What I Learned Growing an 8-Figure Business

What I Learned Growing an 8-Figure Business

11 actionable tips from the learnings of my career.

Sumo and AppSumo have grown massively in the past 12 months. Our team has more than tripled in size (now 40 people), and our revenue hit eight figures for the first time ever.

I don't say this revenue number to brag. It's been a tough journey filled with TONS of mistakes and failures along the way. I want to show you how I got here so you can do it for yourself

No matter where you're at in your own journey, whether you're going from zero to $1— or $100k to $1m — you'll be able to take some of these learnings to help grow your own business.

If you prefer video, check out these tips in the video below...

Table of contents:

  1. Create a clear goal (and plan how to achieve it)
  2. Build complimentary products
  3. Create recurring revenue
  4. Find the right pricing structure
  5. Set up simple frameworks
  6. Focus on your sweet spot
  7. Hiring is everything
  8. Do more of what's working
  9. List all of your problems
  10. You need more people
  11. Iterate the way you communicate

Want my 11-step checklist to build your own 8-figure biz?

1. Create a clear goal (and plan how to achieve it)

With Sumo.com we have one clear goal based on revenue. Here are a few of our goals from recent years:

2014 - 1 billion visitors across Sumo

2015 - $1 million ARR (annual recurring revenue)

2016 - $5 million ARR

2017 - top secret but you get the jist.

I could ask anyone on the Sumo team — whether they work in marketing, support, customer success — and they know the goal.

Have one clear goal for your business and make it visible DAILY to EVERYONE on your team.

Model your goal in spreadsheets

Once you have a goal, the next step is to figure out how you're going to achieve it. For me, this means modeling the goal into a spreadsheet.

With my Noah Kagan Presents podcast, my goal is to achieve 100,000 downloads per episode by the end of 2017. You can see below how I've modeled out that goal into a spreadsheet:

Here are my 6 steps for effective goal setting:

  1. Make a high-level 5-year roadmap
  2. Make a detailed 12-month roadmap
  3. Pick 3 KPI goals that push forward your 12-month roadmap (your goal should scare you a bit — otherwise, it's not big enough)
  4. Create a list of all the things you could do to hit your 3 KPIs
  5. Prioritize the list based on what will be easiest to implement AND have highest impact in the next 3 months
  6. Review weekly if you're on track. Adjust accordingly.

 

Too many businesses wait until the end of the month, or the end of a quarter, to review their progress and retroactively take steps to correct their path. Be proactive to hit your goals.

What can you do to get on target? Not sit by and watch the car accident, you rubbernecker.

2. Build complimentary products

Right now our Sumo business is based around 4 products:

  • Sumo.com: Free marketing tools to grow your business
  • AppSumo: Groupon for geeks
  • KingSumo: Giveaway WordPress plugin
  • Monthly 1k: A course on how we started our businesses

Each tool is complimentary to one another. Think of it like a pyramid:

1- Monthly 1k teaches you how to start
2- KingSumo helps you to grow your business with contests
3- Sumo.com (our core product) gives you all the marketing tools
4- AppSumo provides you with deals on the rest of the tools you'll need in business

Don't worry about getting new customers. Existing customers are so much easier to market , so build complimentary products for your existing customers.

Think about your favorite author. Do you own more than 1 book of theirs? I'd bet 1 million percent you do. Why is that?

I do this too, and it's because we like their stuff and want MORE from them. Think about that with your business: keep giving MORE of what the people already want INSTEAD of starting new businesses, trying totally different categories, or focusing all your attention elsewhere.

Imagine you're a guitar teacher and want to grow that business:

  • Step 1: Teach a student in-person. Make some money, but quickly realize it doesn't scale
  • Step 2: Go on Teachable and make a course multiple people can take
  • Step 3: Then you can sell software that does audio tuning. Even more scale
  • Step 4: Then you can sell your own guitar

Make your current customers happier

People are always looking for the next marketing channel or tactic to grow their business and get in front of new customers.

What very few entrepreneurs realize, though, is that it's much easier to grow your business through your current customers than it is to go out and find a whole bunch of new customers.

Challenge: How would you 2x your business if you COULD NOT get any new customers?

This will help you think of ways you can over-serve your current customers.

They key is to keep over-delivering and make your current customers as happy as possible. The benefits of this are two-fold:

  1. Happy customers will refer your business to their friends
  2. Happy customers are more likely to spend more cash and buy your new products or services

3. Create recurring revenue

The greatest thing about recurring revenue is predictability. When you know how many customers you have on recurring plans, you can begin to hire, spend money, and grow your business confidently.

