StartUp Founders: Second Order Revenue Drives Sales

January 19, 2023 2 mins read

I’ve worked with countless founders who are always on the hunt for the next customer. But what if I told you that your existing customers could be the key to unlocking accelerated growth? It’s called second-order revenue, and it’s something that every startup founder needs to take seriously.

Second-order revenue is when an existing customer refers you to someone else or moves to a new employer and takes your solution with them. This is the ultimate validation of the value and validity of your solution. Not only is it a strong endorsement of your product or service, but it also comes with almost zero cost of acquisition.

As Reid Hoffman, co-founder of LinkedIn, once said, “The fastest way to change yourself is to hang out with people who are already the way you want to be.” The same is true for your startup. By building strong relationships with your existing customers and delivering real value, you’ll not only retain them as customers but also tap into their networks and grow your customer base.

Your existing customers are your best pipeline to your next customers. They know and trust your product or service, and they have firsthand experience with the value you provide. But it’s not enough to simply hope that they’ll refer you to others. You need to work out what you have to do to make it easy for them to want to refer you.

One company that has leveraged the power of second-order revenue is Dropbox. By offering extra storage space to users who refer others, they were able to grow from 100,000 to 4 million users in just 15 months. By focusing on the value they provided to existing customers, they were able to achieve accelerated growth without a massive marketing spend.

So, if you’re a startup founder, I urge you to start taking second-order revenue seriously. Invest in your existing customers, build strong relationships, and deliver real value. Your existing customers can be the key to unlocking accelerated growth and taking your startup to the next level. Good luck!

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