Startup Growth: Up and to the Right
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The document outlines six principles for sustainable growth: 1) Growth is a methodical process that requires testing different growth levers, not "silver bullets." 2) Growth involves optimizing the entire customer funnel, from acquisition to activation to retention and revenue. Companies need an advantage in other parts of the funnel besides just acquisition. 3) Sustainable growth comes from optimizing the long-term retention and lifetime value of customers, not just short-term gains. 4) All users have a cost, whether direct acquisition costs or indirect costs of employees' time, so companies must understand costs and benefits. 5) Companies need to know if they are in the traction stage, focusing on product-
Startup Growth: Up and to the Right
- 1. presents Brian Balfour @bbalfour Startup Growth: Up and to the Right
- 2. 2 Growth Principles To Live By Building A Growth Equation Running A Growth Process 1 2 3
- 3. 3 Principle One: Growth Is A Methodical Process There are no silver bullets, single “hacks,” or magical solutions. Finding growth levers is a methodical process.
- 4. 4 Principle Two: Be A Pirate (via Dave McClure) Growth is more than just “Acquisition.” Growth is about the entire funnel...
- 5. Credit: Dave McClure “Startup Metrics For Pirates” AARRR 5 Revenue Referral Activation Retention Acquisition This funnel helps you understand the most important comparison in growth... CPA to LTV
- 6. Where Is Your Growth Advantage? 6 Over time, all advantages at the acquisition phase of the funnel get competed away.... so you need to be better than your competition at some other part of the funnel... Revenue Referral Activation Retention Acquisition 1 2 to turn the CPA to LTV equation in your favor.3
- 7. They competed in the same acquisition channels (Facebook ads and feed) but.... Example: Zynga vs Kixeye 7 Zynga Kixeye RETENTION: 2 Months REVENUE: 2.4% Conversion RETENTION: 7 Months REVENUE: 6% - 9% Conversion LTV: 10X + Higher Result: Kixeye could outspend/outcompete Zynga in the same acquisition channel with the same techniques.
- 9. 9 Guess The Growth Curve DAU’s
- 10. 10 An Example Of Unsustainable Growth
- 11. 11 Principle Four: There Is No Such Thing As “Free” Users Every user costs money whether you paid for them directly, or indirectly with your time. Know the cost of both.
- 12. 12 Principle Five: There Is A Time For Traction And A Time For Growth Know what stage you are at. It dictates the goals of your growth process.
- 13. 13 Traction vs Growth? Credit: Sean Ellis - Authentic Growth Understand Must Have Experience Macro Optimization Micro Optimization Product/Market Fit Turn On The Faucet Focus On Retention Start Getting Data Turn Up The Faucet Focus On Activation/ Acquisition Faucet Full Force Add More Channels Optimize CPA/LTV Velocity = Payback Period
- 14. 14 Principle Six: More Tools ≠ Sophisticated Growth Growth does not require a magical combination of tools. There are 4 basic things that will take you surprisingly far....
- 15. Growth does not require sophisticated tools Four Foundational Pillars 15 Analytics Excel Basic SQL Skills Basic Statistics Skills Google Analytics + Mixpanel (or KISSmetrics) Your Best Friend Statistical Significance, Correlation vs Causation, Regression, Mean/Median/Mode/Distribution Analysis There will always be certain analysis you can’t do in your analytics tools.
- 16. 16 Growth Principles To Live By Building A Growth Equation Running A Growth Process 1 2 3
- 17. 17 Why Build A Growth Equation ‣ Math Doesn’t Lie ‣ Focus, Focus, Focus ‣ Predictability ‣ Prioritization ‣ Provides A Compass For The Business
- 18. 5 Steps To Building Growth Equation 18 Define Success Metric Drill Down Choose A Channel Basic Equation Define Funnel
- 19. Example: SaaS Business Step 1: Define A Success Metric 19 ‣ Success Metric = X + Y + Z • It’s the variable that you are solving for ‣ What Drives Revenue For The Business? ‣ Always Include A Time Period • i.e. Not just Active Users, but DAU’s or WAU’s
- 20. 20 ‣ What are you optimizing for? • Learning? Volume? Cost? ‣ What are you constraints? • Time? Money? Legal? Step 2: Your Channel Hypothesis How do you choose the right channel?