At AppSumo we've had months where we made $50,000... and months where we've made $500,000. Both sound great until you realize our monthly expenses are at least $300,000. With AppSumo (and KingSumo), we do make money right away, but these customers might not return anytime soon.

But remember: don't force a recurring revenue model just because you have Scrooge McDuck fantasies of constant passive income. It should be something people WANT to pay for monthly. In other words, it makes sense for them to pay monthly instead of one-off. For our business, recurring revenue comes from our Sumo website tools.

The downside is, recurring revenue comes with a bunch of challenges (like churn). It's not just as simple as setting up a monthly subscription for your customers and leaving it.

4. Find the right pricing structure

Pricing is an incredibly important part of your business.

I can't tell you exactly what'll work for your business, but I can help you get started by sharing how we figured out our pricing at Sumo.

Here's what our pricing looks like now:

We've changed our pricing 7 times in 2 years (and we're definitely going to keep experimenting).

For example we started out:

  1. Offering Sumo completely for free.
  2. Only charging for designs of pop up templates.
  3. Then we made each individual app $20 month and added pro options for each of them.
  4. Next we saw people wanted all our email apps and not have to figure which one to buy so we bundled them.
  5. From there we thought why not offer all the apps for 1 price, hello Sumo Pro.
  6. Fast forward today MOST of Sumo is free except the benefits we identified that 80% of customers REALLY value.

One interesting thing, is notice what people REALLY value. We thought everyone would pay to remove our branding. Surprise, NO ONE CARED!

To improve our pricing, we analyzed:

  • The tools people specifically bought
  • Which type of customers churned the least
  • The revenue vs cost of different customer segments

We realized had three types of customers: Wantrepreneurs, businesses, and enterprise companies.

Tiny businesses had no money and large businesses needed a lot more customization and expected account management.

Medium businesses, however, had money to spend with us and got the most value from our product. We began to focus on medium sized businesses and reflected the value we deliver to them in our pricing.

Align your pricing with value

Your pricing should align with the value customers get out of your product.

At Sumo, this meant increasing our prices. By raising our prices we were able to deliver new, highly requested features and provide better support.

This doesn't mean you should just sit back and increase your pricing for the sake of it.

Look at your business:

  • Which customers do you want to serve the most?
  • Which customers are happiest?
  • Which have the highest LTV?

These are the customers you're creating value for. Understand the VALUE they get from your product and align that to the price you charge them.

I recently spoke with Basecamp founder, Jason Fried. He explained a little on how Basecamp are experimenting with pricing for "The Basecamp Way To Work" workshops.

Prices started at $100 per ticket. Now they're selling at $500 - 5x the original price! And they still sell out in 24hrs. By experimenting Jason is able to figure out how much value they deliver to attendees and what price people are willing to pay.

5. Set up simple frameworks

With AppSumo we have a very simple framework for deals. Every month we offer four paid deals.

With our content at Sumo.com we have a framework, too. Sean and Sarah produce four articles per month. I love the number 4 (and this is point 4… coincidence???)

Frameworks make growth and scaling very predictable.

In your business, how you can break down some core processes into frameworks that make it super simple for anyone on the team to pick up. Scale in your business is enabled through 2 options:

  1. More people
  2. Automating things with software

You might have a sales team, but when you have a new product launch, how can you ensure everyone in the company can easily manage the sales process? You guessed it...a framework!

I HIGHLY encourage you to create a Standard Operating Procedure (SOP) for EVERY position in your company. Think of it this way, if you were to hire 10x more people for the role how soon could they onboard to the position. Alternatively, if one of your people get sick or injured how would other people know what responsibilities are necessary to do.

This should be a living document that everyone has access to.

Here's an example of one from my personal SOP.

The ideal is that anyone can pick up the SOP and learn the job near instantly.

6. Focus on your sweet spot

All of us are really good at something.

To scale your company, you need to put your players in the right positions to win. In basketball, you don't see a Point Guard playing as a Center.

You need to make sure you have all your team in the right positions. Including yourself.

Anton on our team is great at sales but we noticed he's a better coach. So we hired a sales team under him so he can be Coach Potato.

Personally, I LOVE marketing and creating content to share it. But for 2 years I spent 85% of my time recruiting for Sumo. It was necessary.

One morning I reflected what my sweet spot has been historically. And I remembered 2014 was my happiest professional time partly because I was working on this blog and marketing it. I love promoting great things. Back to OkDork for me and our new Recruiter gets to do what she loves!

Go to your sweet spot and hire the people who's sweet spot is what you need help with.

7. Hiring is everything

No company thinks it hires bad people.

