What’s Your Number?

I meet many founding teams that have not really considered a minimum financial outcome they would be happy with?  Would it be $2m, $5m, $10m or $50m?  And how much risk are you willing to take to achieve that number?  When I present the option below to new entrepreneurs just writing their business plan – 90% think $2m would be awesome!

However this number changes as the business grows.  Nonetheless it is good to ground yourself (and your co-founders) on a number that you can build a plan around.  For example if your minimum number is $8m each and you have three founders with an equal amount of shares then you will need to sell those shares for $24m + options you give to management.  You can round up to founder equity and options to $30m.  Then think about a very conservative valuation for your SaaS business if it should slow down and the market is not frothy – say 3x revenues?  If you raise no capital you get the business to $10m in ARR and you will very likely achieve your goal.  If you confident you can  get the business to $20m then you can afford to sell 50% of your equity to investors and so on.  In any case have a plan.