQ_AjVaCNKU/edit#gid=3D0) Caption:=20 _How to determine whether to scale up or down your marketing channels_ Channel Scaling Spreadsheet Template (https://docs.google.com/spreadsheets/= d/1gS8L0R2c4h3koG6V8YWNIbzIFbFfSRkXxQ_AjVaCNKU/edit#gid=3D0) View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/de951fea-01d7-4= 540-9ba9-7cd0b598121c/Screen_Shot_2023-12-06_at_4.18.01_PM.png?t=3D17019010= 86) Follow image link: (https://docs.google.com/spreadsheets/d/14DyL5Lik-9oL8wI= KeHgVbIAqAi_kNKAky1TaHEPXFBI/edit#gid=3D0) Caption:=20 _How to calculate ARPA, LTV, Churn, Lifespan, CPL, CAC, and Max CAC_ SaaS Unit Economics Spreadsheet Template (https://docs.google.com/spreadshe= ets/d/14DyL5Lik-9oL8wIKeHgVbIAqAi_kNKAky1TaHEPXFBI/edit#gid=3D0) View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/89223472-c441-4= 19b-b648-c5f14464299e/SaaS_Growth_System.jpeg) Follow image link: (https://docsend.com/view/f9x39hr4fmkru88w) Caption:=20 _A fourteen page in-depth PDF on we take each CEO client through a six-phas= e process designed to increase lead volume, customer acquisition, and reven= ue growth =E2=80=94 and then scale up the sales team, executive team, and i= nvestor support as we help you prepare for future fundraising rounds (if ne= eded) or an exit (if desired)._ Download Now (https://docsend.com/view/f9x39hr4fmkru88w) View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/7382f906-1319-4= b11-a91e-41eb6955d7e4/Screen_Shot_2023-09-13_at_2.05.10_PM.png) Caption:=20 _A twenty page in-depth PDF on how to scale a B2B SaaS Company from $1M to = $50M ARR. Covering CAC-based customer acquisition, sales team scaling, vent= ure capital markets, and preparing for the exit. _ Download Now (https://docsend.com/view/iaugti93e8qw9dku) View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/1ea23c59-4f32-4= e86-88c6-902958562441/formula.png) Follow image link: (https://docsend.com/view/sqq8xukiinx2w2rk) Caption:=20 _The SaaS Growth Formula was written to help SaaS CEOs who are focused on g= rowing their company's sales - by implementing a simple formula called The = Growth Formula. This formula is for companies that have already established= product/market fit, already have paying customers, and are now ready to sc= ale up through scientific and CAC-based digital marketing, inbound sales, a= nd outbound sales._ Download Now (https://docsend.com/view/sqq8xukiinx2w2rk) =E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2= =80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80= =94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94=E2=80=94= =E2=80=94=E2=80=94 ## **Join Our Saas Growth Mastermind for CEOs and Founders With $1M+ in ARR= ** If you like the above resources and want more stuff like this, [apply to jo= in SaasRise](https://thesaascircle.com/), our mastermind community for SaaS= CEOs and Founders with $1M+ in ARR who are focused on scaling up MRR. Ever= y Wednesday we jump on an optional mastermind