Every single CEO I meet always says "I only hire A+ players." But most of the time they're kidding themselves. The fact is most teams suck.

Hiring is everything. The only difference between shitty and successful companies is the people.

Look at Elon Musk, he's crazy smart. But he didn't build the spaceships or cars himself. He found the best people in the world and did whatever it took to hire them.

People make all the difference in business. People turn ideas into successful companies.

Hire people better than you

To be successful, you have to hire people better than you.

We hired Ayman to grow AppSumo. A little over 2 years later AppSumo is the biggest it's ever been and I talk with Ayman at most 15 minutes a week. Don't get me wrong, I want to talk and help him wherever he needs it, but he's better than me at running AppSumo. And I'm a better advisor to him.

You know you've found the right person when they come on-board and your life is instantly better.

As you scale, it gets hard not to compromise. If you compromise, your team of A+ players can soon become C players and your team will get weaker, not stronger. I'll repeat cause it's SO important, don't-ever-never settle on any hire. Ever!

Every hire should level up your business. No compromises.

8. Do more of what's working

I've noticed a LOT of people, myself included, are always looking for the next thing.

At Sumo, content marketing works for us. But we've spent SO much time, energy and cold, hard cash on trying to make ads work.

Instead, we should have doubled down on content and 2, 3, 4x'd our output to maximize on the opportunity. (We are doing this now and have doubled the content team)

When something works do more of it.

At the same, you need to aggressively cut the things that aren't working.

There's nothing wrong with experimenting and trying new channels. But you need to know when to stop. Be ruthless.

This happened with our Instagram account. We currently have 100k+ followers and have made many attempts to convert those people into customers. And we've made a grand total of $0. I'm not kidding. Now we're not going to spend ANY more on it. Be merciless in your cutting.

9. List all of your problems

This is easily one of the most rewarding exercises I've done at Sumo. List out all the problems you face in your business. Stuff that could really screw you up.

For Sumo, this included:

  • Churn is higher than we'd like.
  • How can we differentiate our product from competitors?
  • Which marketing channels can we actually invest more in?
  • How can we scale the sales revenue faster?

Once you've listed all your problems then brainstorm three solutions for every single issue.

Next, I take this to the team at Sumo and we prioritize the issues we feel might hurt us most. This really helps us frame what we need to do to grow our business, plus how we can combat our biggest challenges before they arise.

Zuckerberg said it right, "you have to cannibalize yourself before someone else does."

10. You need more people

I haven't always felt this way, though. I used to look at Facebook and think "why do they need 15,000 people to run that company?"

Like seriously, what is everyone doing all day?

There's a reason that many successful companies have a large number of employees. You can't get done at scale what you want to do with the same amount of people.

Look at the companies in the position you want to be, then model the org charts and types of hiring they are doing. Scale your team to scale your growth.

Top tip: Uncover your competitors org charts

Here's an incredible LinkedIn hack to learn who you should hire.

Almost every company has a public LinkedIn page where you can see who works there and their job titles. From this information, you can begin to work out what their org chart looks like and how they've structured their team.

This isn't the exact blueprint for how to build your company, but it gives you insights on roles you should be hiring to grow your team.

In addition, go talk to someone at their company to understand why they've hired certain positions or roles. Save yourself the time and money, these people have already figured it out. I learned from Jason Cohen at WPEngine who has scaled to 400+ people.

11. Iterate the way you communicate

Communication is the single biggest challenge I DID NOT expected as our business scaled.

Now that the company is bigger I can no longer gauge everyone's performance or directly lead everyone on the team.

Here're a couple of ways we've improved our communication as we've grown:

Team calls

Every Monday at the same time, our team hops on a video call, and we check in on how we're performing vs our core goal.

Here's how our calls flow:

  1. Company Goal Review: How we did last week towards our yearly goal.
  2. Discussion Points: Things everyone needs to know.Highlighted bullet points: Key topics to discuss.
  3. Kudos: Recognize people for doing cool shit.
  4. Team updates: Each team shares 3 bullet points what they worked on last week week and what they're doing this week.

This is done in a Google Doc that we edit each week.

Here's doc of our meeting notes from last week.

We regularly iterate the way we communicate within these meetings. For example, we used to have every team member share an update, but now we've refocused on team updates to save times.

As you grow, you should always be iterating and evaluating how you communicate as a team.

Quarterly anonymous surveys

Every quarter we send a survey out to everyone on the team asking questions like:

  • What do you like about working here?
  • What could we improve?
  • How likely are you to refer someone else to work here? (Rated 1-10 like an NPS score)

Feel free to copy of our anonymous review template.

