I was often a self-funded founder whose SaaS growth strategy needed to include profit, as that was how my co-founders and I paid ourselves. When you’re growing a SaaS in a meteoric sector like martech, taking investment capital out of the growth machine in the form of profit must be done judiciously and intentionally. If not, growth will be slowed, research and development stunted, or employee retention will suffer. There are only so many places to pull from in a lean or bootstrapped P&L.
SaaS Profit Taking
If you’re a founder and you pay yourself a sufficient salary, you’re working within the P&L and can manage capital usage based on cashflow. If you’re living on the business’s variable success or failure, you’re forced to manage for profit. Either way, the sack of cash is no different, so in some ways it’s irrelevant. But, a lot of people manage for profit and balancing that with growth can be hard. Why? Because short-term cash in pocket can get tempting over longer term SaaS growth strategies.
Capital Efficient SaaS Growth Strategy
It takes discipline to keep cold, hard cash in a company as a SaaS growth strategy. It takes steady and steely belief to bet on future growth in lieu of present income. And it takes strong leadership to keep founders, executives and boards aligned in that mission. But discipline is the backbone of capital efficiency. A P&L only has so much cash in it, and using that cash wisely is the only way to keep from needing more capital from outside of the business.
Managing to the Rule of X
I’ve found that discipline in the P&L comes from planning, debate and agreement in advance from all parties. This is especially true of high-level goal setting and profit planning. I like to manage to the sum of annualized growth percentage and annualized EBITDA percentage (a la ‘Rule of 40’). These are both percentages of top line revenue and this planning typically begins with a question. For example: Can we grow at 25% and have 10% EBITDA? (That would be Rule of 35, by the way.)
Managing your SaaS growth strategy to a rule of ‘X’ satisfies everyone and helps align all incentives on keeping the P&L as lean and efficient as it can be. It forces you to edit carefully, considering every single ingredient in the soup — does it help us grow? It forces you to eek out a little bit more everywhere, with reasonable increase in efficiency expectations for KPIs across the organization.
What’s the ‘Right’ Rule of Number?
First of all, don’t get caught up in the Rule of 40. Sub-scale, self-funded SaaS companies are going to have an extremely hard time getting to 40. Where in the continuum your rule of number falls depends on:

* scale in ARR (annual recurring revenue);
* gross profit (and inverse cost to deliver revenue);
* product lifecycle stage (innovation means more R&D and iteration mean less);
* CAC (cost to acquire a customer/sales and marketing efficiency);
* revenue retention and LTV (lifetime value);
* and your ability to push, unify and inspire your organization.

Working Backwards into Your Rule of Number
Look at your P&L for the most recent complete quarter. If you’re managing for profit, look at that percentage. Or, if you’re profit is a silly high percentage, look at it through the lens of hard currency. Either way, decide what is needed in EBITDA. This gets back to discipline, because what is NEEDED is not the same as what is WANTED. Everyone must align and agree on the number of what is needed in EBITDA. What’s left over is your raw material to generate growth. Let’s say your EBITDA number is 10.