The case against sharing MRR, ARR, LTV - or anything else that reveals how you are doing financially

The IH podcast is my favorite, has been for years. That said, I am vehemently against sharing numbers that are far more likely to put my startup at risk. I find it unfortunate that no one wants to talk about just how dangerous it is to share numbers that reveal how you're doing financially. This is something that I hope Courtland comes to understand in time. After all, when we are all telling new founders how important it is to simply stay afloat, why are we asking them to share numbers that put them in harms way?

As the founder of RiteKit, I understand my number one responsibility to be protecting our ability to continue. Sharing the numbers mentioned could be disastrous. Here's why:

I'll explain with one example: MRR, though there are other numbers that you should never share with anyone. How many active customers, customer or product LTV (lifetime value), etc.

So, MRR: Tell anyone your MRR and it's out there. You don't know who they'll share them onwards with, or who those people will reshare them with - and there is very little chance that to each person, that number will fall into the sweet zone of not too high, not too low.

High and Low problems

What's wrong with someone hearing a sales number that they subjectively decide is high: someone in the Bay Area hears that you're doing $10K MRR, they imagine what their costs would be to do a copycat project, and they are not interested. Okay, but about the CS-degreed and quite competent developer in Bangladesh, Pakistan, Egypt, etc., where they may be working full-time for well under US$1,000/month? (Yes, often it's well under that!)

This person might easily arrive at the following line of reasoning. They are not going to begin where you did; they'll start at where you arrived, skipping the iterations, the misses, and begin with what's working. Next, they find the core element of your value proposition for which it days or weeks of caffeinated nights and weekends, they can deliver a stripped-down, somewhat weaker 70% of the core essence of just the main killer feature of your product - and blow it out for 50% of what you sell your's for. It could be, they are thinking, that with their one person team, they might soon be bringing it enough that they can free themselves of the soul-sucking 40~50/hour fulltime job that pays the equivalent of $600/month, right?

And you know what? They'll have an inferior product, zero customer support, etc. - but they will be chipping away market share from you, and the loss in revenue could just be why you go under.

So, please don't risk tempting people with a number which - subjectively - could sound high enough for them to consider eating your lunch.

What about too high?
You're doing better and better, you should be recognized for the success that you have achieved, right?

I used $10K MRR as the too high example. If $10K could be high enough to lead someone to copying you, $50K MRR, how could this be too low?

Here's how: you first got the wildest risk-taking early adopters, and then, slightly more conservative customers trickled in. Now you need to win over organizational customers, the kind that can pay for multi-seat (e.g. many users) accounts or a huge tier, or perhaps many individual accounts. The decision makers are not spending their money, so it spends far more easily. However, the purchase decider (or the gate keepers, such as legal or financial personal that can kill the sale) is aware that should your company go belly-up in a matter of weeks, and they paid for lifetime or a whole year, this will cast a black mark on their record in their organization, It's the kind of thing that if they do it too many times, or coupled with other mistakes that cost their employer, it could cost them their job.

So, this person hears that you are doing $50K/month it based on their - subjective - impression of how many developers it must take for you to operate, much based on what they think of as developer salaries (you know, based on where they live?), this potential organizational customer comes to the conclusion that at $50K MRR, you must be teetering on the brink of implosion.

I'd better hold off. I'll circle back next year, see how you're doing then.

The thing is, with a few more of them taking the plunge, it could be that the revenue from them is why you do not go out of business. You need them to not hesitate in making their purchase decision.

The ideas on the spectrum of customer types, from early adopters through the most conservative of buyer types, and on "gate keepers "who can overrule the decision from a department head to make a purchase, are taken from Crossing the Chasm, a book I recommend frequently. https://en.wikipedia.org/wiki/Crossing_the_Chasm

Read the full story at https://medium.com/@osakasaul/the-case-against-sharing-your-startups-mrr-arr-ltv-or-anything-else-that-reveals-how-you-are-1c1177674adb