Your Next Twelve Months Growth Should A Be Math Problem

Your next 12 months of growth should either be pretty much a solved math problem or an unsolved math problem with a general understanding of the gap you need to fill and a bunch of mathematically justifiable experiments or outs that might fill that gap.

The image below is what goals for a typical early stage self service subscription VC backed company might look like on a weekly or monthly basis. Basically, your VC / advisors have suggested that if you can 4X over the next year with a 6 month payback period on your marketing spend, then you’ll be in a good position to fundraise for the next round. 

So you build a set of goals similar to the image below that takes your revenue goals and then extend them to your company’s funnel stats to date. [Also, notice in this model, as in most, you ramp up growth using a constant CMGR].

Then you want to be able to do a build up of your existing growth channels that will hopefully show you can hit your growth goals without much risk or that will at least define the size of the gap that you need to fill. Here’s what that might look like.

In this situation, you can see that while existing channels look to be able to hit growth targets for the first first half of the year, new channels or unplanned improvement on current channels will have to happen to bridge the gap over the latter half of the year. [The gap is the area highlighted in red.] 

The fact that you have at least an estimate of the magnitude of the gap you need to fill and the time frame of the gap is very helpful for planning and experimentation.  So the next step is to make a list of all the ways that you might want to bridge that gap and each tactic you plan to test needs to be mathematically justifiable. Each test should have one or a couple assumptions that you are testing to see if the channel actually works and might scale as hoped. Here’s what the model for a couple prospective channels might look like. Note that the assumptions highlighted in yellow are what we are trying to get better data on via test before really committing to the channel.

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SEO

Once you do the above modeling of new channels, you generally want to ignore channels that obviously won’t work or will likely be too small to matter. Then you can focus your energy on serially testing the channels that you have modeled out that could really fill in the gap. In the example above, if you can’t expand the SEO keyword targets for the company beyond what it is listed above, you probably would not even pursue the SEO route because the ultimate outcome would be too small to be material. My general bar for what is too small to matter for a new initiative for an early stage company is that it can’t be less than 20% of the company’s revenue the month it peaks.

Your ultimate end goal will be a testing list like the image below that has a bunch of tactics your team wants to try that you’ve already modeled out could deliver meaningful numbers of customers at acceptable unit economics if the assumptions pencil out. 

Being quantitative here is crucial because most startups are definitionally resource constrained so being efficient about only testing high impact stuff is really helpful for using your team’s resources wisely.