If I&rsquo;ve learned anything about working in SaaS, it&rsquo;s that creating a <a href="https://www.forbes.com/sites/theyec/2020/05/19/10-creative-ways-to-find-new-revenue-streams-for-your-business/?sh=492f81847d92">new revenue stream</a> is like hitting the jackpot. So long as a channel makes more money than it costs to operate, people will get excited about it. And so many companies have taken this approach, acquiring startups, building new products, and even licensing some of their features to add more branches to their money tree. But one revenue channel has become particularly fashionable in tech: partnerships.

I recently launched a new partnerships-related revenue channel, so I figured I&rsquo;d share some lessons learned. Although these tips are more specific to partner portals, they are still a valuable review for anyone about to set a new revenue channel in motion. But first, I&rsquo;ll dive into why you would want to introduce a new revenue channel and what typical partnership revenue channels look like.

<h2>Why introduce a new revenue channel?</h2>
You can probably guess that the biggest rationale for introducing a new revenue channel is to increase revenue. While that&rsquo;s true, companies can also benefit from increased brand awareness and legitimacy. Not only does this <a href="https://www.pipedrive.com/en/blog/channel-sales">expand your TAM</a>, it also boosts revenue diversification, <a href="https://www.headway.io/blog/5-strategies-to-find-new-revenue-streams-for-your-business">improving your financial stability</a>. And with more people knowing about and buying your products, it puts you in an excellent spot to sell your business or raise higher rounds.

Plus, new revenue channels force change internally. Finance teams have to <a href="https://www.freshbooks.com/hub/startup/increase-revenue">review pricing strategies</a> more often to make the new revenue channel sustainable. Analytics teams will have to collect and interpret the data they&rsquo;re getting from the new revenue channel. Finally, with potentially extra time on their hands, sales teams will have an opportunity to reevaluate their GTM strategy and play to their strengths. These are all positives if you ask me.

<h2>The partnerships revenue channel(s)</h2>
As we&rsquo;ve discussed before, <a href="https://boringstartupstuff.com/newsletter/strategic-partnerships-for-startups">strategic partnerships</a> have many benefits, but most importantly, in this context, they add revenue. Of course, that doesn&rsquo;t mean cash comes rolling in the first time you talk to a partner. It takes time and effort to build relationships, educate partners, and gain their trust before they even consider sending you a referral. But with the right hires, you&rsquo;ll eventually start expanding your partner program faster than a small team can keep up with.

So what happens when your revenue channel gets too gnarly to manage? At that point, you need what I would call a &ldquo;sub&rdquo; revenue channel, one that&rsquo;s more automated and streamlined. Partner marketers and partner managers are constantly generating new partner leads and converting those leads into full-on partners. But what about the current partners? How will you keep reminding them to submit deals?

At a certain point, it&rsquo;s unsustainable to have one-on-one meetings with every partner. You need them to be able to self-serve. You need them to generate opportunities for you overnight. In partnerships, this usually equates to a portal, a platform where partners can learn about your use cases, get certified, request co-marketing activity, and register deals. In this way, your partnership engine is continuously running.
<h2>7 tips if you&rsquo;re launching a new revenue channel</h2>
No matter if you&rsquo;re launching a partner portal or your own creative new income-generating stream, it&rsquo;s essential to keep these pointers in mind:
<h3>1. Know if it&rsquo;s feasible with the resources you have</h3>
This might be a &ldquo;duh&rdquo; thing, but really, take a moment to think through the budget and time it&rsquo;ll take to bring this new channel to life. You&rsquo;ll need at least one person to own the whole strategy and execution, and you might need some software to get started too, but think broader than that.

For example, to implement a partner portal, you&rsquo;ll need to evaluate, decide on, and then buy a PRM. But beyond that, you&rsquo;ll need someone to gather requirements for, configure, and test that PRM. You&rsquo;ll need a Salesforce admin to set up the integration. You&rsquo;ll want partner manager input on functionality. You&rsquo;ll need someone to measure KPIs and fix maintenance issues. If you end up creating courses or other learning materials, you&rsquo;ll likely need assistance from product marketing or even engineering. Plus, you&rsquo;ll want marketing teams to help you publicize the portal (this might cost money). As you can see, there are a lot of moving pieces, even for what is more of a &ldquo;sub&rdquo; revenue channel.
<h3>2. Design with your audience(s) in mind</h3>
To get your revenue channel to rake in the dough, you need to make it as easy as possible to do so. If you&rsquo;ve ever been a fan of flywheel methodology, you know about &ldquo;reducing friction.&rdquo; Essentially, this boils down to removing as many obstacles as possible for customers trying to buy a product. The same goes for new revenue channels. While someone may not be buying something directly, the concept still applies.

If we think about this in terms of a partner portal, this means catering to partner needs. What will they want to get out of the portal? How can you make it as easy as possible to:

<ul>
<li style="font-weight: 400;" aria-level="1">Register deals</li>
<li style="font-weight: 400;" aria-level="1">Learn about what your company does</li>
<li style="font-weight: 400;" aria-level="1">Find marketing materials</li>
<li style="font-weight: 400;" aria-level="1">Understand the requirements and benefits of moving up in tier</li>
</ul>

Drilling down deeper, you want to provide a fantastic user experience. Take the first bullet, for instance. You don&rsquo;t want it to take 20 steps to register a deal. Instead, you want to obtain the minimum information a partner manager and sales director need to schedule a meeting. Put some thought into this before you get started because it will literally pay off in the long run.
<h3>3. Explain how to use it</h3>
This might sound silly after you&rsquo;ve already thought about number 2. But even if you have the most intuitive new channel, people will still want a way to get their bearings. If they are an existing customer, what will happen to their contract if they buy your new product? If a partner logs into your partner portal how will they know what to do?

There are multiple ways to solve for these issues. After all, PLG companies have been leading the way in the realm of self-serve for years. So take a page out of their book. Create guides, FAQ pages, communities, instructional videos, or welcome sequence emails to quickly get people up to speed. For our partner portal, we created a video that appears first-thing on the homepage explaining what various modules do and how partners should use them. We also uploaded this video and the corresponding slides to the library for reference later.

Hint: give people a call to action. At the end of your instructions, make sure to give people something to do as a first step. This will turn out to be a good way to measure engagement later.
<h3>4. Don&rsquo;t forget about nuts and bolts</h3>
If you&rsquo;re the one in charge of putting a new revenue channel into practice, at some points you&rsquo;ll probably lose the forest for the trees. On any high-stakes project, it&rsquo;s easy to get caught up in the details. You have to hit a certain deadline, and you&rsquo;re doing whatever it takes to get there. Unfortunately, that makes it really easy to forget about what will happen once it goes live. So leave some time to think about:

<ul>
<li style="font-weight: 400;" aria-level="1">Process - What happens when new sales or potential come in? Who will approve or reject them? How will they get assigned to a partner manager? What, if any, interaction will they have with partner managers? Who is responsible for answering support questions? All these questions should be at least relatively ironed out before your launch, else you&rsquo;ll have a mess to deal with when it&rsquo;s in production.</li>
<li style="font-weight: 400;" aria-level="1">Legal - Will customers or partners have to sign agreements? What if they make redlines? Think about how and when you&rsquo;ll need to interact with your GC and how to limit the time it takes to get these documents signed.</li>
<li style="font-weight: 400;" aria-level="1">Incentives - What will make people <a href="https://blog.hubspot.com/sales/channel-sales">want to keep using this channel</a>? If you&rsquo;re building a partner portal, consider adding partner tiers with enticing benefits or sending swag boxes to partners who have registered x number of deals.</li>
<li style="font-weight: 400;" aria-level="1">Pricing adjustments - Not as applicable to a partner portal, but if you&rsquo;re introducing a new feature or product, you&rsquo;ll likely have to make (and then communicate) changes to your pricing structure.</li>
<li style="font-weight: 400;" aria-level="1">Unexpected challenges - For us, we didn&rsquo;t realize that LinkedIn doesn&rsquo;t have a badging system for licenses and certifications until the last minute. To launch the certifications portion of the portal, we had to find and pay for a whole separate credentialing vendor.</li>
</ul>
<h3>5. Do a beta launch</h3>
If there&rsquo;s a way to do a soft launch, I highly suggest it. First, it will expose your bugs. When you&rsquo;re looking at something long enough, your eyes miss a lot. Second, it will show you who your most loyal customers and partners are. The people who give you good feedback now will probably be good candidates to bounce ideas off of later. Third, a beta launch helps you determine what KPIs you can and should track. This will also help you set clearer, more reasonable targets for your go-live. And honestly, a beta launch gets people hyped and makes them feel like one of the lucky chosen ones who get to participate.
<h3>6. Have your marketing plan ready</h3>
Although sometimes revenue channels can go viral (think about D2C companies who partner with a really famous influencer affiliate), most of the time, it won&rsquo;t market itself. You need to put in at least some work to make sure (1) people know about your new program, and (2) they actually go use it or buy from it. So, how do you do that?&nbsp;

Well, first, figure out <a href="https://www.inc.com/guides/find-new-customers.html">where these new customers</a> or partners hang out. What social channels are they on? Maybe they listen to a certain set of industry podcasts. Perhaps there&rsquo;s a professional community where you can place an ad. More generally, you could write announcement blog posts, a press release, or even hosting a webinar about this new channel (or all three).

