That’s the math that David Cummings wrote about in his post of November 23rd. It is quite simple. If you have $1m of new recurring revenue you are likely looking at a 800k gross margin. Invest half in Marketing and half in hiring two sales people. They will add $1m in new recurring revenue. Rinse and repeat.
By the 3rd year it will add $4M in new annual recurring revenue and a pace would be set. The $1M new ARR is now $8M ARR which will potentially add $40M – $80M in Enterprise value.
You do not need to start with $1M new ARR. Even $10K in new ARR can help add $800K to your enterprise value. Collect every dollar you legitimately can. Else you may be leaving a lot behind.
Where I learnt this #343
Compounding Revenue’s Value in the Future