As Startup Founders and early stage employees we all understand that growth is essential for the ongoing success of our company. In order to be successful however you have to be aware of the levers that are available to you and how they can impact growth within your organisation.
Elena Verna, the SVP of Growth at Survey Monkey recently spoke at the 2016 StartCon Conference in Australia on this topic and outlined how to put this concept into practice.
Using Survey Monkey as a prime example of a Software-as-a-Service business operating on a freemium model Elena identified that the three levers relevant to their business (and by virtue most other SaaS companies) are:
- Number of Paid Users/Subscribers
- Average Revenue Per User
Essentially “pulling” on any of these levers will have a positive effect on the business. An increase in paid subscribers obviously has direct relationship with the revenue generated by the business. But so does increasing retention from 10 months to 12 months on average.
Once you understand the levers that impact your business you then need to analyse what can move these levers in a positive direction. Continuing with the example above we can see the following:
- The number of paid users is impacted by increasing customer acquisition/the pace at which new users are acquired.
- Average Revenue Per User is essentially a conversion issue. How can you convert an existing user from one plan to another in order to generate more revenue off of them?
- Retention can be affected by re-engagement. How often are you communicating with the customer and showing that you provide value to them?
To monitor change in these areas Elena then went on to highlight the importance of KPI’s. In particular, she warned against using top line revenue as your measure. By the time the change hits your revenue number it is already too late. You need to identify something further down the line that acts as an “indicator”. There is always something that moves first, before revenue. Identify that, and use that as the KPI for your business.
Finally, Elena referred to the culture in Survey Monkey and how they approach growth hacking experiments that impact these levers. What was interesting here was that they have a stated metric to fail more than 50% of their tests. The belief being that if you have a hypothesis and it fails, then you have learnt something new. And these learnings are crucial for being able to form new hypotheses to drive the business forward.
Image Credit: CC by Alexander von Halem