Think also about what&rsquo;s already in the marketing pipeline. Does your company have a popular newsletter? Can you vie for a special section? Make a note of other big announcements coming down the pike and try to schedule your release around that. You don&rsquo;t want any current marketing to overshadow it. Lastly, set an engagement strategy. Get creative about getting customers or partners back to your platform, whether it&rsquo;s with incentives or FOMO.
<h3>7. Continue asking for feedback</h3>
The cool part about revenue channels is that they aren&rsquo;t a one-and-done thing. You have the chance to improve them as time goes on. And who is best primed to give you constructive criticism? Your partners and customers. So ask them for it! Send short, periodic satisfaction surveys with questions that will give you tangible feedback to work from. Think of other ways to weave this in, too. For example, we asked partner managers to bring up the portal in meetings to get partners&rsquo; take on it. If you&rsquo;re not getting enough responses, try tacking on a gift card to sweeten the deal.

So long as a channel makes more money than it costs to operate, people will get excited about it.

7 tips for introducing a new revenue channel

Creating a new revenue stream is like hitting the jackpot. So long as a channel makes more money than it costs to operate, people will get excited about it.

I have spoken to many founders about what it is like starting a company. When listening to founders talk about their early days, they give off a romantic sense of fearlessness, coupled with a clear sense of direction, followed ultimately by success (this is what we call <a href="https://en.wikipedia.org/wiki/Selection_bias">selection bias</a>). Even when they inevitably launch into anecdotes about late nights, server outages, and customer horror stories, it never seems like they questioned whether each obstacle was the correct one to be addressed at that point in time. But in my experience, this isn&rsquo;t even close to being true.
Now, two months into my own founder journey, I&rsquo;m learning that these David-vs-Goliath stories skip over the daily process of re-evaluating what is important, the sure-things washed away with a single email, the sheer amount of luck involved in starting a company, the amazing (and not so amazing) people willing to help, and the constant state of not knowing which direction the finish line is in &ndash; or if there even is one.
I am not (yet) a successful founder, so take what I say with a grain of salt. However, there are a few lessons I stumbled upon that I want to share:
&nbsp;
Two things happen the moment you quit your day job to go full time on your founder journey:

1. Your LinkedIn inbox gets flooded with spam from every service provider you could imagine (no, I do not have time this week to hop on a quick intro call) and,

2. The sudden waterfall of to-dos starts pouring over your head.
&nbsp;
While I can&rsquo;t help you avoid the LinkedIn spam, I found a few mental models and practices to deal with number 2 so you can avoid feeling like Sisyphus.&nbsp;
<ul>
<li style="font-weight: 400;" aria-level="1">Sit and think as often as possible - Preferably in a quiet place without a toddler. Eventually, you won&rsquo;t have time during your day to let your mind wander about ideas. So make space for this type of thinking, as it is likely what got you to this point in the first place.</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Product reflection - Keep asking why people will care. Don&rsquo;t buy into your own marketing or sales pitch as the truth. Every time you pitch your product, evaluate your listeners' reactions. Are they falling asleep as you start speaking, or do their eyes light up as you lay out your idea?</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Self-reflection - Keep asking what your weaknesses are and keep looking for bottlenecks in your team's process. Find where you are the limiting factor and correct the issue. This usually involves abdicating work to another team member.</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Timebox everything - Otherwise, you don&rsquo;t get the right things done. Each week, I sit down and block out deep work periods to tackle the 2-3 largest items. Ironically, the 2-3 most pressing items change every single day, so adjust accordingly.</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Ask for help on all things out of your expertise &ndash; This ties into self-reflection but goes a step further to seek outward help where necessary. For me, this was bookkeeping and marketing. There are other things I am not great at, but these two were obvious for me to start.</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Listen selectively &ndash; Many people will start offering advice to you simply because you have the title &ldquo;Founder&rdquo; in your LinkedIn profile. Listen to them, ask them about their experiences, but be mindful of the context.&nbsp;&nbsp;</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Sourcing candidates is harder than ever - And I&rsquo;m saying this as the founder of a hiring and recruiting tech company! Get your messaging right. People want to know who is soliciting them and why they should care. Keep asking yourself why people will care about what you are doing &ndash; and be mindful that most people won&rsquo;t care initially.</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Most importantly, put trust in your first hires. But don&rsquo;t do this blindly, or you will set them up for failure. Ensure you have given them the tools to run with things and execute.</li>
</ul>
&nbsp;
Lastly, here are a few things I am still trying to remind myself to do as I move deeper into my founder journey:

<ul>
<li style="font-weight: 400;" aria-level="1">Constantly ask whether I&rsquo;ve got the right data - Simple things like Google Analytics, Stripe events, click events in your app, etc. are necessary to make the right decisions. Data-oriented decisions are the key to success; incorrectly capturing data and making subsequent poor decisions lead to failure. Set your <a href="https://www.insightpartners.com/blog/measuring-your-product-led-growth-strategy/">metric north stars</a> &ndash; monitor and re-evaluate periodically to make sure you are still aiming in the right direction.</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Talk to people constantly - Practice your elevator pitch (drop the stealth-mode nonsense). Get in reps by bringing it up in normal daily conversations. Seek brevity and precision.</li>
</ul>

In two months <a href="https://chatkick.com?utm_source=boringstartupstuff" rel="follow noopener" target="_blank">Chatkick&rsquo;s</a> elevator pitch has gone from:
<blockquote>
&ldquo;Chatkick helps teams scale their interview process by letting teams to record, transcribe, and analyze their candidate screenings. With an interactive video interview platform, hiring managers can be sure every candidate screening is being done consistently. Chatkick offers distributed teams a way to asynchronously review and collaborate on candidate feedback.&rdquo;
</blockquote>
To:&nbsp;
<blockquote>
&ldquo;Interview management for distributed teams.&rdquo;
</blockquote>

It is not that founder stories fail to mention all of these things, it is that these things tend to appear in everyone&rsquo;s narrative in slightly different ways. While the first few weeks and months of a startup are exhausting, it is always a good reminder that Rome wasn&rsquo;t built in a day...although I am damn sure they were laying bricks every single day.

I am not (yet) a successful founder, so take what I say with a grain of salt. However, there are a few lessons I want to share.

So You Want to Be a Founder?

Now, two months into my own founder journey, I’m learning that David-vs-Goliath stories skip over the daily process of re-evaluating what is important, the sure-things washed away with a single email, the sheer amount of luck involved in starting a company, the amazing (and not so amazing) people willing to help, and the constant state of not knowing which direction the finish line is in – or if there even is one.

Pricing for a SaaS business is hard. Really hard.

No matter what stage your company is at, pricing will always be a challenge. That&rsquo;s because it&rsquo;s part mental game, part math game, part trial and error. The key to growing revenue responsibly is to keep iterating. Think about a SaaS product you&rsquo;ve used for years一it probably wouldn&rsquo;t be around today if they hadn&rsquo;t switched up their pricing from time to time (as annoying as it might&rsquo;ve been as a customer). In each of those instances, that company came up with a new pricing strategy by weighing new features against COGS, against customer satisfaction and perception, against inflation, against their competition.

Despite the fact that pricing is a bit of a moving goalpost, we hope to provide a consistent, solid framework for how to think about pricing at an early-stage company.
<h2>Structural aspects of pricing to consider</h2>
Pricing is about a whole lot more than nailing down an amount someone will pay for something. You have to think about pricing holistically, from a product, value, timing, volume, and gross margins perspective. Here are a few questions you&rsquo;ll need to ask yourself when you&rsquo;re thinking about pricing for the first time or reassess your current structure:

<ul>
<li style="font-weight: 400;" aria-level="1">Will you have annual or monthly contracts? Monthly contracts might be more appealing for customers with tighter budgets that aren&rsquo;t sure if they like your product yet. On the other hand, annual contracts give you more peace of mind with <a href="https://www.priceintelligently.com/blog/bid/194370/boosting-mrr-annual-vs-monthly-subscriptions-in-your-saas-pricing-strategy">cash upfront and the security of a year-long commitment</a>. Find out whether there are accounting or volume-related advantages to each. You might end up offering both annual and monthly contracts, giving people a price break if they pick the longer-term option. Whichever way you go, just make sure you have an auto-renew feature.&nbsp;</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Will you charge based on value or gross margins? Cost-plus pricing isn&rsquo;t super advantageous to SaaS companies that don&rsquo;t offer a physical product and may not yet have product-market fit. That said, it probably would end up making your product cheaper, helping you get an edge over the competition when you&rsquo;re just starting out.</li>
</ul>

<ul>
<li style="font-weight: 400;" aria-level="1">Will your contracts be a flat fee, priced on consumption, or both? Right now, consumption-based pricing is on the up and up. According to OpenView Ventures, <a href="https://openviewpartners.com/blog/usage-based-pricing-playbook-2/">45% of expansion stage SaaS companies</a> have a usage-based pricing model. But remember, flat fees and consumption-based pricing don&rsquo;t have to be mutually exclusive. For example, you might charge a flat fee to demonstrate the value of using your platform and then tack on extra fees for overages. A very common practice is turning this combo into <a href="https://www.cobloom.com/blog/saas-pricing-models">a 3-part tiered structure</a>. This strategy often leads to greater contract values but can be tricky to keep track of as you scale. If you go this route, make sure you have a plan in place for collecting overage data.</li>
</ul>
 
<ul>
<li aria-level="1">Would dynamic pricing make sense for your product? Are there certain times of the year where the demand for your product skyrockets? <a href="https://blog.hubspot.com/sales/pricing-strategy">Dynamic pricing</a> may not be as applicable to SaaS companies, but it&rsquo;s worth considering if it applies to you. You might as well capitalize on drastic shifts in demand.</li>
</ul>
 