- 21. 21 Cost Targeting Control Input Time Output Time Scale Perfect World SEM SEO Viral Low High High Low Low High Medium High High Low Low High Low Medium Low Medium High High Low Low Medium High Medium High Sales Very High High High High High High Channel value depends on business. For example, SEO input time could be high for one business and low for another depending on how competitive the terms are. Step 2: Your Channel Hypothesis Build A Channel Matrix For Your Business
- 22. Example: SaaS Business Step 3: Define The Basic Equation 22 Success Metric = New + Retained - Loss (Define what New, Retained, Loss Means)
- 23. Example: SaaS Business Step 4: Define “New” Funnel Per Channel 23 Success Metric = New + Retained - Loss New = Visitor * Acquired * Activated Note: Funnel may vary on channel
- 24. Example: SaaS Business Step 5: Drill Down On Funnel Variables 24 Success Metric = New + Retained - Loss New = Visitor * Acquired * Activated Visitor Channel = A * B * C Acquired Channel = A * B * C
- 25. 25 Growth Principles To Live By Building A Growth Equation Running A Growth Process 1 2 3
- 26. 26 Growth Process Goals ‣ Establish A Rhythm/Cadence Of Testing & Improvement ‣ Forces You To Learn About Your Customer Over Time ‣ Tests Become More Predictable Over Time ‣ Establishes Accountability Among Team (No HiPPO) ‣ Provides Focus Among Team
- 27. 27 Build Your Growth Pipeline/Backlog List Of Growth Experiments Example: Growth Backlog Template
- 29. 29 Predict ‣ In the beginning, you will be dead wrong. This is good. • It means you don’t really understand your customer/ product. • Over time you will improve. Understand the “why” behind the success/failure of each experiment. ‣ Use Both Qualitative and Quantative Evidence To Back Up Predictions • Qualitative: Customer Dev Interviews, External Lessons Learned, etc • Quantitative: Previous Experiments, Surrounding Data, etc
- 30. 30 Prioritize ‣ Focus On 1 - 2 Channels At A Time • A channel rarely works out of the gate. • The depth of knowledge on an individual channel becomes a competitive advantage over time • Most big companies have been built off the back of 1 channel. ‣ What Stage Are You At? Traction or Growth? • Need big results? Don’t focus on the micro (i.e. Button Color) ‣ What Variable Are You Optimizing For?
- 31. 31 Test ‣ What is the MVT (Minimum Viable Test)? ‣ Segment/Isolate Your Test • i.e. Test a change on a portion of your keywords, not all of them at once • Segment large enough to get close to Statistical Signficance ‣ Define The Test Period/Goal • The number/date when you stop a test
- 33. 33 Analyze ‣ Owner Should Analyze Results ‣ Understand Why They Were Right/Wrong ‣ Averages Can Be Misleading • Use distribution analysis to get rid of outliers ‣ Understand The Macro and Micro Source: http://www.kaushik.net/avinash/excellent-analytics-tip-13-measure-macro-and-micro-conversions/
- 34. 34 Team Review ‣ Transparency Is Key ‣ Why Was The Prediction Right/Wrong? • Drill Down ‣ What Were The Lessons Learned? • Feed these lessons back into the experiment ‣ Are There Any Repeatable Best Practices? • Extract the repeatable best practices to inform and gain consistency of future marketing initiatives.
- 36. 36 Thanks & Resources ‣ Me - http://brianbalfour.com and @bbalfour ‣ Growth Masters: Andy Johns, Andrew Chen, Sean Ellis, Mike Greenfield, Gustaf Alstromer, Chamath Palihapitiya, Noah Kagan, Mark Roberge ‣ Stats/Analytics: Avinash Kaushik, Udacity/Coursera/ Boundless ‣ Quora/Twitter
- 37. Course Title Course Title INSTRUCTOR NAME