This article is based on Anatoly’s brilliant talk at the Product Marketing Festival in 2021. You can watch the recording in its full glory here.

Hello everyone! I'm Anatoly Sharifulin, CEO and Co-founder of AppFollow. Just a few years ago, the idea for our company was sparked at a hackathon; today, we’ve secured over $7 million in investments. 

I’m excited to share with you the achievements we’ve made along this journey and, more importantly, our failures and the invaluable insights we gleaned from them.

Let’s get into it.

The mistakes that slowed our growth

When you’re talking about your product's story, it's easy to focus on the successes, but there's immense value in understanding failures. Why? Because every failure brings with it an insight, helping you chart a better course for the future. 

At AppFollow, we view mistakes as learning opportunities. We want to make our first mistakes quickly, learn from them, and most importantly, ensure they're never repeated.

Reflecting on our journey, if I had to pinpoint our biggest challenge, it'd be our slow initial growth. Moving from zero to our first million in annual recurring revenue took longer than we hoped. 

So, what were the reasons for this slow growth? There were four main mistakes we made:

  1. Setting a low average price
  2. Focusing too much on product development
  3. Focusing on the wrong metrics
  4. Pouring too much energy into growth hacking

Let’s dive a little deeper into each of these mistakes and see what we could have done differently.

Mistake #1: Setting a low average price

The first and most critical mistake we made was setting a low price. We introduced our first premium plan at a mere $9 per month, with an average price hovering around $30 per month. This was incredibly low. 

While such a price might have been reasonable for smaller companies, we also offered this rate to enterprise-level companies. In hindsight, that was a misstep.

Mistake #2: Focusing too much on product development

Our second major error? Our intense focus on product development. My background as a product manager meant I loved diving deep into features, researching competitors, gleaning insights, and continuously improving our product. So much of my time was devoted to these tasks. 

However, over time, I've come to realize that as founders, we need to evolve alongside our company, promoting and managing our team rather than just the product. Though I still involve myself in product vision and research, it's essential to take a broader perspective, especially when planning for future investments.

Mistake #3: Focusing on the wrong metrics

Next, let's talk about KPIs and metrics. For the first year of AppFollow’s life, our monthly recurring revenue (MRR) growth was around 7 to 10% month-on-month. It's a decent figure, but not outstanding. To put it in perspective, Y Combinator startups have a benchmark growth of 10%, but that's on a week-over-week basis. 

Every business needs to identify its ideal growth metric, but if you're in the early stages, rapid growth is imperative. 

Our focus on metrics has evolved over time. For instance, in 2016, our primary KPI was the number of signups. We wanted to hit 50k sign-ups within a year, but it took us two years to reach that milestone. We also spent considerable time analyzing conversion rates, from visitors becoming signups to signups converting to trials. 

If I could turn back time, I'd place more emphasis on MRR growth.

Mistake #4: Pouring too much energy into growth hacking

As a former product manager, I was drawn to the idea of growth hacking. Tweaking our website's sign-up button, modifying call-to-action texts, and incorporating different images and videos – these were all tactics we employed. 

While these tactics can be powerful, they might not always be the best approach for early-stage B2B companies. When you have only a handful of leads, the goal should be to convert them. If they aren't converting, you need to understand why not. Are there product or pricing issues, or is it something else entirely? 

Instead of focusing solely on small growth hacks in the beginning, it might be more beneficial to monitor metrics that help you understand your target customers and why they choose to buy from you (or not!).

Lessons learned

We learned some valuable lessons on the way to our first million in ARR.

Lesson #1: Hone in on the right pricing strategy

These days, we regularly re-evaluate our pricing strategy. However, it's crucial not to get caught up in constant changes. If you have a lot of ideas for experimentation, that's great, but it's essential to strike a balance. For us, honing in on the right pricing and packaging was instrumental in our growth journey.

Lesson #2: Iterate constantly

The terrain of B2B SaaS is ever-evolving. Consider how platforms like the App Store and Google Play were continuously updating their stores, consoles, algorithms, and features a few years back. As an app review management and ASO (App Store Optimization) services platform, this meant we had to continuously adapt, seeking out fresh ways to cater to our customers' needs. 

This constant iteration is essential if you’re in an immature market or you haven’t achieved a solid product-market fit (PMF). However, once you’ve reached PMF and your market is a little more stable, it’s often wise to slow the pace of your iteration and focus on cementing your position.

Lesson #3: Pivoting is great, but it gets harder as you grow

There's magic in the term "pivot.” Over the years, we've pivoted about five times. Each time, after identifying a product-market fit and being satisfied with our product, a look at our financial metrics often revealed that the results weren't as scalable or profitable as we'd like. 

That’s why we pivoted to new product offerings, renewed our focus on customer development, and repackaged our product.

Lesson #4: Focus on your average price

As I mentioned, one of the biggest mistakes we made early in our journey was setting our prices too low. The emphasis always needs to be on achieving the right average price for the type of customer you’re targeting. 

What helped us finally reach our first $1 million in ARR was shifting our focus from average revenue per premium account (ARPPA), which is suitable for small businesses, to annual contract value (ACV) as we moved towards sealing bigger deals. 

The transition from ARPPA to ACV required an understanding of the distinct resources and strategies necessary to secure these larger contracts.

Lesson #4: Pay attention to retention

Net dollar retention rate (NRR) is another metric I'm particularly fond of, and our investors feel the same. 

It serves as a barometer of product quality. If customers are renewing and upselling, then your NRR will likely be above 100%. But, if it's below 100%, that's a sign of a problematic customer segment which, in the long run, could diminish to zero due to churn

We saw this issue among our small business customers because our product wasn’t offering them the value they expected. Recognizing this, we redefined our strategy, offering an extended free plan and reallocating our support and sales resources to cater to medium and large companies. 

Monitoring NRR across different customer segments allowed us to see which companies stuck with us and how they evolved with our offerings.

Bonus tip: Coaching can help you achieve quick growth

The final pearl of wisdom I'd like to share is about the power of coaching. Advice from seasoned experts can help you unlock tremendous growth. Perhaps you’re new to the world of B2B SaaS or you don’t have much leadership experience – why not seek advice from someone who’s walked in your shoes? 

Our journey has been filled with sharp learning curves. Yes, mistakes happen, and they can be invaluable lessons. But some mistakes have the potential to fatally wound a company. To safeguard against such pitfalls, we've sought guidance from experts.

We’re currently working with experts in each of the following areas:

Their input has been invaluable. After all, as Eric Schmidt, former CEO of Google said:

“Every famous athlete, every famous performer has a coach – somebody who can watch what they’re doing and say, ‘Is that what you really meant to do?’ and give them perspective.
“One thing that people are never good at is seeing themselves as others see them. A coach really really helps.”