<ul>
<li aria-level="1">Can you get more customers in the door with a freemium strategy? If your company is in a crowded space, and you want to get a leg up on customer acquisition, <a href="https://boringstartupstuff.com/newsletter/when-freemium-fits">freemium might be for you</a>. Freemium is a smart choice if you have a low marketing budget and low COGS. Freemium allows users to try before buying, so if they have a fantastic experience and know that even more great features are behind a paywall, you&rsquo;ll likely have yourself a loyal customer.&nbsp;</li>
</ul>
<h2>Five tenets of pricing</h2>
Leading VCs have published a lot of articles and ebooks on pricing. After reviewing several, we found several tenets come up over and over again. So let&rsquo;s dive into what each of these five principles means before providing a real-life example of how each element works in practice. For this exercise, we asked how the founder of a growing SaaS startup in the HR space applied each of these doctrines to his pricing strategy.
<h3>1. Pricing will always be a WIP</h3>
It&rsquo;s worth belaboring this point: pricing is never &ldquo;done.&rdquo; As <a href="https://www.bvp.com/atlas/the-four-ironclad-laws-of-b2b-saas-pricing-that-can-boost-your-revenue-up-to-32">Bessemer Ventures says</a>, &ldquo;too many companies treat pricing as a point-in-time exercise,&rdquo; which seems foolish, given that the market is always changing, new competitors emerge, and customers&rsquo; budgets evolve. Not to mention, your company goals change, too. So revisiting pricing regularly一twice a year or more一is a practice you should adopt right away. It gets you in the iterative state of mind and makes you pay closer attention to the way customers&rsquo; needs and willingness to pay have transformed.
<h3>Real-life example</h3>
&ldquo;I recently purchased another smaller SaaS company to merge with my current startup. Prior to the acquisition, the original founder modified pricing several hundred times. While he got some users in the door (60), he was bending over backward for it. And only 4 or 5 of those customers were on annual plans, so it was really hard for him to profit from the ridiculously low prices customers were favoring.

So the first thing I did was change it up. I instituted a freemium model because I wanted that steady stream of new prospects to demonstrate our value. And I elevated the base price slightly to show that we still provided the same quality as others in the space but were still 50% of the annualized cost per user of the next-best competitor. Based on the experience of the previous owner, I know that won&rsquo;t be sustainable forever though. I don&rsquo;t know how this new product will fit into our value prop and what customers&rsquo; willingness to pay for it is, so I&rsquo;ve introduced a new policy of revisiting our pricing quarterly.&rdquo;
<h3>2. Use the data you have</h3>
When you&rsquo;re creating a pricing structure, the logical thing to do is to look at your competitors&rsquo;. But what if you don&rsquo;t have any competition yet? Startups are pioneering new industries, making it extremely difficult to know where to start. In fact, roughly <a href="https://get.fuelbymckinsey.com/article/the-6-rules-of-setting-price-for-saas-offerings/">1 in 5 SaaS companies admit that they set their pricing by guessing</a> what the right price might be. Often, this makes for a great excuse to put off pricing discussions.&nbsp;

Don&rsquo;t fall into that trap. Even if no companies are doing exactly what you&rsquo;re doing, there will definitely be benchmarks in other spheres. Study companies in a tangential space that serve a similar customer base. Or, if your product will be one of many in an enterprise&rsquo;s tech stack, figure out how much the other products cost relative to yours. Take the time to do your research.
<h3>Real-life example</h3>
&ldquo;There aren&rsquo;t a ton of direct competitors, but that doesn&rsquo;t mean I haven&rsquo;t tried to find relevant data. I&rsquo;ve looked at the pricing structures of employee recognition and rewards software, employee engagement platforms, recruiting AI companies, and even applicant tracking systems. They are all serving the same customer base we want to penetrate so looking at how they price was really helpful. Just like those companies, we wanted to offer a clean entry-level price, structured in a way so that teams could find an extreme amount of value without feeling like they were ripped off.&rdquo;
<h3>3. Pay attention to feedback</h3>
When you&rsquo;re small, everyone on your team is collecting feedback about pricing一from the customer-facing people to the product people. And <a href="https://sixteenventures.com/saas-pricing-strategy">customer feedback matters</a>. After all, they&rsquo;re the ones who are going to be refusing to buy your product or evangelizing it. If you&rsquo;re the founder, people might feel more comfortable giving you their candid opinions, so use customer interviews to your advantage. Next, establish a way of collating and talking about all this input and how it can translate to changes in your pricing framework. This could be a monthly meeting, a working google doc, or part of your offsites. Designate a point person to organize the feedback and schedule time to keep pricing conversations going to prevent this dialogue from getting lost in the shuffle.
<h3>Real-life example</h3>
&ldquo;Talking to customers and figuring out how they're using the product was huge for us. We realized there was an issue with per-user pricing: some users get way more value from our products than others. This is because recruiters use &ldquo;aliasing&rdquo; where they do their work on behalf of hiring managers. So, even if just a few recruiters were using our tool, they had to buy multiple seats. And the hiring managers who were being aliased really didn&rsquo;t use the tool at all. So that&rsquo;s when we decided to totally scrap per-user licensing.&rdquo;
<h3>4. Packaging matters</h3>
Not all people are bargain buyers一they can be swayed by performance, packaging, and other perks. Think about what else you can offer, like a loyalty or referral program, outstanding customer service, specific product features, or access to a certain network of industry leaders. Also keep in mind that not all customers have the same objectives nor the same budgets. <a href="https://www.priceintelligently.com/hubfs/Price-Intelligently-SaaS-Pricing-Strategy.pdf">Segment your customers into personas</a> to pinpoint their buying power, top use cases, and perceived value more accurately. Then, incorporate these differences into your pricing model to give customers more flexibility. A classic example of this is <a href="https://www.pwc.com/mt/en/publications/assets/pwc-the-future-of-software-pricing-excellence-saas-pricing.pdf">offering a software package with enterprise, small business, and personal editions</a>. As you do more research, you might brainstorm ways to bundle your products in a way that encourages upsells or create more compelling offers and discounts.
<h3>Real-life example</h3>
&ldquo;Because of the aliasing problem, we completely shifted our pricing strategy. Instead of a per-user pricing model, we came up with three unique tiers based on our customer segments. Our base plan has 3 seats at $99. This is an affordable price for some of the mid-market companies we&rsquo;ve been targeting. The next level up has unlimited seats, but has a cap on the messages recruiters can send. It&rsquo;s a flat $399 platform fee plus volume buckets starting at $5 per month. The enterprise model (the highest tier) also has unlimited seats but has to talk to sales to negotiate a deal for the volume piece of the puzzle. Based on how this goes, we&rsquo;ll also be thinking about the integrations we offer (custom vs. basic) and other ways to switch up our pricing based on features coming down the pike.&rdquo;
<h3>5. Measure your success&nbsp;</h3>
You won&rsquo;t know if the pricing and packaging you&rsquo;ve decided on are working unless you measure it. But like everything in pricing, measurement is a bit nebulous. Try setting KPIs based on <a href="https://medium.com/swlh/5-signs-your-prices-are-too-low-7e8bb218a322">customer pushback</a> and the number of inquiries, leads, and conversions you get from different versions of your pricing page, email campaigns, and sales scripts. <a href="https://www.pragmaticinstitute.com/resources/articles/product/how-to-price-saas-products/">Use A/B tests to gauge customer behavior</a> and continue refining until you see patterns in each customer segment. Of course, keep the bigger picture in mind. One pricing strategy might get really good reception and seem like a wonderful idea until you realize you&rsquo;re actually losing money.
<h3>Real-life example</h3>
&ldquo;My rule of thumb is that if you generate 50 inbound leads and 45 of them convert on the pricing published on your website一no questions asked一your pricing is too low. If people are inputting their credit card information with no hesitation at all, you&rsquo;ve way undershot. It&rsquo;s time to increase your prices. Keep track of what people are responding to and what they&rsquo;re not and continue trial and error-ing until you get the response you want. At the same time, keep your unit economics in mind. I once read that your <a href="https://get.fuelbymckinsey.com/article/the-6-rules-of-setting-price-for-saas-offerings/">Annual Contract Value (ACV) divided by your Customer Acquisition Cost (CAC) should be greater than 1</a> (ACV/CAC &gt; 1).&rdquo;
<h2>Conclusion</h2>
Pricing is a delicate balance with so many variables. And it&rsquo;s even tougher for small startups that don&rsquo;t have much data to go on nor resources to execute. But, of course, that doesn&rsquo;t mean you should just give up. Instead, you should think about pricing as an ever-evolving project bearing these five tenets in mind.

Pricing is a delicate balance, and it’s even tougher for small startups that don’t have much data to go on nor resources to execute.

Strategic Pricing for SaaS Startups

Today&rsquo;s hiring climate is uniquely hard for young startups. <a href="https://www.economist.com/business/2020/12/09/companies-have-raised-more-capital-in-2020-than-ever-before">Incumbent growth companies raising massive amounts of money</a>, <a href="https://www.bls.gov/charts/employment-situation/civilian-labor-force-participation-rate.htm">record low labor participation</a>, <a href="https://www.cnbc.com/2020/07/28/remote-work-burnout-is-growing-as-coronavirus-pandemic-stretches-on.html">digital burnout</a>, and more are contributing to an obstacle course of hurdles when sourcing talent.&nbsp;

Crafting the right outreach can make all the difference. Personalized cold messaging combined with a concise process can be the secret weapon for a startup in the face of current hiring challenges. Let&rsquo;s take a quick look at what strong candidate outreach looks like.

