Scaling a software company from $1M to $2M in Annual Recurring Revenue (ARR) is fun, but has its challenges. It’s a pivotal phase where your initial success is tested, and your strategies for growth are pushed to their limits. This leap in revenue is indicative of your company’s ability to adapt, evolve, and expand in a competitive market. Smart moves and strategic shifts are crucial.

It took years for me to reach $1M ARR, and when I did, things started to accelerate — but it was not by accident! It takes the right strategies to pour gasoline on growth.

From adjusting your pricing strategy to doubling down on what’s working, let’s explore how to effectively double your ARR and set your software company on a path to that next level.

The Power of Pricing Strategies

In the world of software businesses, your pricing strategy is more than throwing up a number and seeing what sticks. It’s a pivotal component of your growth trajectory.

Increasing your prices or introducing a new, higher pricing tier can significantly impact your revenue, especially if your product has evolved since its inception.

Over the course of my software business, I made adjustments to my prices serveral times, and using a variety of strategies, such as:

• Adding a new pricing tier
• Eliminating renewal discounts
• Automatic annual subscriptions
• Increasing the price across all plans

Each one of these had a positive impact on the bottom line, and not once did demand drop.

Pricing adjustments help to reposition your product in the market. It’s a signal of confidence in your product’s value and a nod to its continuous improvement.

It’s important to communicate price changes effectively — but only if they impact existing customers. If a price change only impacts new customers, just change the price and move on with life. That’s what I did (many times). No one will care.

Customers need to understand not just the ‘what’, but the ‘why’ behind your new pricing. When done right, these adjustments can propel your ARR significantly, setting the stage for sustainable long-term growth.

Eliminating Underperforming Marketing Tactics

What got you to $1M won’t always get you to $2M in revenue. It’s crucial to take a hard look at your marketing strategies. This means conducting a thorough audit of what’s working and, more importantly, what isn’t.

Start by analyzing the ROI of each marketing channel. Are there campaigns or platforms that are draining resources without delivering proportional returns? Could those resources be better spent maximizing the areas that have higher returns?

For example, perhaps a social media platform isn’t as receptive to your messaging, or a certain type of content isn’t resonating with your audience. Cutting these loose frees up resources that can be reallocated to strategies with a proven track record.

It’s essential, however, to make these decisions based on data. Look at engagement rates, lead generation statistics, and conversion rates.

I ran YouTube ads for a period of time at the same time as Google Ads for search results. The Google Ad impact was more measurable as I could see that the company made $10 for every $1 dollar that was spent on the ads. So, I cut out YouTube, and focused those funds into the Google Ads.

A careful, analytical approach ensures you don’t inadvertently axe a pivotal part of your marketing machinery. By strategically reallocating resources to high-performing areas, you can create a more focused, efficient marketing strategy that directly contributes to your ARR growth goals.

Doubling Down on Successful Channels

Once you’ve identified the marketing channels that genuinely work for your software business, the next step in scaling your ARR is to double down on them. It’s about taking what’s already successful and pushing it to new heights.

For instance, if blogging has been a fertile ground for leads and brand awareness, then it’s time to amplify your efforts. Revigorate your keyword research and publishing schedule. Investing more in these successful channels is about adopting a more aggressive and strategic approach.

If YouTube is working, then this could mean ramping up your video production schedule, introducing more diverse content formats, or engaging with your audience more interactively. In fact, this is what I did with my company’s YouTube channel.

Engagement was high on certain videos, so we started creating more and distributing them to a broader audience.

The key to all of this is to be targeted in your approach. More content isn’t always better unless it’s the right content. Understand what your audience on these platforms wants and deliver it creatively and consistently. Pair this with data-driven paid advertising campaigns to expand your reach even further.

Reassessing Operational Costs

Efficiently managing operational costs is a cornerstone strategy when trying to amplify your sales. You have to strike the right balance between spending and saving without compromising the quality of your product or service.

One significant area to consider is your approach to staffing. The traditional model of in-office teams is no longer the only viable option. With advancements in technology and changing work cultures, shifting towards virtual employment can be both cost-effective and productivity-enhancing.

