You’re Doing It Wrong: Anticipating (and Demonstrating) Growth

Business.com / Starting a Business / Last Modified: February 22, 2017

Growth metrics are often based on guesswork. Instead, businesses should work backwards from a sensible goal to figure out what to track.

As a good baseline rule, you don’t want to try to slapshot business growth with a hockey stick.

Outside of the actual game, a “hockey stick” for business is a classic graphical depiction that shows data points dramatically changing from a steadily and slightly inclining upwards base line (the blade) to immediately straight up (the stick’s shaft). This is usually achieved by projecting a fixed percentage of incremental growth every month that eventually results, whether you intended it to or not, in a hockey stick growth curve.

The problem with this, as David Crow observes, is:

"It often seems that entrepreneurs are obligated to include a hockey-stick growth curve in their pitch deck to potential investors—regardless of the actual traction or revenue growth. You know that investors want to see momentum. They are looking for data that demonstrates a startup is moving up and to the right. The reality is that there is no ‘right’ number that makes investors throw money at startups. What matters most are not the numbers you use in the pitch, but your understanding of the key aspects of the underlying business."

We all tend to accentuate the positive to make our business look as good as possible. But there’s a difference between creative marketing and wishful thinking. Just saying you expect to grow, and amassing a bunch of data and charts that seem to project an impressive growth curve, doesn’t mean you will in fact grow. A

s David Crow notes, “The problem is not that entrepreneurs use projections, but that they present models disconnected from the minute data they have.”

What and How You Should Grow in Business

The only way can you grow is to focus on what you can grow and how you can grow it, then work to deliver it. That seems obvious, but as Noah Kagan explains in TechCrunch, it’s sometimes hard to see the proverbial forest for the trees. He recommends following the advice he received from Mark Zuckerberg: focus on one thing at a time.

Kagan’s company, AppSumo, used to employ a complicated dashboard that incorporated a spreadsheet and multiple charts to display:

  • Daily paid invoices
  • Total emails
  • Average paid buys
  • Average gross

All of this information was sorted out by various parameters and looped into goals, if you knew where to find them. The trouble was, as Kagan says, “We had so many numbers we were trying to improve we ended up improving none at all. Worst yet, if you went around the asked AppSumo employees what our company goal was, everyone would say something different.”

So, Kagan took a new tack. Instead of an information dump, a new dashboard displayed a big number. Get 3,333 customers to sign up to a new course offering by the end of the year. He and his staff then looked at exactly how they could go about doing it.

Related Article: Which Social Media Metrics Actually Matter

They looked at their previous marketing efforts and the digital marketing channels used (Google Ads, Reddit, Digg, etc.) to discover which delivered confirmed users of their services. Then they developed a social media strategy that employed those channels that best delivered confirmed users. They based their marketing plan on past performance, evaluated what was actually happening, and shifted efforts from what was actually working well from what was not.

The result was they made their one-stated goal by October.

If this seems overly obvious to you, Kagan agrees. He notes that it’s “stupidly simple. That’s what makes it so powerful.”

Focus On Inputs and Outputs

  • Are specific to your product/business. Basic cookie cutter metrics, such as total registered users, don’t tell you anything by themselves; it’s great you’ve got a ton of people registered for your service, but how many have actually used it (conversion rate)?
  • Should lead to a desired output, i.e., number of new customers (growth rate).
  • Must be scalable. For example, if you’re doubling your content marketing, what kind of content do you need to produce, what channels will you use to deliver it, what will it cost you to produce and deliver it?

Related Article: Smart Business Growth Lessons for the Risk Adverse

You can control your inputs. If the outputs aren’t what you expect, you can always adjust the inputs. Equally important, you can identify obstacles or bottlenecks that prevent the inputs from creating the desired results, and create new inputs that eliminate the problems.

This results in real growth that you can continually evaluate, adjust expectations up or down, and truly act upon. As opposed to just hoping everything will work out as those guestimates on a spreadsheet seem to indicate.

 

 

 

 

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