5 Insights for Startups to Drive Growth in 2018
Paul Graham has said before that startups are meant to grow fast. Execution is a very key component, every other aspect of startups is important but growth is paramount. Growth is dependent on execution which is shown in several ways from product design, to PR, marketing, customer support, among other things.
In 2018 when differences between competing companies only amount to a couple of features, the stakes are high. For startups, the additional stresses of grappling with low sales, few users, and little revenue means that the stakes are even much higher than normal. It is critical to understand several components that make what has come to be known as growth in the startup world. In order to push your growth and beat milestones, startups must note and consider the following insights:
1. Product market fit
The product needs to be needed by the target market. In fact, in most instances, it is preferred to relate to this product as a “must-have” product for the market it is intended for. Without the product market fit, a startup would be trying to force growth and that comes at high acquisition costs, lots of spending in advertising and marketing, yet very little results to show in the end.
“You can always feel when product/market fit isn’t happening. The customers aren’t quite getting value out of the product, word of mouth isn’t spreading, usage isn’t growing that fast, press reviews are kind of ‘blah’, the sales cycle takes too long, and lots of deals never close. And you can always feel product/market fit when it’s happening. The customers are buying the product just as fast as you can make it — or usage is growing just as fast as you can add more servers. Money from customers is piling up in your company checking account. You’re hiring sales and customer support staff as fast as you can. Reporters are calling because they’ve heard about your hot new thing and they want to talk to you about it. You start getting entrepreneur of the year awards from Harvard Business School. Investment bankers are staking out your house. You could eat free for a year at Buck’s.” ~ Marc Andreessen
2. Use retention to understand product market fit
The topic of retention rates for startup has come a long way. We have written a lot of articles on how startups should retain their customers and what metrics and data to consider for this. The more the users who keep using your product, the more illustrative of your product’s market fit. What would be essential however, is to investigate your retention rates vis-à-vis your churn rates. The people who keep using your product after their first month will be an indication of how much your poduct is needed. When retention rates are higher and there is less churn happening after the first week, or first month, or after a customer has achieved their main goal of adopting your product, then you can look at it as a good indication of market fitness. High retention rates translate to growth, because of word of mouth, good reviews, sharing, etc. Sometimes the growth can be lacking incentives except for the fact of the need which your startup solves.
“The term product/market fit describes ‘the moment when a startup finally finds a widespread set of customers that resonate with its product’.” ~ Eric Ries
3. Track your data
Understanding when, where in the onboarding process you are losing your customers most is a very valuable aspect of growth. Startups need to invest a lot in tracking and reporting this data in order to know what problems are faced by customers on their journeys to become loyal customers. In most cases, the process would need to be tweaked or overhauled without affecting the product. Nabbing these churn points is important, but it is impossible to know them without teaching your team to track and report this data.
“As you gain fresh insight from your data, it opens the door to new questions. As you have new questions, you need to update your instrumentation and analysis. Saying the process is “done” is saying you understand every thing there is to know about your users, product, and channels.” ~ Brian Balfour
4. Understand what is driving your growth rate
Your growth rate is a combination of your retention numbers + new users + resurrected users – churned users. It is good to know what the driver of your growth rate is so that you can maximize more on it. Without knowing your winning points, it is not possible to improve them. With the same zeal that you use to understand your churn and retention rates, learn what incentivizes or accelerates your growth and how to improve it more to grow bigger and faster.
If there’s one number every founder should always know, it’s the company’s growth rate. That’s the measure of a startup. If you don’t know that number, you don’t even know if you’re doing well or badly. ~ Paul Graham
5. Test and test some more
The only way to know what works is to find out. For startups, the way to know is by testing. You don’t want to overhaul an already working system and replace with one that has been tried yet. Therefore, you segment your users and try out an experiment geared towards noting the response from the users in the testing segment. Testing can be in form of A/B tests, call to actions, and a shift in the onboarding process, among several other ways. Encourage your team to run growth tests on a monthly or weekly basis to inform product features and improvements. Growth is achieved continually, running tests and knowing what works and what doesn’t; and consequently implementing what works, can accelerate the growth rate tremendously.
“For meaningful growth, startups must completely change the rules of traditional channels or innovate outside of those growth channels. They are too desperate and disadvantaged to adapt to the old rules of marketing. They have to dig deep creatively, and relentlessly test new ideas. If they don’t figure it out quickly, they will go out of business.” ~ Sean Ellis
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