This remote work model not only reduces overhead costs like office space and utilities but also opens up a broader talent pool since geographical limitations are removed. My business had 40 employees from all over the world, and no office. We hired quickly, filling gaps with the best possible candidate.

In addition, a virtual employer of record can offer tax and cost-stavings benefits, depending on your location and business structure. I switched to this and saved the company tens of thousands of dollars. For instance, I still offered healthcare and retirement benefits, but for a fraction of the cost due to the service.

Strategic cost management not only supports your financial health but also aligns with evolving workplace trends, potentially giving you an edge in both talent acquisition and operational efficiency.

Expanding Market Reach

Breaking into new markets or customer segments is a powerful strategy to skyrocket your revenue.

Start by identifying markets where your product can solve unique problems or fill existing gaps for specific audiences. Researching customer needs, competitors, and market trends will give you insights into where your product can make the most impact.

Once you identify an area, forming strategic partnerships is an effective way to expand your reach for these new markets quickly. Collaborating with established players in the new target market can provide you with the necessary local insights and customer trust. You benefit by leveraging their existing influence to introduce your product to a new audience.

Don’t overlook the potential of diversifying your product offerings, either. This could mean tweaking existing features to suit different market needs, or developing entirely new functionalities that address specific problems of your new customer segment.

Leveraging Technology and Automation

Today’s software is really incredible, especially with AI in the mix. When you are making $1M ARR, you have the ability to invest in more advanced tools that can really improve the efficiencies for standard tasks. In most cases, efficiency translates to increased income.

For example, in customer service, automation tools like chatbots or automated ticketing systems can handle routine inquiries without human intervention, allowing your team to focus on more complex customer needs. This not only speeds up response times but also enhances customer satisfaction.

For marketing, automating repetitive tasks such as email campaigns, social media posting, or even lead generation can boost your marketing efforts. It ensures consistent engagement with your audience while providing valuable data insights for optimizing future campaigns.

Operational processes are also ripe for automation. From payroll and invoicing to project management and reporting, there are numerous tools available that can reduce manual workload, minimize errors, and improve overall efficiency.

By selecting the right combination of automation tools, you can streamline your operations, improve customer experiences, and focus on strategic activities that drive revenue growth. Your staff becomes more efficient, and this is good for both your internal operations and customerbase.

Strengthening Customer Relationships

Customer retention is just as crucial as acquisition. Loyal customers don’t just provide steady revenue; they become advocates for your brand.

Implementing effective loyalty programs can significantly enhance these relationships. These programs could include exclusive access to new features, discounts, or better support options, incentivizing customers to stick around and engage more with your product.

One strategy I used was a “price lock-in” promotion. If a customer purchased our product at a certain time, then their price would not be raised for as long as they maintained their subscription. As you can imagine, this decreased churn and also resulted in an influx of sales.

Improving customer experience is another critical aspect, with an emphasis on creating a customer journey that’s seamless, as enjoyable as possible, and continually evolving based on customer feedback. Tailored experiences make customers feel valued and understood, leading to higher satisfaction.

Over the years, my support process changed several times, evolving from forums, to tickets and automated chat. The support team constantly evolved the support channels and resources based on customer feedback and hard data from our reporting.

Higher customer satisfaction naturally translates into increased lifetime value. Satisfied customers are more likely to upgrade or subscribe to additional services, and they also become your brand ambassadors.

Doubling ARR Takes Detailed Intention

Scaling from $1M to $2M in ARR demands a strategic blend of innovation and efficiency.

Key strategies include refining pricing, optimizing marketing, streamlining operations, and enhancing customer relationships.

Embrace these changes with agility and focus, and watch your software company thrive in a competitive, evolving landscape.

Hey, thanks for reading!

I’m Justin — I can help you to grow your profits.

Prior to coaching, I was the founder and CEO of an edtech startup, achieving a respectable 32% YoY growth and 76% profit margin over eight years before eventually selling.