When is Achieving a Nice Round Number of Customers a Meaningful Milestone?

The answer is, it depends on how you derive the number and how you communicate it.  I’m wearing my angel investor hat as I write this article.  I hear a common response when I ask a startup what milestones they are trying to reach in ___ months.  Included in the response will often be a statement like “We want to get to 100 customers within that timeframe.”  Or I might ask why $____ is the right amount of money to raise (see related article titled “How Much Should Your Raise?”).  The response will commonly include “That amount allows us to acquire our first 100 customers.”  I love the focus on outcomes rather than activities (see related article titled “Investors Write Checks for Outcomes, Not Activities“).  The problem I have with these responses is they are nice round numbers that are obviously being used because they are nice round numbers.  For some companies the magic number might be 1,000 or 10,000 but my reaction is the same: so what, why do I care about that nice round number?  (see related article titled The “So What” Rule)  In other words, why is that a meaningful milestone to an interested investor?  I have a few suggestions.

Instead, approach the exercise another way.  Ask yourself how many customers it will take to claim initial validation of your product’s value or some other aspect of your business model?  How many customers will it take to reach cash flow breakeven with your current staff (plus maybe your already-identified near term hires)?  How many customers will it take to overtake a competitor you care about?  How many customers will it take to reach __% market share in your focus geography?  These are meaningful milestones and the number of customers required to get there is a natural byproduct of working backwards and it doesn’t matter if the answer is 345.

I would rather hear a response like “We plan to reach cash flow breakeven within 9 months with an additional 345 subscription customers.  In order to acquire these 345 customers we need to A, B and C.”  And if you’re fundraising, the amount of money you are raising helps ensure you can do A, B and C so that you can reach your milestone goal of getting to cash flow breakeven.  This is just an example to demonstrate that the milestone is reaching cash flow breakeven and acquiring 345 customers is a means to get there.

Now let me contradict what I’ve written to cover some exceptions.  There are some good uses for nice round milestone numbers.  For example, they are extremely useful for employee morale (ie – announcing a company party once 1,000 customers are gained) or establishing credibility with prospects or analysts (ie – your briefing presentation makes a claim about having more than 1,000 customers).  So my guidance is to think first about the purpose of expressing a number as part of a milestone objective.

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