What you're looking to identify is things your team would like you to fix in the business and ideas on how you can improve the company.

The NPS score (how likely team members are to refer another person) is a great way to measure ongoing teammate satisfaction..

DON'T MISS: My exclusive guide to building an 8-figure biz

Bonus: 1% ideas

In our weekly leadership meetings we always discuss 1% ideas and people love it!

A 1% idea can be literally anything.

The KEY idea is that every week we aim to get 1% better at that thing and over a year that compounds to 100%+ improvement.

A few examples are: paying for Slack, initiating leadership personal development, iterating on our monday meetings and more.

Every week, ask your team what is one thing we could get 1% better at and improve our business.

---

What a freaking wild and amazing ride it's been in the past 7 years.

I LOVE the team I work with, the products we create and the successful customers who appreciate us.

Through creating this article for you I realized a few things:

  1. People are everything.
  2. Systems create predictability which creates sustainable growth.
  3. Constant iteration is the lubricant for growth.
  4. Don't forget to have fun.

Here's to hitting 9 figures in revenue...

Leave a Reply

Your email address will not be published. Required fields are marked *

38 responses to “What I Learned Growing an 8-Figure Business”

Pim
September 26, 2017 at 1:22 am

Someone should give this guy a medal ?

What an awesome peace of content, again...

I consume Noah’s content for the past 3 years now and I grew my company to 6 figures per year because of it. I started to repeat reading, listening and watching his stuff to understand much better what it’s about, to get the most value out of it and to really become the results and to live the methodologies.

I’m currently trying to figure out our One Metric That Matters (OMTM) as a Marketing and web development agency that works with hour retainers. Any suggestions are welcome ?

Reply
Corey Hinde
July 18, 2017 at 11:12 pm

loving your content bro, absolutely loving it, and I also happen to love Mexican food AND beer!!

Reply
Cody
July 18, 2017 at 9:21 am

Packed to the brim with value. You're the man. Definitely using your weekly updates doc going forward in my business with the team. Wanted one of these for a while to go along with our weekly team meeting but yours is perfect and simple. Thank you.

Reply
Russ Perry
May 5, 2017 at 10:50 am

Perfect content as we're chasing 8 figures! Congrats Noah!

Reply
Joanna
March 29, 2017 at 9:18 am

I've been reading this for 3 days now. No, I'm not a slow reader, I just didn't want to read it all at once, as I thought I would miss important points as I always hurry doing stuff. thank you for this.

Reply
Clayton Ferguson
March 7, 2017 at 1:14 am

I found this googling org. related keywords and scaling to 8 figures as that's the path we're currently on. Hilarious to see we're actually a SumoMe customer too!

Love the content and I learned a lot of hard to come by tactical advice for managing an internet company of about 20 - 40 employees.

Cool

Reply
Noah Kagan
March 7, 2017 at 8:26 am

You rock Clayton. Thanks for the content 🙂

Reply
Alexander Chau
March 4, 2017 at 6:16 am

This was big. Thanks Noah.

Reply
Murray
March 1, 2017 at 6:52 pm

Excellent stuff Noah - thanks for sharing!

Very interested in your comments about Instagram though. I've heard recently that Shopify say their top performing sites have all used Facebook and Instagram to grow their businesses.

So I'm really curious to know why you think it did not work for you? I'm particularly interested to know how exactly you were measuring Instagram for you to conclude that it generated $0?

Reply
Omer
March 1, 2017 at 4:33 pm

Love it, Love it, Love it!!

Reply
Flo
February 28, 2017 at 10:03 am

Hey Noah,
Thanks for this amazing post. How did you find/hire someone like Ayman? How did it happen? I am more someone who builds, I love selling too but I think I am not that good at it.
Many thanks!
Flo

Reply
Ravi
February 28, 2017 at 2:21 am

Something best read in this week, really thanks for sharing all.

Reply
Moses Yoon
February 25, 2017 at 11:47 am

Hi, fully loaded taco here.
Just skimmed through but great read with lots of golden nuggets and reminders.
Happy to be a subscriber as you always send good content.

Reply
Raghu Veer Dendukuri
February 25, 2017 at 6:24 am

Nice info Noah, I like the idea of anonymous feedback and the way the inputs of team are considered, as team is everything like leg and arm and every vital organ of the body for the successful functioning of the business.

