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How to Build Your Growth Engine

1/2/2015

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graphic of start up growth engine

What is a growth engine?

A key element of your business model is the growth engine. Your start up needs a repeatable and predictable set of activities which will enable you to build customers and revenues - this is your growth engine. Your growth engine determines the processes you will adopt, your sales and marketing strategy and many of the staff you will hire. It also enables you to identify the best metrics for your business. Tracking these metrics and taking actions to improve them will become the core of your management model.

Are you ready for growth?

Start ups needs to scale and a powerful growth engine is an essential part of a scalable business model. Note that the growth engine only comes into focus at the right point in the development of a start up. Identifying and developing customers and establishing product/ market fit must come before you fire up your growth engine.

Every business will have a unique growth engine adapted specifically to your products, customers and users. Different business models have growth engines with different core characteristics. For example B2B is different from B2C, SaaS is different from usage based revenue and so on. But we can identify the core common components.

The 4 cylinders

Your growth engine has 4 cylinders:
  • Acquire - You should know your market (if you don’t then I suggest you don’t yet have product/ market fit). You need to reach out to that market and persuade the potential customers and users within it to acquire your product. Acquisition in this sense is the entry level to your sales process. Signing up for your website or downloading your app for instance.
  • Engage - Next you must engage users with your product or service. Note that it is users who must be engaged first. In many cases users and customers will be the same thing but not for every business. Think of Facebook again. Its users are closely engaged with the product but they pay nothing. Engagement is the next level. You need to measure patterns of user behaviour and activity to understand and grow engagement.
  • Monetise - Acquisition and engagement should be a reinforcing cycle. At the right point in the cycle you will seek to realise value. This can be directly by converting users into paying customers or indirectly by selling advertising or generating value in some other way from user data. 
  • Economics - You must understand the drivers of revenue and cost for each activity in the first 3 cylinders. Getting this balance right is critical to ensuring growth is profitable growth.

Do not view this as a linear process. Like a real engine, each of the four cylinders needs to fire in unison to generate real power. It is common to to find start ups who can make one or two of the 4 elements work - acquire customers easily perhaps or make find a price where the customers they do have would be very profitable if only they had enough. True growth only happens when all four elements are working well.

Measure, Measure, Measure

Measurement is the vital element to make the growth engine work. Analytics have come a long way and we are now able to precisely track user behaviour and action in real time. Measure to understand how your product is used and build patterns of user behaviour. These numbers drive the heart of your business in 3 ways:
  • Understanding how your product is used and improving the experience for the user are the key drivers of product development.
  • Tracking patterns of user behaviour and predicting future actions is the basis for both converting free users to paying customers and upselling existing customers to higher value products.
  • Data about user demographics and engagement are the core value that you will offer to advertisers or any other source of data revenue.

How do you find your growth engine? Sign up for our newsletter to get regular ideas and tools that will help.
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    Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.

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  • Home
    • Tartan in Tallinn
  • Blog
  • Free Downloads
    • Sunstone Financial Information Survey 2017
    • Sunstone SaaS SWOT Analysis Tool
    • The Book of Business Plan Ephemera 2014
    • SMB SaaS Unit Economics Calculator
    • How technology is killing the CIO
  • About
    • Kenny Fraser
    • The Legend
    • Community >
      • Mallzee
      • Appointedd
      • SaaS Group
  • Financial Model