Five Concepts to Measure Growth and Success for your Startup

Knowing your numbers is a crucial step towards unlocking the potential of your product. During my time working in several fast-growing companies, I figured out that every business fundamentally relies on five major pillars in order to grow. If we break down these areas and start to identify key performance indicators, you’ll see how a data driven mindset can lead to tremendous growth. I’ve summarized a framework of approaches which will give you a basic idea of these key indicators. You won’t be disappointed to have a data driven mind set to see what matters the most for your startup. Lets call this concept AAVRR 💸

Acquisition

Explore every existing channel from Social media to forums to platforms and identify the best channels to acquire your potential users. Dive into the Conversion Prism of Brian Solis and discover the possibilities to find the right target group. Besides that, use paid growth channels, like adverting, growth hacks, sponsoring, partnerships to test and explore which channels converts the best. Use the key performance indicator CAC (Customer Acquisition Cost) for that metric. It’s important to keep track of your costs when you acquire new users. To specify your metrics and make them more comparable you can use Cost per click (CPC). Understand the target group of your product/app/website and find the best source to reach them.

Activation

The next step is turning the visitor into a user or activating them. Think of this as starting a relationship with the visitor. Your goal is to get some level of commitment from the user. Different verticals have different shaped funnels, but this is generally the amuse-bouche of your product. For SaaS companies we are most familiar with a limited time free trial or a freemium offering with limited features. For an e-commerce company this could be a loss-leader product, and for a photographer this could be a free consultation and/or product samples. Track how many visitors turn into customers by using the conversion rate (CR) as a metric. Depending on your vertical, the height of the activation stage in your funnel will vary, but it is generally when a customer is able to experience the product you are offering first hand.

Virality

Your startup won’t grow exponentially if there is no virality component in it. With every user you acquire, a minimum of 1,1 users should follow. This concept is known as a viral coefficient (VC) — defined as the number of new users an existing user generates. This kind of natural sharing process is also called inherent virality. You can use referral programs, invite friends to unlock features, sharing options, or other growth hacking techniques to encourage users to bring contacts onboard. For that, other ecosystems and APIs could be the best leverage for viral growth, as they’re full of potential leads. To point it out, virality is not a single feature. It’s a design principle. It’s not a result of good luck. It’s engineered. Forget about forcing users to use random share buttons. You must understand your audience and design a user flow that leads to sharing.

Retention

You will start to see when users start to love your product by how often they come back over and over again. The best way to measure this indicator of success is to look at how long they are using the product over a certain period of time. You can measure it by user retention (UR) and is defined as the percentage of users who come back and perform any action with your product. Use simple techniques like push notifications, newsletters, promos, reminders to encourage users to use your product on a regular basis.

Revenue

The most important overall KPI’s where business, product & marketing runs together is at the end the revenue stream. The KPI is defined as the Monthly Recurring Revenue (MRR) or the result of the performance of your product summarized as the amount of revenue generated per month.

A baseline metric to measure is how much value is derived from a customer. Use the Lifetime value (LTV) KPI to get an understanding of the value of a customer of their lifetime.

It is correlated to previous efforts and can be measured with the conversion rate, which is the percentage of visits which is converting into leads. When you know what the value of a lead is, you can determine how many leads you need each month to sustain your business and how much you should pay for advertising and the circle starts from point one again.

Always consider measuring your metrics on a weekly or monthly basis to gain a better understanding of your week over week growth (WOW %) or your month over month growth (MOM %). Use tools like Chart.io, to visualize your data and make them more interpretable. However, you need to figure out which key performance indicators can be the leverage for your product. It should become your mission to focus on a data centered approach to unfold the potential in order to find weak spots or opportunities which will help you to leverage your growth.

Get in touch with me: https://www.linkedin.com/in/felixgerlach/