<h2>Messaging Prospects</h2>
For new founders, writing cold emails can be a little scary. Here are a few pointers to structure clear, powerful candidate outreach campaigns:

<ul>
<li aria-level="1">Use (personal) email, not LinkedIn messages - While email has it&rsquo;s challenges, LinkedIn can be incredibly limiting when attempting to scale a recruiting process. Additionally, many highly skilled candidates do not use or monitor LinkedIn (with the exception of Sales &amp; Marketing candidates).</li>
</ul>
<ul>
<ul>
<li style="font-weight: 400;" aria-level="1">Subject lines matter - Short and sweet wins the day. Add the candidate's first name for an even better open rate.&nbsp;&nbsp;</li>
<li style="font-weight: 400;" aria-level="1">Tell them how you found them - Be honest here. It gives them some context as to what you may &ndash; or may not&nbsp;&ndash; already know about their background.</li>
</ul>
</ul>
<ul>
<li aria-level="1">Spark some curiosity - This could include a wild backstory of how you ended up founding or working at your current startup. Or perhaps it's a few crazy facts about some of your team members. Anything to make them read onward helps!</li>
</ul>
<ul>
<li style="font-weight: 400;" aria-level="1">Establish your credibility - Qualified candidates receive a lot of messages. But most of these messages have no relevant information and are quickly dismissed. Talk about who you are and why working with you would be a great opportunity upfront. Also try throwing in current revenue or customer traction metrics, early fundraising numbers, a sampling of your strong team members, or the idea behind your groundbreaking new product. Even better, ask the prospect about a common connection if you have one!</li>
<li style="font-weight: 400;" aria-level="1">Make a call to action - Keep your CTA simple. In practice, people are rarely willing to schedule a call immediately. Offer to send over more information on the role, the company, or product. If someone is even the slightest bit curious about the position, they are much more likely to accept a proposition for information than a request for carving out more time.</li>
<li style="font-weight: 400;" aria-level="1">Money is in the follow-up - As the old sales expression goes, the money is in the follow-up. Don&rsquo;t let a single unanswered email get you down. Schedule follow-ups with your prospects easily with tools like <a href="https://trinsly.com?utm_source=bss">Trinsly</a>.</li>
<li style="font-weight: 400;" aria-level="1">Bonus tip: If you created your email address within the last month, use an email warming service for a few weeks (we like <a href="https://www.warmupinbox.com/">Warmup Inbox</a>) to ensure your messages stay out of the spam folder.</li>
</ul>

<h2>Should you use external recruiters?</h2>
There is no right or wrong answer here. Recruiters may be the answer for niche roles where your network or sourcing capabilities may not have reach. Most recruiters use the same methodologies described above &ndash; don&rsquo;t think there is some secret sauce behind their hefty fees. Of course, if you are time-constrained and have the money to spend, a recruiter can be a godsend. If you choose to go this route, make sure your recruiting team is crystal clear on how to position and deliver the message about the role, company, and founder(s).

<h2>Some final words on recruiting for startups</h2>
Make sure you have a process in place before you start prospecting. The worst-case scenario is bringing candidates into a process with <a href="https://www.bbc.com/worklife/article/20210727-the-rise-of-never-ending-job-interviews">no clear ending</a>.&nbsp;&nbsp;

Make sure your team knows the core competencies you are hiring for. In other words, have an explicit set of qualities to define the ideal candidate. Competencies are not skills per se, rather they are more qualitative characteristics of a candidate (e.g. empathetic, analytical, resourceful).

Know your compensation package ahead of time. This question will arise, so you need to be prepared to answer on the spot. Failure to do so will result in candidates leaving the process or being picked up by competitors.&nbsp;

Lastly, move fast. This market is challenging, but as a startup, you have one main advantage: the ability to move fast.

Personalized cold messages combined with a concise process can be the secret weapon for a startup in the face of current hiring challenges.

Early Stage Recruiting

Today’s hiring climate is uniquely hard for young startups. Incumbent growth companies raising massive amounts of money, record low labor participation, digital burnout, and more are contributing to an obstacle course of hurdles when sourcing talent.

If you work at a tech startup, you&rsquo;ve probably read an announcement about a new strategic partnership, been invited to a webinar showcasing a new integration, or been asked to join the partner program of a big player in your industry. It&rsquo;s getting harder and harder to avoid these emails as the SaaS scene continues to explode with new partnerships and alliances. What&rsquo;s all the hype about?

Strategic partnerships have the power to skyrocket your startup&rsquo;s growth. Being backed by a leader in your space instantly elevates your credibility and gets your name out there far faster than even the best marketing teams could. And strategic partnerships are good for the other company, too, infusing fresh perspectives and new customers into their product teams and sales funnel. In fact, <a href="https://breezy.io/blog/strategic-partnership-stats/">57% of companies are using partnerships to acquire new customers</a>, and 44% form alliances to get new insights and innovation.

As they say, &ldquo;teamwork makes the dream work.&rdquo; That is, of course, if everyone&rsquo;s on the same page. In this piece, we talk about what strategic partnerships are, the advantages they bring to startups, and how partnership teams reap those benefits.&nbsp;
<h2>What are strategic partnerships?</h2>
Before we go any further, it&rsquo;s important to understand what a strategic partnership is. At its core, a strategic partnership is one in which two organizations form a relationship that is <a href="https://medium.com/ceoquest/how-to-form-strategic-partnerships-without-getting-crushed-d28adfe2b664">mutually beneficial and transformative, based on each company&rsquo;s strengths</a>. For startups, partnering with a market leader can mean greater reach and notoriety. Catching the attention of a household brand, a prominent consulting firm, or a renowned agency can skyrocket your name recognition.

For a well-known company, partnering with a startup shows customers and prospects that they are interested in innovating. Working with a startup can add to their current suite of integrations or services that they&rsquo;ve not had the time, expertise, or resources to build in-house. Beyond that, building a strategic partnership might one day turn into a successful acquisition for both parties. The key is finding the right fit and coming up with a plan to ensure the strategic partnership is worth it to both groups.
<h2>What are the benefits of strategic partnerships for startups?</h2>
We&rsquo;ve touched on a few reasons why startups should consider strategic partnerships, but here are some explicit advantages:&nbsp;
 
<ul>
<li aria-level="1">Clout &amp; Marketing - By associating your company with a larger company&rsquo;s already-established brand can provide priceless legitimacy and trustworthiness among your prospects and customers. This also ties into marketing, shining a long-overdue light on the amazing things your startup is doing, and sending impressions, PR, and engagement through the roof. Over the long term, a strategic partnership validates your value proposition and reinforces your competitiveness in the market.&nbsp;</li>
</ul>
 
<ul>
<li aria-level="1">Sales Network - One of the most compelling reasons to form strong strategic partnerships is because you&rsquo;ll gain access to their customer base. These days, there are tons of customer and prospect overlap tools (<a href="https://partnered.com/">Partnered</a>, <a href="https://www.crossbeam.com/">Crossbeam</a>, <a href="https://reveal.co/">Reveal</a>) that surface mutual opportunities for both parties to influence deals. This can be <a href="https://learn.marsdd.com/article/partnerships-as-a-market-development-strategy-for-startups/">especially helpful if you are in a niche market</a> that&rsquo;s tough to penetrate. Eventually, your strategic partner may even consider becoming a reseller of your product.</li>
</ul>
 
<ul>
<li aria-level="1">Round out your expertise - Startups don&rsquo;t always have access to the resources they need to take their product and go-to-market efforts to the next level. Partnering with a bigger company can supply connections, technology expertise, project management and business process skills, and sales proficiency that you may not have had access to otherwise.&nbsp;</li>
</ul>
 
<ul>
<li aria-level="1">Product feedback - Your strategic partners will be showing off your product to their customers and prospects, giving you the opportunity to stress-test your product. Because they have a stake in how your startup performs and the value it provides to their customers, they&rsquo;ll likely offer overall <a href="https://review.firstround.com/What-to-Learn-from-This-Restaurant-Startup-That-Turned-Strong-Partnerships-into-a-Better-Product">guidance to scale up your product suite</a>. Just like customer service representatives or customer success managers would, they&rsquo;ll pass along feature requests, bugs, or other advice on how to differentiate your product from others they&rsquo;ve come across in the market.&nbsp;</li>
</ul>
<h2>What would someone on a strategic partnerships team do?</h2>
Before you institute a partnership team (or person), you need to know what their responsibilities and goals should be. Below, we outline several tasks that typically fall under this department&rsquo;s purview.
<h3>Research</h3>
Partnership leaders are always looking for new strategic partners. But knowing where to look isn&rsquo;t always easy or intuitive. Start by listing out and researching the behemoths in your category. You won&rsquo;t necessarily become partners with the big guns in the next few years, but getting an understanding of how their partner program works and who they are looking for can help you prep for pitching the smaller ones. Next, ask your customers what tools they use and the service providers they recommend and put them on your list. Then, start adding the names of people at those companies who are in sales or partnership roles. Look for people you know from school, previous jobs, accelerator programs, local businesses, or internships who might work in the space and could make intros for you.

Having a big list isn&rsquo;t a bad thing at the beginning, since you&rsquo;ll be whittling it down as you decide who to contact. The most important thing you should be looking for are companies with a gap where your product or service would fit perfectly. This gap should be causing enough problems for their go-to-market teams that they&rsquo;ll want to do something about it. Another point worth mentioning is that you want to approach partners <a href="https://www.startups.com/library/expert-advice/3-steps-you-can-take-to-build-great-strategic-partnerships">whose purpose and values line up with yours</a>. Without that alignment in place, things could go awry quickly.
<h3>Engage&nbsp;</h3>
Now comes the fun一and sometimes frustrating一part: contacting the people on your list. Before you do, you need to do a significant amount of stalking. Try to find several people at the company you&rsquo;re interested in partnering with and find out what they are interested in. Maybe they are publishing articles on Medium outside of work on exactly the topic you&rsquo;ve noted as a gap. Or maybe they have a mutual customer. Knowing these data points can set you apart and put a unique spin on your cold outreach.

You also need an airtight argument for why partnering with your startup makes sense. If it doesn&rsquo;t sound strategic and straightforward enough to you, it certainly won&rsquo;t be a no-brainer for the person receiving your email or LinkedIn message. Really emphasize what&rsquo;s in it for them and don&rsquo;t forget to play into their motivations around launching a new service line, better serving their customers, making more sales, or simply getting promoted. And remember, if you know someone who knows the person you&rsquo;re trying to reach, that&rsquo;s way better. A warm intro is almost always more secure and effective than a cold one.