call to support each other an= d share what is working with scaling our companies =E2=80=93 and we support= each other throughout the week in our private community on Slack, WhatsApp= , and our own custom platform. View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/df2a1afe-d9d6-4= a30-b3f5-db55cd3e918f/image.png?t=3D1701900409) Follow image link: (https://www.saasrise.com) Caption: Our private community platform, SaasRise ### _**About The Author**_ View image: (https://media.beehiiv.com/cdn-cgi/image/fit=3Dscale-down,forma= t=3Dauto,onerror=3Dredirect,quality=3D80/uploads/asset/file/95ce4977-1eff-4= 123-99fd-29b7974424a0/Ryan_Allis_Headshot_.jpg) Caption:=20 =E2=80=9C_Ryan Allis is the founder of _[SaasRise](https://www.saasrise.com= )_, the mastermind community for growth-focused SaaS CEOs with $1M-$100M in= ARR. He is a three time INC 500 CEO. He was previously CEO of iContact and= grew the firm as founder/CEO to 70,000 customers, 1 million users, 300 emp= loyees, $50M per year in sales, and an exit for $169M to Vocus (NASDAQ:VOCS= ). _ _Since the sale of iContact, Ryan has been the CEO coach to high-growth Saa= S firms including Tatango, Seamless.ai, Pipeline, Datalyse, Green Packet, R= evenue Accelerator, RXNT, Galleon, Clearstream, YouCanBookMe, Retreaver, an= d EventMobi. Ryan has been part of the EO and Summit Series communities._ _He holds an MBA from Harvard Business School, where he was Co-President of= the Social Enterprise Club and a member of the Harvard Graduate School Lea= dership Institute. He=E2=80=99s passionate about helping recurring revenue = software companies grow and exit._=E2=80=9C =E2=80=94=20 _We=E2=80=99ll see you next time with more great SaaS growth and scaling co= ntent!_ =E2=80=94=E2=80=94=E2=80=94 You are reading a plain text version of this post. For the best experience,= copy and paste this link in your browser to view the post online: https://saasrise.beehiiv.com/p/founderpath-case-study --01bf33c237b16f32804189d17ffd5be6a19afa754bfa6ab6eeb9e91dee51 Content-Transfer-Encoding: quoted-printable Content-Type: text/html; charset=utf-8 Mime-Version: 1.0 Founderpath Case Study: Using Revenue-Based Financing to Scale Up Custome= r Acquisition
The real story of how we took a $170k RBF loan and invested it i= n sales and marketing  ‌ ‌ ‌ ‌&= #160;‌ ‌ ‌ ‌ ‌ ̴= 4; ‌ ‌ ‌ ‌ ‌ &#= 8204; ‌ ‌ ‌ ‌ ‌ = ;‌ ‌ ‌ ‌ ‌ ‌&#= 160;‌ ‌ ‌ ‌ ‌ ‌= ; ‌ ‌ ‌ ‌ ‌ = 204; ‌ ‌ ‌ ‌ ‌ = ‌ ‌ ‌ ‌ ‌ ‌= 60;‌ ‌ ‌ ‌ ‌ ‌=  ‌ ‌ ‌ ‌ ‌ R= 04; ‌ ‌ ‌ ‌ ‌ &= #8204; ‌ ‌ ‌ ‌ ‌= 0;‌ ‌ ‌ ‌ ‌ ‌&= #160;‌ ‌ ‌ ‌ ‌ ̴= 4; ‌ ‌ ‌ ‌ ‌ &#= 8204; ‌ ‌ ‌ ‌ ‌ = ;‌ ‌ ‌ ‌ ‌ ‌&#= 160;‌ ‌ ‌ ‌ ‌ ‌= ; ‌ ‌ ‌ ‌ ‌ = 204; ‌ ‌ ‌ ‌ ‌ = ‌ ‌ ‌ ‌ ‌ ‌= 60;‌ ‌ ‌ ‌ ‌ ‌=  ‌ ‌ ‌ ‌ ‌ R= 04; ‌ ‌ ‌ ‌ ‌ &= #8204; ‌ ‌ ‌ ‌ ‌= 0;‌ ‌ ‌ ‌ ‌ ‌&= #160;‌ ‌ ‌ ‌ ‌ ̴= 4; ‌ ‌ ‌ ‌ ‌ &#= 8204; ‌ ‌ ‌ ‌ ‌ = ;‌ ‌ ‌ ‌ ‌ ‌&#= 160;‌ ‌ ‌ ‌ ‌ ‌= ; ‌ ‌ ‌ ‌ ‌ = 204; ‌ ‌ ‌ ‌ ‌ = ‌ ‌ ‌ ‌ ‌ ‌
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June= 06, 2024   |   Read Online<= /p>

