Revenue Teams | January 20, 2024

Why Do So Many SaaS Companies Fail to Scale

Read time: 6 minutes

Written by:

  • Joel Arnold
    VP of Revenue Operations

0.4% of SaaS businesses ever reach $10M in ARR. According to SaaStock, only 0.001% make it to $50M in ARR.

While some businesses have a natural ceiling to the amount they can grow, most of the time promising companies stall out because they’ve grown past the capabilities of their GTM process.

Most companies succumb to these stress tests between milestones, either dissolving, settling for an acquisition in a fire sale or continuing along without ever reaching the next stage of growth.

To make matters more encouraging, these fall-off points have been endearingly labeled “The Valley of Death”.

Crossing the Valley of Death for Each Growth Milestone

You can’t scale from $3M to $10M or from $10M to $50M without a functional, repeatable, and scalable GTM model that can handle the weight of that growth.

Each level of growth requires stronger processes to sustain it, and as you grow, mistakes that could be overlooked before tend to snowball.

$0 to $1M (The PMF Test): The first biggest hurdle is achieving product-market fit. Most budding SaaS companies never get off the ground due to a PMF disconnect. If you do manage to scrape past $1M ARR without your PMF and ICP dialed in, it won’t take long for things to crumble.

$1M to $10M (The Sales Process Test): You’re unlikely to make it through this valley without a solid, professionalized sales process. This means, at the very least, you have one or two salespeople and a standardized base of knowledge about the product, its capabilities, and the pain points it targets. This is the zone where most companies start making mistakes in their processes that catch up with them later.

$10M to $30M (The Sustainable Growth Practices Test): By $15Mil, bad processes are catching up to you as they buckle and break under the size of the company’s growth. Unsustainable growth practices will not get you past $20Mil.

$30M to $50M (The Retention Test): This is where your problems start to shift from new sales to retention. Here, you might start to struggle to outsell your churn, like dumping water into a leaking bucket.

$50M + (The Repeatability Test): At this point, if the company’s GTM strategy is scalable and repeatable, building out new products and repeating this process will allow further growth depending on the limits of the market.

These valleys occur when what worked previously stops working. And sometimes, it’s the strategies that got you to this point that are now causing problems in the next phase of growth.

The companies that can figure this out and adapt in time – or better yet, prepare for it – are the ones that defy the odds and continue to grow.

Snowballing Mistakes That Prevent Growth at Scale

Hardly anybody invests in fine-tuning their revenue processes upfront. When you’re a small startup and things are going really well, it doesn’t feel like you need anyone’s help in this area.

Up to a certain point, that’s a reasonable assumption. Lots of SaaS companies with great products or charismatic leaders get pretty far before needing strategic RevOps.

Then eventually, someone makes a mistake with the revenue process. And when you have hundreds of customers and over $10M in revenue, a small mistake can have outsized impacts. Especially since these kinds of mistakes are typically structural and have been around long before they were ever noticed.

But if it was as easy as getting to $10M, fixing all your problems, and continuing on to $30M – $50M, the number of companies making it to the other side wouldn’t be dropping from 0.4% to 0.001%.

In reality, the companies that make it past $30M are the ones that didn’t make the mistakes most other companies did during their growth from $0 to $20M.

Once a company has reached ~$20M, you’re either set to keep growing or you’re not, and I’ve hardly ever seen one turn it around.

VERY few companies grow to $20M and 200 employees, suddenly realize the problems in their revenue engine, retool their business, and continue on to hit the $30M milestone. These structural mistakes need to be caught early or else your organization becomes too big to realistically fix.

(I say “very few” because I HAVE seen it happen – I did this very thing for a past client, and it was a long, painful, and expensive process.)

How Do You Catch These Problems?

If you’re subscribed to our newsletter or reading our content on Strategic RevOps, then you’re already halfway there! Identifying, fixing, and preventing these problems before they get out of hand makes up the bulk of what we talk about — because it’s what we do best.

If you’re new to our content or want to refresh your memory, here are some past newsletter issues we recommend to avoid common problems that prevent companies from scaling:

Zombie Pipeline: Bad CRM practices can inflate your data, tank the value of your pipeline, and prevent you from realizing what’s happening until it’s too late.

Territory Management: You need clean territories with iron-clad assignments so that reps can focus their energy on selling.

The Consequences of Undefined Metrics: Defining your metrics is a crucial but not immediately-obvious investment.

Will Hiring Salespeople Stimulate Growth?: Unless everybody (or near everybody) on your sales team is at 80%+ attainment, hiring more salespeople is not the solution for stalled growth. Instead, investigate the root of the problem. We’ll show you how.

Narrow Your Focus For Scalable, Consistent Growth: If you go too broad, too fast, you’ll spread yourself too thin across too many segments to be successful in any of them.


  • 0.4% of SaaS companies ever reach $10M in ARR
  • According to Saastock, only 0.001% make it to $50M in ARR.
  • Most companies succumb to stress-tests between each growth milestone
  • These stress tests are called “The Valley of Death”, and each valley tests a different aspect of your GTM operations
    • $0 to $1M (The PMF Test)
    • $1M to $10M (The Sales Process Test)
    • $10M to $30M (The Sustainable Growth Practices Test)
    • $30M to $50M (The Retention Test)
    • $50M + (The Repeatability Test)
  • Most of the mistakes that prevent growth later on are created when the business is small
  • These mistakes snowball as you grow, until your processes buckle under the new weight
  • It’s incredibly rare for a company to grow past $25M with unsustainable growth practices
  • If a company does manage to grow large with bad processes, fixing the mess is painful
  • Our content focuses on the various problems companies make that stall their growth
  • Stick around and we’ll show you how to identify, fix, and prevent these issues!

When you’re ready, here’s how we can help:

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