Now is also the time to get creative. Don&rsquo;t be afraid to sign up for demos, attend webinars and ask questions in the Q&amp;A, leave comments on blog posts, go to industry event networking sessions, ask your customer to mention your name, send relevant articles to your contacts, and more. <a href="https://jproco.medium.com/how-startups-secure-valuable-partnerships-934717093838">You&rsquo;ll get a lot of nos</a>, but you never know what might be your way in.
<h3>Plan</h3>
Once a partner is serious about partnering with you, it&rsquo;s time to sign some papers. Many companies require you to sign a mutual NDA and a partnership agreement. At this point, you&rsquo;ll be really excited, but do not skip over the fine print. While it doesn&rsquo;t always happen, partnership deals can be very lopsided, so make sure you&rsquo;re getting what you need in the agreement before signing. Of course, many other agreements can be quite lucrative, allowing you to get money from referrals. In tech, this is typically 10% of the total ARR. After everything&rsquo;s signed, sealed, and delivered, it&rsquo;s time to plan.

Think hard about your <a href="https://www.startupgrind.com/blog/how-to-find-partners-for-your-startup/">short and long-term goals for this partnership</a> and the steps to get there. You don&rsquo;t need to come up with a 10-year plan this minute (in fact, shorter is probably better at first), but having these outcomes in mind is essential when reviewing with your new partner. Schedule a kickoff meeting to align on expectations, document mutual goals, create a roadmap with timelines, and decide on a first project. This project could be some sort of joint marketing, a mutual deal, or even a reselling strategy. Set up a recurring monthly meeting to make sure this project is moving in the right direction and everyone is pulling their weight. But bear in mind that a big partner usually has a lot more leverage than you do in this partnership. So whatever you do, make sure you are delivering on your terms and doing what you can to <a href="https://startupnation.com/grow-your-business/networking/tips-successful-startup-partnership/">help your partner achieve their goals</a>.&nbsp;
<h2>Measure your outcomes</h2>
Partnering with industry titans might mean unrealistic expectations or slow-moving activity. And your partnerships are only as good as the mutual benefits you create. Building partnerships takes far too much time and effort to get nothing in return. One way to get ahead of these issues is to <a href="https://www.valuer.ai/blog/how-to-create-a-successful-startup-partnership">set and monitor KPIs</a>.

Frame your KPIs based on the goals you set and break them down into monthly, quarterly, and annual metrics. Some examples might be the number and ARR of sourced and influenced deals, time to enable and certify partners, and the quality and quantity of leads as a result of co-marketing activities. Strategic partnerships come with risk, but can also have enormous upside. Doing what you can to mitigate these risks should be top of mind for anyone working in Partnerships一especially at a startup.

Becoming a strategic partner involves extensive research, continuous engagement, and diligent planning, but the rewards can really pay off in terms of thought leadership, marketing, and most importantly, sales.

Becoming a strategic partner involves extensive research, continuous engagement, and diligent planning, but the rewards can really pay off in terms of thought leadership, marketing, and most importantly, sales.

Strategic Partnerships for Startups

Insurance feels like a waste of money until the day you need it.
When founding or starting a company, most people only spend time thinking about shipping and selling product &mdash; they don't think about the day they are hit with a multi-million dollar lawsuit from a former employee.
"Hiscox reports that one in five small or medium-sized businesses will face employment charges with an <a href="https://www.inc.com/marissa-levin/5-things-employers-can-do-now-to-avoid-costly-and-harmful-employee-lawsuits.html?cid=search" rel="follow noopener" target="_blank">average cost to defend of $125,000</a>".<a href="https://www.inc.com/marissa-levin/5-things-employers-can-do-now-to-avoid-costly-and-harmful-employee-lawsuits.html?cid=search"></a>
The last position you want to end up in is paying<a href="https://www.quicksprout.com/what-i-learned-from-fighting-a-12-month-lawsuit/" rel="follow noopener" target="_blank"> $1250 per hour legal fees</a> because you didn't read the fine print. "[M]ake sure your policy is flexible enough to allow you to pick your own attorney. The insurance company&rsquo;s goal is to spend the least amount of money, which means the lawyers they appoint might not be your first pick."
You need insurance, but be wary of how you select coverage. Before we talk about where to grab insurance for your business, let's do a breakdown of the 8 types of insurance your startup likely needs:
<h5>Professional Liability or Comprehensive General Liability</h5>
<ul>
<li>What it does: This is the most basic form of business insurance and protects you against liability for product usage that causes physical damages (property, bodily).</li>
<li>When you need it: Day 1. Once your company becomes a legal entity, you will want to get some form of General Liability or Professional Liability</li>
<li>What amount of coverage to purchase: $2M total coverage is a standard starting point for a small business.</li>
<li>What it costs: starts at $500 per year</li>
</ul>
<h5>Errors &amp; Omissions (E&amp;O) Insurance</h5>
<ul>
<li>What it does: Protects against claims against you that are caused by system issues or work provided to customers that result in financial harm to your customer. Almost all major SaaS enterprise contracts will require some type of E&amp;O coverage</li>
<li>When you need it: The moment your platform or product is live and handling customer transactions or data. It is fine to wait until launch day to secure E&amp;O as this type of insurance policy can be set up to cover based on when the claim was made and not when the actual event happened.</li>
<li>What amount of coverage to purchase: This is heavily based on the revenue of your company, size of customer contracts, and sensitivity of processes or systems your product or service deals with. You should work with your agent to determine the right level of coverage.</li>
<li>What it costs: Starts at around $2000 per year</li>
</ul>
<h5>Workers Compensation Insurance</h5>
<ul>
<li>What it does: This will cover costs of employee injury on the job.</li>
<li>When you need it: For founders, the moment you decide to make your first hire you should get set up with Workers Comp Insurance. At a certain size, it is required by law to carry workers comp insurance (typically 3 or more employees, but in California you will need it for your first employee).</li>
<li>What amount of coverage to purchase: Start at $750k to $1M.</li>
<li>What it costs: $400-600 per employee per year</li>
</ul>
<h5>Property Insurance</h5>
<ul>
<li>What it does: Once your business has a physical presence or storefront anywhere you will want to investigate whether you need property insurance.</li>
<li>When you need it: Typically any company that has warehouses, owns office space, or in some cases, lease offices. Property insurance is occasionally required as part of the terms to lease or sublease a space. It is strongly encouraged if you own any physical properties (warehouses, land, offices) that you acquire Property insurance.</li>
<li>What amount of coverage to purchase: Coverage amount will vary based on lease terms or size and usage of space.</li>
<li>What it costs: Highly variable on the space you own or lease - speak with an agent.</li>
</ul>
<h5>Employment Practices Liability Insurance (EPLI)</h5>
<ul>
<li>What it does: Covers costs for defending against lawsuits or paying out settlements and judgments in employment-related cases.</li>
<li>When you need it: In conjunction to workers comp, EPLI can cover employment claims made against the business of several kinds (e.g. harassment, discrimination). Typically, businesses will get EPLI as they move into the &gt;10 employee range.</li>
<li>What amount of coverage to purchase: Around $1M</li>
<li>What it costs: $4500-10,000 per year</li>
</ul>
<h5>Cyber (Data Breach) insurance</h5>
<ul>
<li>What it does: This insurance will cover any costs that are incurred as a result of defending or investigating a data breach. If you get hacked, this will prevent your company from completely losing their shirts as a result of legal fees, customer clawbacks, operational expenses from investigations, etc.</li>
<li>When you need it: The second you start storing customer, client, or employee data.</li>
<li>What amount of coverage to purchase: Similar to E&amp;O, this will be highly variable on the types of data you store on behalf of customers and the operating model of your business. Speak with an agent to get a better idea of how much coverage you need.</li>
<li>What it costs: Starts around $2000 per year</li>
</ul>
<h5>Directors &amp; Officers (D&amp;O) Insurance</h5>
<ul>
<li>What it does: Covers legal claims against company leadership such as breach of contract or fiduciary duty, mismanagement, noncompliance with laws and regulations, misuse of company funds, misrepresentations of company assets, and failure to comply with workplace laws.</li>
<li>When you need it: If you are seeking your Series A or above you will likely be required to show proof of D&amp;O insurance. Additionally, as your company scales and has more public-facing communications you will likely want this to cover any issues that arise.</li>
<li>What amount of coverage to purchase: Around $1M with increases as your business scales</li>
<li>What it costs: Starts at $5k per year</li>
</ul>
<h5>Key Man Insurance</h5>
<ul>
<li>What it does: This provides life insurance for individuals that are critical to the function of the business. This typically can be executives or founders whose passing would result in a substantial impact on the business.</li>
<li>When you need it: Once your business is producing revenue and has a headcount north of 10 employees you should consider getting Key Man policies. Additionally, many Series A or later funding rounds will have a clause that requires proof of Key Man insurance policies.</li>
<li>What amount of coverage to purchase: At a minimum $1M per key person. This should be evaluated as the business scales.</li>
<li>What it costs: Starts at $1000 per year per individual. This will vary widely due to the health and other considerations of the individuals you insure.</li>
</ul>