3D=

H= i Andrew,

Today we have a new = case study on how we took a revenue-based financing loan from= Founderpath to invest more aggressively in sales and marketing, resulting = in substantially increased MRR.

If you like in-depth quality growth content like this, appl= y to join our mastermind community for SaaS CEOs and Founders wi= th $1M to $100M in ARR.

Apply to Join SaasRise= =F0=9F=94=A5
=
= 3D""

Case Study: Using Revenue-Based Fina= ncing to Scale Up Customer Acquisition
By= Ryan Allis, CEO & Founder of SaasRise

<= tr>

About the Art= icle: This article is by Ryan Allis, the co-founder an= d former CEO of iContact. This article will walk you through how to use non= -dilutive debt capital to scale up customer acquisition when your unit econ= omics are profitable. We=E2=80=99ve used the real metrics from our own busi= ness to provide a detailed case study that you can apply to your own firm. = If you want more killer SaaS scaling content like this =E2=80=93 apply to join SaasRise and review our member information deck= here.

On May 2, SaasRise, took a = $170,000 revenue-based finance (RBF) loan from

So far, it= =E2=80=99s working, and we added a record 62 new members last month into ou= r SaaS CEO/Founder community.

3D""

Founderpath provides 2-3 year loans for up to 50% of your ARR. So if you have $2M= in ARR you could get approved for up to a $1M loan, for example =E2=80=93 = a great alternative or addition to a Series A round =E2=80=93 especially if= you=E2=80=99ve figured out your business model and are now ready to really= scale up customer acquisition.

This type of growth capital can be very helpful if you=E2=80=99ve figured= out your Lifetime Value (LTV) and Customer Acquisition Cost (CAC) and are = seeing a 6:1 LTV:CAC ratio or better, which means you=E2=80=99re getting a = good payback for your sales and marketing investments and are ready to go b= igger.

= =E2=9D=9D
 

If you=E2=80=99ve bu= ilt a good engine and are ready to put fuel into it =E2=80=94 revenue-based= financing can be an excellent non-dilutive alternative to venture capital.=

 
- Ryan Allis

To explore getting an RBF loan for your compa= ny, create a Founderpath account and sync your billing system (Stripe, Chargebee, csv file, etc.) to se= e all your key SaaS metrics and how much capital they=E2=80=99ll provide. T= hey work with all types of recurring revenue companies all over the world, = as long as you have at least $50k in ARR.

The Pro= cess of Working With FounderPath

From start to finish it was a very quick 96 hour process work= ing with FounderPath from application to capital receipt.=C2=A0

We first applied on Monday April 29. Beca= use FounderPath already was connected to our Stripe, all we had to do was u= pload a CSV of our non-stripe transactions, upload our P&L and Balance shee= t for the prior 12 months, and create an org chart.

We were approved two-days later on Wednesday May 1. T= he capital was wired and arrived on Thursday May 2.=C2=A0

Then 48 hours later, presto we were approved.

=
3D""

Below you can see the actual = emails received from FounderPath.

3D""
3D""<= /td>

When to Take The Money and When Not = To

If your LTV:CAC = ratio is strong, it will likely increase your enterprise value to take on c= apital to invest more in sales and marketing. Here=E2=80=99s a payback calculation sheet we used to show that we = expected to grow our Enterprise Value by $1.5M over time by taking the $170= k loan and putting the capital into our growth engine.

A f= lowchart to determine whether revenue-based financing is right for you

<= /td>
3D""

Our Rationale for Taking the Financi= ng

Why did we take = the money? It was simple. We wanted to grow faster and had determined mathe= matically through careful testing that we could scale customer acquisition = faster by investing more in advertising.

In short, = our unit economics were positive and we wanted to invest more= money in positive ROI sales & marketing without taking on any equity dilut= ion.

We are acquiring customer= s for about $500 each (CAC =3D $500) that are worth on average $8500 in lif= etime revenue to us (LTV=3D $8500) =E2=80=93 so it=E2=80=99s a no-brainer f= or us to invest as much as we can in sales and marketing if we want to scal= e our revenue and enterprise value.

no-brainer to scale up (anything above 6:1 is good, anything above 12:1 is great!).=

Our customer LTV is $8698 and= our CAC is $504, so it was an absolute no brainer to take the money to put= fuel into the engine. Here=E2=80=99s our actual lifetime value chart from = BareMetrics.=C2=A0

=
3D""

The average LTV of a = customer is estimated by taking our ARPA ($946/month per customer) and mult= iplying it by the average lifespan of a customer (9.17 months), which is ca= lculated in Baremetrics wit= h the formula of Lifespan =3D (1/Monthly Account Churn Rate).

3D""

Since we have a 10.9% mo= nthly account churn rate, for us the math is Lifespan =3D 1/.109 =3D 9.17 m= onths.

=3D""

This = means an average SaasRise community member stays 9.17 months before canceli= ng. So $946x9.17 months =3D a lifetime value of $8698. Kaboom=E2=80=A6 now = you understand the LTV formula.

So now that we know how much a customer is worth to us ($8698 in revenue)= , how much does it cost to acquire an incremental customer in upfront sales= and marketing costs?

