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I recently read "Hacking Growth" and found the concept of "Growth Equations" very interesting, so I'm looking for more examples and writing about this. I'm particularly interested to see examples of growth equations applied to different business models, and discuss how granular it is helpful to go. For example, for a direct-to-consumer ecommerce brand, it could be as simple to say: (# Sales Units) x (Average unit value) = Sales Revenue. But that's not very insightful or actionable. So perhaps it's more helpful to look at something that better helps understand how to move the lever for the business, such as: ((Sales Units) x (Av. Value)) - (CAC) = Gross Profitability? Then, of course, you could subdivide from there, breaking "sales units" down into which units come from paid, organic, referral or repeat customers, and look at the CAC separately for each. Or you could break out the funnel for how you get to those sales units, such as visits to product and conversion rate to sale. But then it gets very granular and complicated. What do you think?

  • EF

    Ed Fry

    over 2 years ago #

    I did something similar in my last role. Really, you need some level of volume to start breaking this kind of stuff up and draw statistical significance.

    Signsups, paid conversions etc. are all easy to measure, but hard to find causation. The "aha!" moment is a key part of your growth equation to identify some of those leading triggers and drivers of growth.

    At Hull, we've researched how different companies like Typeform, Appcues, DigitalOcean, Moz and others of different sizes and stages go about finding these signals - we found three methods:

    1. Raw product usage (quick start, easy. Less than 15 minutes). Guess at a trigger.
    2. Quick regression analysis (identify more and better opportunities. An hour or less). Remember, specificity allows you to hone in your content on what matters and convert more. Find a handful of triggers.
    3. Data science and artificial intelligence. Find many triggers, and deliver precise content (ongoing, five-figure spend)

    Since these increase in complexity and potential return, start with the simplest. The basis of the more advanced techniques comes from the simpler techniques anyway. Start with a guess.

    You can read more about that here: https://get.hull.io/complete-guide-pqls/chapter5/

    At my last role at inbound.org, the key trigger to becoming a contributor (which drives all the content and engagement across the community) was completing a profile. 30% of users would fully complete their profiles, and then 25% of these would become contributors. I found this with simple regression analysis in Google Sheets using data pulled from our backend database.


    Once you've identified these causal moments, you can start to build out these growth models that join the dots between your key SaaS metrics like CAC, LTV, number of signups etc. and inform your growth experiments.

  • GC

    Gary-Yau Chan

    over 2 years ago #

    That's a complex concept.

    First, you need a Growth Model to justify how many users you are bringing in and the conversion level in each cohort for each channel.

    Then you need a Financial Model to figure out the level of investment input for each channel.

    I think once you complete these 2, you have an idea on how to define this "growth equation" for the company.

    If you are presenting this, I would macro the equation to the Growth Model