Cheers 🙂

Reply
Carlo
February 25, 2017 at 1:13 am

Thanks for the post. I learned a lot from it. I'm currently working on scaling my business. I'm going to apply what I've learned from this post. Getting too excited for the result. 🙂

Reply
Marc Perry
February 24, 2017 at 2:54 pm

This is an outstanding post and resource, thanks Noah. How you summed everything up at the end with those 4 key points is now etched in my memory. It's easy to get caught up in the minutiae and forget the power of the right people in the right roles

Reply
Sean
February 24, 2017 at 12:56 am

Shared it, flipped it, thumbed it up. What else can I do? Great tips @Noah!

Reply
Bon
February 23, 2017 at 3:29 pm

Thank you. I've never been so glad to be on a mailing list. Growth management is everything in our business right now. This is awesome. Yay for middle fingers. Brilliant ideas. And tacos. Yay!

Reply
Jesscy Z
February 23, 2017 at 1:51 pm

Fuckin' great. I love your style. I'm motivated!

Reply
Sean
February 23, 2017 at 9:20 am

Another way to build out a company's org chart is to search for the companies name on Indeed and see what roles are not represented on Linkedin. An added bonus is being able to see who may be looking to jump ship!

Reply
David Oudiette
February 23, 2017 at 8:14 am

Cool article.

Re: 6, I've certainly been waaaay too much of a control freak in the past, but I think it's unavoidable to some extent: I don't think you can hire people if you haven't done the job before (however crappily). Definitely feels good to go back to things where you're a natural.

Hope you get back closer to that sweet spot and write more of that good stuff!

P.S. *Complementary

Reply
Moses
February 22, 2017 at 6:22 pm

Great post! What you have shown is the operational part of running a business. I especially can relate to SOP (standard operation procedure).

Almost every I can across only talked about what to do, you've actually given us a fair idea on the mechanism of running a business.

Thanks alot.

Reply
Gregory Galant
February 22, 2017 at 3:10 pm

This really jives with our experience at Muck Rack. Love the templates, I'm going to steal the weekly update.

Reply
Brian Brown
February 22, 2017 at 1:59 pm

Really cool Noah thanks for sharing. that linkedin tip is awesome.

Reply
Libby
February 22, 2017 at 1:23 pm

Thank you for a fantastic info-rich, story-rich, engaging, super useful article Noah. From a newbie business person who's at Stage 0.01 of start up. ?

Reply
Brad
February 22, 2017 at 12:42 pm

Great info, Noah.

I see in your spreadsheet that you have Reddit Ads as one of your marketing channels. Can you expand on your tactics/ methods there? It's my understanding that Reddit users hate being marketed too and will eat you alive.

I'm curious on how you go there and have success.

All the best!

Reply
Murray
March 2, 2017 at 7:38 am

...or is it simply a content marketing channel, where the readers don't even realize they're being marketed to?

Reply
Lara
February 22, 2017 at 12:05 pm

Awesome post, all useful info as usual. I especially like the listing out all your biz problems and 3 solutions to each issue...I'm getting on that one asap. 🙂 Thank you!

Reply
Noah Kagan
February 22, 2017 at 4:15 pm

Hell yea Lara. Kick b00ty

Reply
Chris
February 22, 2017 at 10:04 am

Wow! Great stuff Noah!

Reply
Sam
February 22, 2017 at 9:29 am

Congrats Noah, great to read of your success and lessons learnt.

One of my own problems is having to many competing goals - I'm starting to notice I'm not doing as good as I could in each area because I'm simply not focusing 100% on one thing. What would your advice be on this?

Thanks,

Sam

Reply
Romeo
February 22, 2017 at 9:19 am

Great f*cking post, Noah! Loved the video, too!

Reply
Gina Hemmings
February 22, 2017 at 9:08 am

I'm in the middle of writing a business plan and these ideas are immensely helpful. I appreciate that you share your knowledge with anyone that's willing to listen. You're a virtual mentor. Thank you.

Reply
Jay
February 22, 2017 at 8:56 am

Hi! Helpful article that gave me lots of tips & knows I didn´t know before.
Just a tip: It is "a 6 figure business" and not "an 6 figure business"
Hope I could help:)

Reply
Winum
February 22, 2017 at 8:53 am

Thank you for creating this vid Noah!

Reply
Sam Stevens
February 22, 2017 at 8:34 am

Great post! Thanks for sharing the details with aspiring entrepreneurs like me. I have created an app for short stories with a recurring revenue model and so far have 88 subscribers in 3 months paying on an average of $8-10 a month. Retention, as you mentioned is a big problem. However I am keen to scale but its challenging without a big marketing budget.

Reply
Alex
March 10, 2017 at 10:47 am

Sam, can you post your app? I would love to check it out.

Reply
Pol
February 22, 2017 at 8:14 am

Thank You Noah! Tons of useful stuff as always. I'll keep reading 😉

Reply