Once we = know LTV and CAC, we can determine if it makes sense to scale up investment= s in customer acquisition =E2=80=93 and even take a loan to do that.

As long as CAC is lower than 1/6th o= f LTV, you generally want to ramp up customer acquisition investments.=C2= =A0

So we want to invest more = in S&M as long as our CAC is lower than $1400. Right now it=E2=80=99s at $5= 04 so we=E2=80=99re scaling up.

Landing & Expandi= ng: How We Grow Our ARPA Over Time

If our membership is $197/month, how exactly did we get o= ur Average Revenue Per Account to $946 per month? That=E2=80=99s from our t= hree upsell offerings including our group coaching, ads setup and scaling, = and growth and exit consulting.

= 3D""

If you=E2=80=99re intereste= d in any of the above services, please apply to join our co= mmunity here first, become a member, and then reach out to us ab= ove what you need.

What is your customer a= scension model?

At iContact, w= e grew our monthly ARPA over time for our 70,000 paying customers from an a= verage of $33 to an average of $56. And we could have probably done even mo= re had I known what I know now about building community and offering manage= d services within a high-trust environment.=C2=A0

Our first salesperson at SaasRise starts later this mon= th, and their job will be to both follow-up with our approved applicants to= convert them into members, and follow-up with our members to offer them ad= ditional packages, increasing ARPA and LTV =E2=80=93 and increasing what we= can profitably pay to acquire a new customer.

Using this customer ascension model, even though our acco= unt retention is only 89% per month, our revenue retention is 108% per mont= h (meaning the growth in revenue from existing customers outweighs the loss= in revenue from canceling members, a strong signal of company health).

3D""=

Breaking Down Our CAC Calculation=

Here=E2=80=99s a table= of our actual customer acquisition cost (CAC) for March-May 2024. Our CAC = has averaged $291 over the last 3 months, when we started doing paid advert= ising. This is ad spend divided by customers influenced by ads (either post= -click or post-view within 24 hours), as tracked by our ad tracking platfor= m Cometly<= /a>.

=3D""

Of co= urse to look at the full-cost of customer acquisition, you=E2=80=99ll also = want to add in any sales expenses. After adding in the cost of our single s= ales rep who follow-ups with leads (so far we have 1 outsourced SDR from RooCruit with 5 years of software sales experience = for $2700/month), it averages out to $504 per customer.

The downside of equity (aka venture capital) of co= urse is that it dilutes your stake in the firm and reduces your control.=C2= =A0

<= tr><= td id=3D"founder-paths-free-saa-s-metrics-da" class=3D"dd" align=3D"left" v= align=3D"top" style=3D"padding:0px 15px;text-align:left;">

FounderPath=E2=80=99s Free SaaS Metrics Dashboard

<= /td>=
3D""

This means that we have created = a system that consistently is converting $500 in upfront S&M investment int= o $950 per month in revenue and $8500 in lifetime value. That=E2=80=99s a &= lt;1 month payback on S&M investment. And an impressive 17x LTV:CAC ratio! =

Green light! Time to invest! = =E2=9C=85

I= n SaaS, anytime you=E2=80=99re getting your Sales & Marketing investments b= ack in less than 6 months, it makes rational sense to SCALE UP your investm= ents =E2=80=93 even if it means taking on outside capital to do so.

So you can see why using no= n-dilutive revenue-based financing at a cost of 16-18% per year is actually= a wise decision if you=E2=80=99re going to make $17 back in revenue for ev= ery $1 spent on sales and marketing =E2=80=93 and if you don=E2=80=99t want= to give up ownership.

And thi= s is why we took the FounderPath capital =E2=80=93 and will continue to do = so as long as we keep getting fast payback periods and high LTV:CAC ratios.= =C2=A0

At iContact, we investe= d $500 in upfront customer acquisition costs to get $1848 in lifetime value= ($56 ARPA x 33 average months of life). We were venture-backed, weren=E2= =80=99t concerned with profitability in the short-term, and wanted to grow = as much as possible, so we were fine with a 3.5:1 LTV to CAC ratio.

We ramped up our ad spend at iContact= (the email marketing software company I co-founded in 2002 and led as CEO = for ten years) to $2M/month by 2011 and were consistently acquiring 4000 ne= w paying customers per month. The model worked, and in Q1 2012 we were acqu= ired for $169 million by a public company. You can see the 42 slides I put together document= ing how we did this.