<hr class="solid" />
<h5>Where do I get Insurance?</h5>
Ok - so now we know what you need. Where do you go for insurance?
First off, you can find a specialized agent or broker for all of the types listed above. Some common places to start are with online brokers that can aggregate quotes for you.
Here are some more tech-friendly startups and brokers that are tackling the process of buying and managing your companies insurance policies:
<ul>
<li><a href="https://www.vouch.us?utm_source=boringstartupstuff.com" rel="follow">https://www.vouch.us</a></li>
<li><a href="https://withlayr.com/">https://withlayr.com/</a></li>
<li><a href="https://foundershield.com/">https://foundershield.com/</a></li>
<li><a href="https://www.embroker.com/">https://www.embroker.com/</a></li>
</ul>
There are also plenty of big players in the space as well such as:
<ul>
<li><a href="https://www.biberk.com/">https://www.biberk.com/</a> (Berkshire Hathaway)</li>
<li><a href="https://www.thehartford.com/business-insurance-landing-page">https://www.thehartford.com/business-insurance-landing-page</a> (The Hartford)</li>
<li><a href="https://www.hiscox.com/small-business-insurance">https://www.hiscox.com/small-business-insurance</a> (Hiscox)</li>
<li><a href="https://www.chubb.com/us-en/business-insurance/">https://www.chubb.com/us-en/business-insurance/</a> (Chubb)</li>
</ul>
<h5>Side note: The difference between an Agent and a Broker</h5>
Agents act on behalf of insurance companies &mdash; sometimes one or more&mdash; to sell insurance to businesses. Brokers, on the other hand, represent the business seek quotes in the marketplace.
When buying insurance you can contact several agents or brokers. We recommend working with a reputable broker and also getting independent agent quotes to compare prices.
<hr class="solid" />
<h5>Conclusion</h5>
<ul>
<li>If you operate a tech startup, at the very least, you need GLI and E&amp;O policies and may be legally required to have Workers Compensation Insurance if you have any employees.</li>
<li>As your business grows, reevaluate your coverage costs &amp; needs. It is best practice at a minimum to do this annually, if not quarterly.</li>
<li>Read the fine print. Don't just get as much coverage as possible. You want to make sure coverage terms are what you expect.</li>
</ul>
Lastly, below is a chart from <a href="http://foundershield.com/?utm_source=boringstartupstuff" rel="follow noopener" target="_blank">Foundershield</a> to give you an idea of when in your companies life you should be thinking about these types of insurance:
<img src="https://foundershield.com/wp-content/uploads/2018/04/Insurance-for-Startups-Packages.jpg" alt="https://foundershield.com/wp-content/uploads/2018/04/Insurance-for-Startups-Packages.jpg" width="778" height="502" style="display: block; margin-left: auto; margin-right: auto;" />

Insurance feels like a waste of money until you need it; don't pay $1250 per hour legal fees because you didn't read the fine print.

Insurance for Startups

If your CEO tweets like Elon, you might want to check your D&O Insurance policy. While you probably spend most of your day thinking about shipping and selling products, you still need frameworks in place to defend yourself against potential costly lawsuits in the future.

PR sounds a lot cooler on TV. Who doesn&rsquo;t want to be as badass as Olivia Pope?

In reality, she&rsquo;s more of a crisis manager than a PR agent, but she still orchestrates exactly how her clients should speak, who they should be speaking to, and how they should behave in order to convey a certain message to the world. Essentially, that&rsquo;s what PR does (on a far less dramatic scale). PR, or public relations, is about finding ways to disseminate information about an organization to affect public perception.

With fewer resources and time on their hands, most startups put PR on the back burner. But there are scrappy ways to approach PR to get you the notoriety you are craving. Read on to understand the difference between traditional marketing and PR, why PR is important, and how to form and implement a short and long-term PR strategy.
<h2>What&rsquo;s the difference between PR and marketing?</h2>
On the surface it can seem like marketing and PR are kind of the same thing. They both encourage people to buy products or services, right? While that&rsquo;s true, and <a href="https://www.linkedin.com/pulse/simple-guide-pr-startups-john-moorwood/">marketing and PR do have overlap</a>, the main difference is that marketing can involve paying for exposure to an intended audience. This can be in the form of social ads, PPC activity, TV commercials, billboards, or even direct mail. PR, on the other hand, is generally thought of as &ldquo;earned&rdquo; media exposure. Essentially, you&rsquo;re only featured in certain publications or outlets because your product, your people, or your customers are impressive to readers. Reporters need to feel like there&rsquo;s enough to your story that everyone needs to hear about it.&nbsp;
<h2>Why do you need PR?</h2>
The overall consensus is that earned media (PR) lends more credibility than paid media (marketing). If you think about it, who would you rather believe一a company telling you they&rsquo;re a big deal or a publication you trust telling you a startup is a big deal? <a href="https://techcrunch.com/">TechCrunch</a>, <a href="https://www.businessinsider.com/">Business Insider</a>, or <a href="https://venturebeat.com/">VentureBeat</a> carry significant weight in the minds of consumers and investors. You can say your product is cool until you&rsquo;re blue in the face and still not get very far.

With a pub&rsquo;s seal of approval, people immediately take notice. This can have an enormous ROI&mdash;we&rsquo;ve all heard stories of website traffic or free trial signups 10x-ing in one day. People put stock in certain media outlets and even in individual writers, particularly those that cover niche topics.

It&rsquo;s important to note that the best kind of PR is real news. Publicizing something when it&rsquo;s not up to snuff is a huge mistake. Not only will it tarnish your reputation among customers and prospects, it&rsquo;ll put you straight onto journalists&rsquo; blacklists. Make certain you are comfortable with what&rsquo;s being said and you have the receipts to back it up.&nbsp;
<h2>Building a startup PR engine</h2>
The secret to realizing PR success is about establishing short- and long-term habits that help you nail down an enticing elevator pitch, get your name out there, build relationships with writers, and continue crafting interesting stories as your company scales.&nbsp;
<h3>Before you start</h3>
It&rsquo;s tempting to want to jump right in, but there are few things you need to nail down before you even start developing your PR strategy. This includes your:
 
<ul>
<li aria-level="1">Audience - Who do you want to speak to? It&rsquo;s probably potential customers, but who else? VCs? Partners? Potential employees? Each of these audiences has different preferences and habits, which should influence the types of journalists or content creators you want to get to know.</li>
</ul>
<ul>
<ul>
<li style="font-weight: 400;" aria-level="1">Key message - There should be a <a href="https://respona.com/blog/startup-pr/">driving force behind your PR</a>. Think of the main message you&rsquo;re trying to get across for each audience you&rsquo;re targeting. Ensure that this key message is at the crux of each article when it gets published.</li>
</ul>
</ul>
<ul>
<li aria-level="1">Founding story - Everyone likes a good backstory. Make sure you&rsquo;re able to eloquently and succinctly describe the founding story in a way that props up your key messages and mission.&nbsp;</li>
</ul>
<ul>
<li style="font-weight: 400;" aria-level="1">Website and landing pages - When people hear about you, guess where they&rsquo;re going first? Your website. It should be in tip-top shape before you reach out to journalists or PR sites. Be sure to have some fact sheets, customer testimonials, and case studies readily available as well.</li>
<li style="font-weight: 400;" aria-level="1">Professional headshots - This one sounds silly, but every reporter wants images to break up their text. Make it easier on them by having these pictures on hand.</li>
<li style="font-weight: 400;" aria-level="1">Google alerts - Google alerts are free and are a super useful way to keep track of your competition, find new media outlets, and connect your company to emerging issues or stories. Set up keywords related to your company and industry, as well as ones that your audience might be searching for.</li>
</ul>
<h3>Short-Term</h3>
Let&rsquo;s say there&rsquo;s a game-changing product launch or fundraise quickly approaching. You don&rsquo;t have time to build rapport with writers and cold outreach is rarely fruitful. What do you do?

First, lean on your network. Do your investors or fellow founders have any writer contacts? What about your friends and family? Do any of them freelance for relevant publications? You never know, if you have a compelling enough story, there might be someone who is willing to give you and your company a shot.

Next, submit ideas to free sites. There are <a href="https://www.forbes.com/sites/kateharrison/2014/01/15/3-simple-ways-to-get-free-pr-for-your-startup/?sh=504f19802e34">tons of PR sites out there these days</a>. Here are some that are accustomed to more last-minute pitches:

<ul>
<li style="font-weight: 400;" aria-level="1"><a href="https://www.helpareporter.com/">HARO</a> - Help A Reporter Out (HARO for short) is a platform that allows you to pitch your story to over 75,000 journalists and bloggers at once by <a href="https://app.helpareporter.com/reporters/queries">submitting a short form</a>. HARO also enables you to list yourself as an expert source, meaning your quote could end up in a really popular piece. HARO is free, but you can pay $19/month for a premium plan which gives you first access to journalists&rsquo; requests and premium support.</li>
<li style="font-weight: 400;" aria-level="1"><a href="https://muckrack.com/">MuckRack</a> - MuckRack is a Public Relations Management (PRM) platform that connects you with bloggers and journalists and measures the success of your PR efforts. For the full platform experience, it costs $200/month, but MuckRack has other options like submitting one-line, tweetable press releases for $1 per character. Pro-tip: use tinyurl to reduce characters.</li>
<li style="font-weight: 400;" aria-level="1"><a href="https://www.newswire.com/">Newswire</a> - If you already have a press release typed up and ready to roll, consider using Newswire. It costs $199 for a one-time distribution to Google News, targeted trade publications, and a <a href="https://cdn.newswire.com/assets/other/distribution-pdfs/Newswire_Distribution_Network.pdf?_ga=2.128835980.1042634315.1626819341-1324909307.1626819341">whole host of other news sites</a>. After the release goes live, you&rsquo;ll also get a detailed analytics report of the results.</li>
</ul>
<h3>Long-Term</h3>
The key to a sustainable PR engine is forming an outstanding journalist network. Whenever you need an extra PR boost, you simply dip into your Rolodex and pick the best person to tell your story. Of course, building up this pool of contacts isn&rsquo;t an overnight thing. Dedicate time to:

<ul>
<li style="font-weight: 400;" aria-level="1">Creating a Contact List - You don&rsquo;t want to talk to just any journalist. You want <a href="https://www.criminallyprolific.com/pr-for-startups/">a list of contacts who can cater to the audience</a> you came up with in the &ldquo;Before&rdquo; section. Figure out where your audience hangs out online. What are they reading first thing in the morning? What types of articles do they forward to their colleagues? Once you determine what those publications are, you need to find the email addresses of journalists that cover your beat. Try <a href="https://awario.com/blog/best-free-or-cheap-pr-tools-for-startups/">using Hunter</a> or LinkedIn Sales Navigator.</li>
<li style="font-weight: 400;" aria-level="1">Making connections - After you have a healthy list, it&rsquo;s time to make connections. Start small by retweeting their Tweets or leaving insightful comments on their articles. If you want to do a warm intro email, make it quick. Explain who you are, why your company is important, and how you can help them source intriguing story material. Whatever you do, don&rsquo;t be obnoxious. As Neil Patel says, <a href="https://neilpatel.com/blog/guide-to-public-relations/">make friends, not contacts</a>.&nbsp;</li>
<li style="font-weight: 400;" aria-level="1">Writing killer pitches - Journalists are seasoned veterans, especially in the tech industry, and nothing turns them off faster than a cookie-cutter email. Just imagine how many of those they get per day! Your pitches need to be concise, yet spark their curiosity. Go back to your key messages, value prop, and founding story. What is truly unique about what you&rsquo;re doing, who you&rsquo;re serving, or how your product was built? Is there some way to tie your company to a burgeoning trend that&rsquo;s of particular interest to this specific journalist? Explain what&rsquo;s in it for them, and tailor your story around that. Help them first so they can help you.</li>
<li style="font-weight: 400;" aria-level="1">Putting it on the calendar - Again, sounds like a no-brainer, but <a href="https://www.growthmarketingpro.com/important-pr-tips-startup/">schedule set times</a> for following up. Reporters are busy, just like you. They may not see your initial emails or submissions, so feel free to follow up in a few weeks. At the same time, continue to take small actions to let them know you&rsquo;re impressed by their work. Building trust takes time, so fit it into your routine.</li>
<li style="font-weight: 400;" aria-level="1">Tracking your success - Not every pitch will work out, even with the reporters you know the best. Keep track of which pitches work and which don&rsquo;t. Try to find patterns among the ones that didn&rsquo;t work well, and improve upon those in your next batch of reach-outs. As an aside, if a writer declines, do not pressure them. Respect their time, requirements, and interests. Being deferential now can pay off in the future, since they may think of you the next time they hear about a similar topic. Plus, writers talk, so don&rsquo;t be the annoying person they gossip about.&nbsp;</li>
</ul>

The hardest part of PR for startups is figuring out how to express what your company does and what makes it unique in a way that grabs journalists&rsquo; attention. What makes this even more competitive is that many companies hire outside firms to do this work for them. But remember, you&rsquo;re in it for the long haul. By getting the wheels turning on your PR strategy early, you can win over journalists, customers, and investors with little monetary investment.

With fewer resources and time on their hands, most startups put PR on the back burner. But there are scrappy ways to approach PR to get you the notoriety you are craving.

Public Relations for Startups

This past March, Indeed.com released survey results indicating that more than half of current employees are feeling burnt out, with <a href="https://www.indeed.com/lead/preventing-employee-burnout-report">over two-thirds attributing the burnout to the ongoing pandemic</a>.&nbsp;

Prolonged burnout can have serious consequences&mdash;both for individuals and their teams. <a href="https://www.mayoclinic.org/healthy-lifestyle/adult-health/in-depth/burnout/art-20046642">Symptoms of employee burnout</a> include increased cynicism and difficulty engaging at work. Oftentimes, this leads to decreased productivity and a lack of job satisfaction.&nbsp;

Burnout and mental well-being in startups are even more precarious than in traditional work settings. Tight deadlines combined with fewer resources, a lot of ambiguity, and a high likelihood of failure place substantially more stress on startup teams and founders. With all this in mind, it is important to set up guardrails early on to ensure you and your team are paying attention to mental health. Here are a few of our recommendations to alleviate burnout and reduce mental stress across your organization:

<h2>Require paid time off every quarter&nbsp;</h2>
Startups are known to provide unlimited PTO policies, but few people take advantage of the benefit. Managers and founders need to enforce PTO. Require a minimum number of days off per quarter, and set up quarterly reminders to check in on people who have not taken any time off. Lastly, make sure people truly disconnect from work when on PTO - this means setting up out-of-office messages and muting Slack. When you&rsquo;re taking time off, don&rsquo;t apologize for it.

<h2>Knock it off with the Zoom happy hours</h2>
Along with the pandemic, zoom happy hours need to end. While fun the first one or two times, post-work team events over video conferencing tools have gotten out of hand, and are doing more damage than good. Most people already spend hours per day sitting in front of their webcam; the last thing they want to do is spend another hour listening to one or two people run a conversation. As a better solution, give people time to unwind and give everyone credits for Drizly or Grubhub to grab drinks or dinner on their own terms.&nbsp;
<h2>Get everyone together &ndash; safely</h2>
Get your team together for something as simple as lunch or in-person meetings. Facetime is still extremely valuable in this remote-first world. At the end of the day, people stay at a company because of their co-workers and managers. If your team has gone fully remote, do this at least once per quarter. Of course, this recommendation comes with the major caveat of having appropriate safety measures.&nbsp;
<h2>Compensation isn&rsquo;t just about money&nbsp;</h2>
Salary and equity are still the core form of compensation for most companies. But a quick way to stand out is to offer expanded ancillary benefits. Some of the largest stressors today involve healthcare and childcare. Consider no-premium health insurance coverage and expanded child care offerings through things like a <a href="https://www.fsafeds.com/explore/dcfsa">DCFSA</a>. Top firms are even offering subsidized daycare and after-school programs. This is not viable for every firm, but there are other creative options like giving new parents a years-worth of diapers. And for those without children, doing things like sending your employees <a href="https://www.livelyroot.com/collections/plants-as-gifts">a new desk plant</a> or paying for subscriptions to meditation apps and at-home exercise programs can be game-changers.
<h2>Limit communication outside of work hours to emergencies only</h2>
This is a tough one for startup founders and operators. While speed is the name of the game in the startup world, you need to keep things in perspective. Constantly pinging team members on weekends and in the evenings may move the needle in the very short term, but it will erode team morale over time.
Mental health is important for the entire company, but for founders especially. Carrying the weight of people&rsquo;s livelihood on your shoulders takes its toll. If you are a founder, you should work with an executive coach to help you through the tough times of the business. What&rsquo;s even better is working with a professional therapist to discuss personal challenges that evolve from your startup stress. Don&rsquo;t be shy about opening up and finding help when you are struggling.

Tight deadlines, limited resources, a lot of ambiguity, and a high likelihood of failure place substantial stress on startup teams.

Improving Mental Health at Your Startup

Burnout and mental well-being in startups are even more precarious than in traditional work settings. Tight deadlines combined with fewer resources, a lot of ambiguity, and a high likelihood of failure place substantially more stress on startup teams and founders.

Interviews are a time for candidates to talk about themselves, their achievements, and their hopes for the role that they are interviewing for. However, interviews shouldn&rsquo;t be one-sided. They can serve as a tool for figuring out if the job and the people at the company are the right fit for you.

There are questions that you need to ask before joining a startup that provide more insight beyond the job description. At a startup, you have to consider other factors like risk, company culture, and the future trajectory of the business.&nbsp;&nbsp;

Here are some questions we like to ask before joining a startup:
<ol>
<li style="font-weight: 400;" aria-level="1">
<h2>Where is the company now, and what direction do you see the company going in the long term?</h2>
</li>
</ol>

Startups operate in a very dynamic space. The team, as well as the product, can go down completely different and unexpected paths within a short period of time. It is important to establish a clear sense of where the company is today (in terms of funding, growth, product roadmap, team, leadership, etc.) and where it&nbsp; plans to be in the future. While all plans are subject to change, this question allows you to understand what you might be getting yourself into and how this plays into your future career trajectory.

<ol>
<li style="font-weight: 400;" aria-level="1">
<h2>What motivates your team?</h2>
</li>
</ol>

People&rsquo;s belief in their own product is crucial to gauge before joining a startup.&nbsp; It is essential to be around people who are forward-thinking and self-motivated against all odds. This question can provide insight into the culture of the company and what types of people are running and supporting the work being done. Are people motivated by the same ideas, or are they driven by personal motives that just happen to move the needle on the same end goal?

<ol>
<li style="font-weight: 400;" aria-level="1">
<h2>What are the current challenges the company faces? And how will this new role address those challenges?</h2>
</li>
</ol>

It is important to know about the positive growth companies are experiencing, but it is also essential to understand the shortfalls and struggles of the company.. You cannot understand a company&rsquo;s challenges simply by looking at their website, so this question explicitly brings to light what still needs to be worked on. Plus, people who work at startups wear a lot of different hats, so this question forces the interviewer to provide a specific perspective on their expectations for someone in your potential position.&nbsp;

<ol>
<li style="font-weight: 400;" aria-level="1">
<h2>What are the biggest risks involved in this company and how do current employees reduce those risks?</h2>
</li>
</ol>

Working at a startup is risky. Transparency about&nbsp; potential risks (financial, career etc.) are all the more necessary when joining a startup. Risks take on different forms and some might not be as observable to employees as others. Spelling out what risks you should expect can help you prepare for uncertainties that lie ahead. Additionally, learning about how current employees interpret those risks provides an idea of the type of environment you will operate in. Are people constantly working to make sure everything is in line? Are people always ready to pick up extra work when things take a turn for the worse?

