Building a Growth Model to Drive Your Startup

Andy Young // @andyy // andyyoung.co
Building a
Growth Model
to drive your business
Andy Young
@andyy

Hi, I’m Andy!
@andyy
#fb
PhotobyDanTaylor-dan@heisenbergmedia.com

So what is this about
“Growth” anyways?

What do we mean by Growth?

● Typically growing our active customer/user base
● Growing whatever drives value in our business

● Not necessarily growing revenue $$$

● Not necessarily growing revenue $$$
● Growing whatever’s most strategically important to
us right now

Why do we
Growth Model?

Understand how we grow
so we can
grow more!
Ensure our growth is sustainable
Why do we Growth Model?

Growth Marketing is finding growth that is:
● Measurable
● Predictable
● Repeatable & Scalable
Growth is a mindset, and a process.
Growth Truths

How can we grow?

ACQUIRING new customers
vs.
RETAINING existing customers
Ways to grow..

Retention is a SILENT KILLER!
Brian Balfour, Reforge.com

Most important: Retention Flattens

When your retention curve flattens..

Ways to grow
Sustainably:
Growth
Loops & Engines

Paid Engine of Growth
Pay to acquire
new users Monetise those
users
Reinvest profit into acquiring
the next set of users

Viral Engine of Growth
Acquire new users
(initially via
seeding)
Each new user
invites N friends
% of invites convert
to new users

Sticky Engine of Growth
Acquire new users
(any channel)
Users stick
around
Acquisition >> churn
so we grow

http://www.startuplessonslearned.com/2008/09/three-drivers-of-growth-for-your.html
https://www.slideshare.net/Leananalytics/lean-analytics-for-intrapreneurs-lean-startup-conference-dec-2013-public-share

User-Generated Content Growth Loop
New people
discover content
via Google
Users sign up
and create new
content
Content is indexed by Google

B2B Content Growth Loop
New people discover
content via
search & social
Users sign up
and/or follow
Profit is invested in
new content creation
Distributed to existing
followers, who amplify to
new users Brian Balfour, Reforge.com

● Over time, you’ll typically make use of
multiple growth loops - powered by different engines
● But you’ll typically always have
one loop that dominates your growth
Which engine(s) work for you?

● Is your engine of growth coherent?
● Beware attempts to force a user to take
unnatural behaviours
Watch out for
FAILURE!

The myth of the
Hockey Stick
AKA what growth actually looks like..

What people think
hockey-stick growth
looks like..

What people think
hockey-stick growth
looks like..
..what it actually looks like

https://insomanic.me.uk/selective-tweets-3-years-zero-marketing-and-nearly-1m-users-later-now-open-source-851a011f6d5c
Selective Tweets - 1.3 million users
3 years

Selective Tweets
1.3 million users
3 years

http://www.david.blog/blog/the-importance-of-launching-early-and-staying-alive

Which
startup
is this?

https://blog.rjmetrics.com/2012/04/27/airbnb-data-analysis-6-million-users-by-year-end-only-20-active/

http://blog.airdna.co/2015-in-review-airbnb-data-for-the-usa/

Engineering-driven Growth
AirBnB built on top of Craigslist

http://leananalyticsbook.com/analytics-lessons-learned-free-e-book-with-13-case-studies/

● ACQUISITION at top of funnel
○ How to reach HUGE new audiences in a cost-effective way
● CONVERSION at middle of funnel
○ Attracting and drawing people deeper into engaging with you
● REVENUE at bottom of funnel
○ Close to the $$$ - convert higher % and simply make more money!
Working across the whole FUNNEL

Our most precious commodity is
TIME

Intentionality
If we can’t explain why
we’re doing something
then We have
no idea WTF we’re doing

Make predictions in advance!

Identify Levers
and prioritise our ideas

Levers:
things we can push
to get growth

Prioritise using ICE framework
Impact
Chance of Success
Effort (time/resources)

Building a Model
to understand your growth

Growth Model Spreadsheet

• Not an OPERATIONAL dashboard:
metrics related to GROWTH
http://bit.ly/kpi-sheet

How?

Building a Growth Model
1. Identify your traction KPI

Spoiler alert..
Ultimately it’s $$$

NOT revenue (that’s an output)
Traction KPI leads directly to revenue

The one metric that - if it’s not growing -
there’s only so long we can go kidding ourselves
we’re making any progress

Keep it simple!
There’s probably a
pre-determined answer
for how to measure your growth

Commerce: # sales
Subscription / SaaS: # subscribers
Marketplace: # transactions

2. Next, add NUANCE

Nuance metrics: help understand
the full picture behind your Traction KPI
E.g. for commerce:
Traction KPI: # sales
Nuance: average sale $; # customers

2. Next, add NUANCE
3. Add DRIVERS & LOOPS

DRIVERS: the things we
actually work on to grow

E.g. for marketplaces:
Traction KPI: # transactions
Drivers: # suppliers, # customers

E.g. for commerce:
Traction KPI: # sales
Drivers: # new customers, # repeat

E.g. for SaaS:
Traction KPI: # subscribers
Drivers: # new customers, # retained

LOOPS:
model out our engine(s) of growth
Paid, viral, sticky, referral, B2B/B2C content..

2. Next, add NUANCE
4. Add FUNNEL for each driver & loop

2. Next, add NUANCE
4. Add FUNNEL for each driver & loop
end up with AARRR..

• Review weekly - zoom out vs. zoom in
• Share with whole team
• Use to predict and prioritise
• What to look at daily vs. weekly vs.
monthly
http://bit.ly/kpi-sheet

Let’s see some
examples..

Identify your
One Metric That Matters (OMTM)
to get everyone pushing
in the same direction

Weekly/Monthly reporting
% week-on-week or month-on-month growth
in your
One Metric That Matters
Focus. Set a target.
How to choose? Read this Lean Analytics post

Thanks, & good luck!

● Bryan Balfour: The Scientific Method: How to Design &
Track Viral Growth Experiments
● Dave McClure's Startup Metrics for Pirates
● Eric Ries’s Three Engines of Growth
● My deck on Analytics for Startups
Further references..

Building a Growth Model to Drive Your Startup

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