The difference was at iContact we were funded by equity capital and by th= e time we sold we=E2=80=99d given up 55% of the equity of the firm to the i= nvestors. This time around, we=E2=80=99re scaling up using revenue-based fi= nancing capital rather than even more costly equity capital.=C2=A0

The Types of Ads We=E2=80=99re Investing the Money Into

Where do we show our= ads? We run digital ads across on five networks including: Meta, LinkedIn,= Google Search, Bing Search, Google Display, and Adroll using these four di= fferent type of ads:

  1. Search ads (Google/Bing) - Ads that show up based on the keyword= s a user types into a search engine

  2. Lookali= ke ads (Meta) - Ads that show up on Facebook and Instagram to audiences tha= t are very similar by location, interest, and job title as to your current = list of paying customers.

  3. Retargeting ads (= Google/Meta/LinkedIn/Adroll) - Ads that show up to anyone who has visited y= our website in the last 180 days.

  4. Matched a= udience ads (Google/Meta/LinkedIn/Adroll) - Matched audience ads are where = you upload a list of prospects either from your CRM tool or a lead prospect= ing platform like Apollo.io and show ads to exact= ly those people).

I recommend testing the CPL and CPA for all four types of ads, across = all five networks, to see which work for you. I also suggest testing the CP= L and CPA on the review sites (G2, Capterra, Software Advice, GetApp, etc.)= and also from direct mail, outbound email, and postcards. Once you know wh= at works, take the RBF financing to scale it up!

<= b>Rapidly Scaling Your SaaS Revenue Through CAC-Based Scientific Advertisin= g

So what does all = this mean for your business? And how can you apply this mathematical CAC-ba= sed model to scaling your revenue.=C2=A0

There are three steps.

    Run test spend across every major = ad channel - First, do a test to determine the Cost Per Lead (CP= L) and Customer Acquisition Cost (CAC) from every major ad channel includin= g Facebook, Instagram, Google Search, Google Display, Adroll, Bing Search, = G2, Capterra, SoftwareAdvice, GetApp, etc. Note that you should invest enou= gh of a test budget to acquire at least 2-3 new customers per channel. If t= hat isn=E2=80=99t possible due to budgetary constraints or sales cycle leng= th, focus first on establishing the CPL and then later on the CAC.

    <= /li>

  1. Determine CPL & CPA for every ch= annel - Second, after running the tests, calculate the CPL and C= AC for every major type of paid advertising including: search ads, display = ads, retargeting ads, matched audience ads, lookalike audience ads, review = site ads, tradeshows, outbound, direct mail, podcast ads, affiliates, etc. = Calculate for each channel and each type of advertising how long it takes t= o get your money back on the sales and marketing spend. Create a sheet like this to compare the channel ROI.
    <= /p>

  2. Scale Up Where LTV:CAC is 6:= 1 - Then, you ramp up investments in the channels paying back in= <6 months, or where the LTV:CAC ratio is at least 6:1 or better, and fo= cus on optimizing/scaling back any investments in channels where the paybac= k window is more than 12 months. You can use a spreadsheet like this to rev= iew the results of your marketing channels and ramp up what works.

=3D""

And t= hat is how you rapidly scale up customer acquisition in a recurring revenue= business (and how we grew iContact from $1M ARR to $50M ARR in six years).=

Sources of Capital: Debt vs. Equity

In SaaS, you earn your revenue ov= er time. Where are you supposed to get the money from to afford a 6-12 mont= hs of payback time?

Well you h= ave two choices for capital of course: debt or equity.

And traditional banks simp= ly won=E2=80=99t provide loans to software companies where the payback is o= ver time (at least until you are a large, established, and profitable firm = with collateral). Most banks like SVB do "Venture Lending" or &qu= ot;Sponsor Lending" which means you have to raise VC to take debt from= the bank. The bank is underwriting the cash from the Sponsor (VC investor)= , not your SaaS business.

So m= ore and more recurring revenue software firms are turning to a new form of = capital called revenue-based financing (RBF) where you give up a right to s= ome of your future revenue in exchange for getting the capital you need now= to scale up.