<ol>
<li style="font-weight: 400;" aria-level="1">
<h2>Where do you guys typically hang out for lunch?</h2>
</li>
</ol>

Despite the risks, challenges, and structure of the company you are interviewing for, you are ultimately going to be working and extensively interacting with the set of people who are currently there. Learning about small, but fundamental interactions such as lunch breaks can allow you to understand more of the culture that the firm operates on and the types of people you will be spending at least eight hours of your day with. Do people generally bring their own food to eat on their own time? Or is there more of a collaborative community where people go out and find places to eat together?
 
Once you reach the &ldquo;do you have any questions to ask me?&rdquo; stage of the interview, it is important to ask unique, hard-hitting interview questions to your prospective employer. Not only can tough questions provide you the answers you need to make a decision about the role, they also set you apart from other candidates.

Interviews shouldn’t be one-sided; they should serve as a tool for figuring out if the job is the right fit for you.

Questions to Ask in an Interview That Don't Suck

Once you reach the “do you have any questions to ask me?” stage of the interview, it is important to ask unique, hard-hitting interview questions to your prospective employer. Not only can tough questions provide you the answers you need to make a decision about the role, they also set you apart from other candidates.

LTV, or lifetime value, is a benchmark for the health of a business, no matter the industry or model. A high LTV can indicate <a href="https://www.bigcommerce.com/ecommerce-answers/what-is-customer-lifetime-value-and-why-is-it-very-important/">brand loyalty, good product-market fit, and viable unit economics</a>. In contrast, a low LTV could suggest issues with customer retention, product selection, or even marketing. Steadily improving lifetime value will grow your bottom line.

According to HBR, a 5% increase in customer retention can <a href="https://hbr.org/2014/10/the-value-of-keeping-the-right-customers">increase a company&rsquo;s profitability by 25% to 95%</a>. To achieve those kinds of results, it&rsquo;s crucial to understand LTV and start incorporating it into your startup metrics as soon as you start collecting customer data. In this piece, we&rsquo;ll define lifetime value, explain why a healthy LTV is essential to your business, and offer a few tips for calculating LTV and fitting it into your reporting cadence.

<h2>What is lifetime value?</h2>
Think of lifetime value as the sum of money a customer will bring your company for the duration of your relationship. Take a second to pause and think about your personal LTV for your favorite coffee shop, clothing store, or gas station. Yikes for you, good for them!

Of course, there are other places that you&rsquo;ve only patronized once in your whole life, right? So LTV varies from customer to customer. As a business, you want to reduce the number of customers who are &ldquo;one-and-dones&rdquo; and draw in prospects who will stick around and bring you the most value over their lifetimes.&nbsp;

Several things influence LTV (customer satisfaction, product-market fit, etc.), so many companies use LTV as a point of reference and start digging in when the number goes up or down. While calculating the total number of orders for each customer seems simple, it gets more complex as you start to consider the unique ways your business operates and how it might grow and change in the future.
<h2>How do you calculate LTV?</h2>
Depending on who you ask, you might get a different answer for how to calculate LTV. That&rsquo;s because how much data you have and how you structure your business have a lot to do with it. However, as a baseline, <a href="https://useinsider.com/what-is-customer-lifetime-value-clv-and-why-does-it-matter/">the simplest way to measure LTV</a> is:

<blockquote>
Average Order Total ($) x Average Number of Purchases (per year or month) x Average Retention Time (years or months)
</blockquote>

The formula represents the lifetime value of your average customer in dollars. The more orders you have to go off of, the more accurate this number will become. This is where eCommerce companies have the edge over SaaS companies with much longer sales cycles (at least at first). It&rsquo;s also important to note that this basic LTV formula <a href="https://www.forentrepreneurs.com/saas-metrics-2-definitions-2/">does not consider profit margins or the costs associated with acquiring each customer</a>.

LTV can drastically differ from customer to customer, so companies <a href="https://www.profitwell.com/recur/all/calculate-customer-ltv">segment their customers into targetable personas</a> (age, gender, product purchased) and see how the average LTV changes. Groups with low LTV are prime candidates for customer research. For example, you might find that one of your products works particularly poorly for a certain segment of your customer population because of its specific characteristics.&nbsp;

You might&rsquo;ve also heard the term <a href="https://mailchimp.com/clv/">&ldquo;CLV&rdquo; or customer lifetime value</a>. CLV is essentially LTV, just at the individual customer level. Sometimes, companies will include acquisition cost and profit margin to make the number more precise:

<blockquote>
(Lifetime Value (Order Total x Number of Purchases x Retention Time) &times; Profit Margin) &ndash; Acquisition Cost
</blockquote>

Regardless of what method you choose, LTV can help you brainstorm better promotion, retention, and acquisition strategies.&nbsp;
<h2>Why are LTV and CLV important?</h2>
Once you&rsquo;ve nailed down your <a href="https://corporatefinanceinstitute.com/resources/knowledge/valuation/cac-ltv-ratio/">method of calculating LTV and CLV</a>, you&rsquo;ll be ready to delve deeper into how each lever (order value, purchase frequency, and customer lifespan) affects your business outcomes. To pull out more details from your LTV calculation, here are some questions you can start to ask:

<ul>
<li style="font-weight: 400;" aria-level="1">Why are order values high/low? Is there some kind of messaging that&rsquo;s convincing people to buy more expensive products?</li>
<li style="font-weight: 400;" aria-level="1">Are we making or losing money in the long-term by offering free samples or discounts?</li>
<li style="font-weight: 400;" aria-level="1">Are we spending an awful lot on customer acquisition on Facebook and Google but only getting low LTV customers to convert?</li>
<li style="font-weight: 400;" aria-level="1">Should we implement a loyalty program to keep our high LTV customers around and bump low LTV customers up a level?</li>
<li style="font-weight: 400;" aria-level="1">Who is our most valuable segment, and how can we acquire more of those customers?</li>
<li style="font-weight: 400;" aria-level="1">What do our customers think of our product quality? Are they running out of our product and buying more or simply not coming back?</li>
<li style="font-weight: 400;" aria-level="1">Should we consider a subscription program to hit our retention goals?</li>
<li style="font-weight: 400;" aria-level="1">Are there signs that we might need to expand our ideal customer profile to include other types of prospective customers?</li>
</ul>

If you want to get really fancy, you can start to forecast LTV. Keep in mind that you need several years&rsquo; worth of data for <a href="https://medium.com/bcg-digital-ventures/grow-margin-based-marketing-2-0-bd5de5ce30f3">sophisticated modeling and LTV prediction</a>. But if you can manage to do it, it will help your finance team with <a href="https://boringstartupstuff.com/newsletter/dec-29th-2020-become-a-financial-quarterback">FP&amp;A</a>, your product team with new launches, and your marketing team with enhanced segmentation.
<h2>How does lifetime value fit into other company metrics?</h2>
LTV is informative, but it becomes even more powerful in the context of other metrics your startup will be tracking. Here are just a few:
 
<ul>
<li aria-level="1">Customer acquisition cost - Otherwise known as CAC, refers to the cost of gaining a new paying customer. Typically companies compare LTV to CAC as a way of determining whether their marketing spend is reasonable. If a company&rsquo;s LTV:CAC ratio is less than 1, they&rsquo;re not doing so hot. There could be issues with the customers they&rsquo;re bringing in, or they are spending too much money on acquisition, or both. If the LTV:CAC ratio is greater than 1, the company is generating value, but more could be done. An <a href="https://firstmark.medium.com/a-crash-course-on-the-subscription-metrics-that-matter-with-freshlys-cpo-3ccd7b0add67">LTV:CAC ratio greater than 3 is often considered healthy</a>.</li>
</ul>
<ul>
<li aria-level="1">Revenue retention - Your net revenue retention (NRR) is the percent of recurring revenue from existing customers during a set period. LTV comes into play because it encapsulates the purchase frequency (more applicable to consumer goods) and the average order value (more applicable to SaaS and subscription businesses with consistent purchase timing but flexible order value). Breaking out NRR from LTV can help you figure out whether to focus your efforts on more conversions, upsells, and cross-sells.</li>
</ul>
<ul>
<li aria-level="1">Churn rate - If you recall, customer retention is a major part of the LTV equation. So if your churn rates start to skyrocket, you&rsquo;ll feel it in your LTV. A quick way to think about this is to measure your customer lifetime as 1/churn rate. Let&rsquo;s say you&rsquo;re looking at a monthly churn rate of 4%. In this case, the customer lifetime will be 1/.04, or 25 months. If you can get that down by one percent, your customer lifetime will extend by 8 months (33 months - 25 months). If your average order value, purchase frequency, profit margins, and CAC stay the same, that means you&rsquo;ve gotten a massive boost in LTV.</li>
</ul>
<h2>LTV in the early days of your startup</h2>
Frankly, it&rsquo;s hard for early-stage startups to pay close attention to LTV. With things constantly changing, it&rsquo;s hard to tell what might be moving LTV up or down. And to do even the most basic calculation, you need customer data. That said, LTV will matter in the future, particularly in relation to CAC, if you&rsquo;re <a href="https://boringstartupstuff.com/newsletter/product-led-growth-what-is-it-and-how-do-you-do-it">going the product-led growth route</a>. So now that you know what subcomponents you need to calculate LTV and CLV, make sure you have a plan to capture the proper customer data points over time. Not only will LTV help you identify ways to strengthen your business model, it will also help you attract the highest value customers and develop the best products in the market.

LTV is a benchmark for the health of a business, indicating brand loyalty, product-market fit, and viable unit economics.

What is LTV, and why does it matter?

LTV, or lifetime value, is a benchmark for the health of a business, no matter the industry or model. A high LTV can indicate brand loyalty, good product-market fit, and viable unit economics. In contrast, a low LTV could suggest issues with customer retention, product selection, or even marketing. Steadily improving lifetime value will grow your bottom line.