This is what FounderPath excels at. As ment= ioned earlier, they will finance recurring revenue software firms up to 50%= of their current ARR (and are geography agnostic). Then you=E2=80=99ll pay= this up to 6 months of revenue advance back over 24-36 months, with around= 16-20% interest depending on your numbers (growth rate, churn rate, revenu= e concentration etc.).=C2=A0

F= or our deal ($170k financing over 24 months, we=E2=80=99ll have to pay back= $8480 per month to total $204k).

3D""

Our actual financing = details within the FounderPath interface

This is definitely NOT free capital. But it=E2= =80=99s highly profitable for us because we have an engine in place that tu= rns $1 in S&M spend into $17 in revenue over time. And it=E2=80=99s better = than losing 20-40% of the company to venture capital firms.

Determining Whether It=E2=80=99s Profitable To Take a RBF Loan

Here is a simple payback model of the expected economics= on my side from taking a $170k loan from them that I then use to invest in= additional sales and marketing.

3D""

We estimated the $170k loa= n would generate $1.5M in new enterprise value

You can see above that if we generate 5 i= ncremental new customers per month over the next 24 months because of this = $170,000 (for a total of 120 additional customers due to the additional cap= ital), taking this capital will add $1.57M in enterprise value to our busin= ess assuming a 3x revenue multiple.=C2=A0

The analysis is rather conservative as we=E2=80=99re acquiring = customers for $504 per customer and the above chart assumes a $1416 CAC. We= =E2=80=99re currently adding around 30-40 new customers per month, so I thi= nk we=E2=80=99ll be able to ramp up more than 5 new customers per month wit= h this added capital.=C2=A0

So why wouldn=E2=80=99t you take an RBF financing?<= /i>

The only reason I co= uld think of NOT to take financing like this is if you don=E2=80=99t have a= productive place to put it to work, haven=E2=80=99t properly tested ads ye= t, or if you already have a big balance sheet.=C2=A0

If you have a productive place to put capital to wor= k (R&D or new customer acquisition) and have already completed the tests ne= eded to determine how much capital it costs to acquire a new customer =E2= =80=93 then go get the capital, put it to work, ramp up slowly, reinvest, a= nd then when needed go get more to ramp up even faster.

FounderPath also provides free metrics dashboards for your SaaS= company that look like this. You just sync your billing too and/or account= ing platform, add in a custom CSV for any accounts that pay by wire, and a = few hours later have some beautiful charts (I=E2=80=99m still helping them = get the data exactly right, but it=E2=80=99s a good start and goes nicely a= long with Profitwell, Baremetrics, SaasGrid, or ChartMogul).

<= /table>

Join Our Saa= s Growth Mastermind for CEOs and Founders With $1M+ in ARR

<= tr>
3D""

What Other Options Exist For Revenue Based F= inancing?

We like <= a class=3D"link" href=3D"https://link.mail.beehiiv.com/ss/c/u001.5LVZgu6haJ= jMb5mfcCcNJkUpwqALZaiHzFloTpHIObPcsOCcN6H-q3zz6FrQubV07ziWpScHsVBezOQ-U5pF6= h-xsDWzMbYNZwx_waH_EWVJTAFVY3Qk_VBYizXZmURvsR40K-6a9anIcbL1MBbShD93v6ePehEB= T0xxcLbKxcNDCmPI_pSX6heuWGjT_qL6xuI9fmUxXgX0ZHti-v84nnX0LviK9XyCjT6rh-v9SRw= NFOB9rTEv6vahkqOaw9M3dPJVo-tfEEUKoTrzxEUZhQ/46z/KnNipdTTQr60AXOg-e6-nQ/h22/= h001.nvATzaZo18VLmP0wt3tK-jAcgIpbvuHhb3CWbhVGInI" target=3D"_blank" rel=3D"= noopener noreferrer nofollow">FounderPath because they are= easy to work with, provide a quick 3-5 day process from start to finish, h= ave free metrics dashboards, say yes to founders in many countries, and I= =E2=80=99ve known their CEO Nathan for about 15 years, but if you want to l= ook around at other options, see this article I wrote a few months ago comparing all the compe= tition in the revenue-based financing space including CapChase, = Pipe, and many others.

3D""

We hope you enjoyed this case study. If you want more killer Saa= S scaling content like this =E2=80=93 apply to join SaasRi= se, our community of software CEOs/Founders with $1M-$100M in AR= R.

 

Join Our Wednesday S= aaS CEO & Founder Mastermind Calls

3D""

A recent= SaasRise CEO mastermind

If you like in-depth quality SaaS growth content like thi= s, apply to join our community of SaaS CEOs and Founders with $1M to $100M = in ARR. Apply at www.saasrise.com. We do 3 weekly= mastermind calls for our members and also have a private Slack channel and= WhatsApp group and provide an in-depth library of SaaS growth, fundraising= , and exit resources. We offer a free two week trial then it=E2=80=99s $197= /month if you stay. We also offer 1:1 CEO Coaching, group coaching, digital= ad management, and exit prep consulting services.

You can apply here.

<= /table>

See you next week with more killer SaaS scaling con= tent!

How to calculate ARPA, LTV, Churn, Lifespan,= CPL, CAC, and Max CAC

=
Apply to Join SaasRise Here
 

About the Author: <= span style=3D"">Ryan Allis is the founder of S= aasRise, a community for SaaS CEOs with $1M = to $100M in ARR. Ryan previously led iContact as CEO and Co-Founder to $50M= ARR and a $169M exit, raised $47M in equity capital and $6M in venture deb= t, and earned an MBA from Harvard Business School. Today, Ryan advises B2B = SaaS CEOs on scaling up and helping them prepare for nine figure exits.=

P.S. - Below are six va= luable SaaS growth resources we=E2=80=99ve put out. I hope they are useful = to you!

 

Six Helpful = Free SaaS Growth Resources from SaasRise

3D""
View Google Slides
3D""

How to determine whether to scale up or down your marke= ting channels

Channel Scaling Spreadsheet Template <= /td>
3D""
SaaS Unit Economics Spreadsheet T= emplate
3D""

A fourteen p= age in-depth PDF on we take each CEO client through a six-phase process des= igned to increase lead volume, customer acquisition, and revenue growth =E2= =80=94 and then scale up the sales team, executive team, and investor suppo= rt as we help you prepare for future fundraising rounds (if needed) or an e= xit (if desired).

<= table role=3D"none" border=3D"0" cellspacing=3D"0" cellpadding=3D"0" align= =3D"center">
Download Now
3D""

A twenty page in-depth PDF on how to scale a B2B SaaS Company fr= om $1M to $50M ARR. Covering CAC-based customer acquisition, sales team sca= ling, venture capital markets, and preparing for the exit.

Download Now
3D""

The SaaS Growth Formula was written to help SaaS CEOs who are focused on g= rowing their company's sales - by implementing a simple formula called = The Growth Formula. This formula is for companies that have already establi= shed product/market fit, already have paying customers, and are now ready t= o scale up through scientific and CAC-based digital marketing, inbound sale= s, and outbound sales.

=
Download Now
 

If you like the above resources and want m= ore stuff like this, apply to join SaasRise, our = mastermind community for SaaS CEOs and Founders with $1M+ in ARR who are fo= cused on scaling up MRR. Every Wednesday we jump on an optional mastermind = call to support each other and share what is working with scaling our compa= nies =E2=80=93 and we support each other throughout the week in our private= community on Slack, WhatsApp, and our own custom platform.

3D""

Our private community platform,= SaasRise

About The Author

3D""

Ryan Allis is the found= er of SaasRise, the mastermind community f= or growth-focused SaaS CEOs with $1M-$100M in ARR. He is a three time INC 5= 00 CEO. He was previously CEO of iContact and grew the firm as founder/CEO = to 70,000 customers, 1 million users, 300 employees, $50M per year in sales= , and an exit for $169M to Vocus (NASDAQ:VOCS).

Since the sale of iContact, Ryan has been the CEO = coach to high-growth SaaS firms including Tatango, Seamless.ai, Pipeline, D= atalyse, Green Packet, Revenue Accelerator, RXNT, Galleon, Clearstream, You= CanBookMe, Retreaver, and EventMobi. Ryan has been part of the EO and Summi= t Series communities.

He= holds an MBA from Harvard Business School, where he was Co-President of th= e Social Enterprise Club and a member of the Harvard Graduate School Leader= ship Institute. He=E2=80=99s passionate about helping recurring revenue sof= tware companies grow and exit.

<= /td>

We=E2=80=99ll see you next time w= ith more great SaaS growth and scaling content!

 

Update your ema= il preferences or unsubscribe here

© 2024 SaasRise

O= utpost Guiones
Nosara, Guanacaste 50206, Costa Rica

<= /td>
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