Sounds nice, but what exactly is a startup growth engine? In our recent webinar, Chris Bechtel, CMO at BlueDeer, LLC, and Gadiel Morantes, Partner with EGFS, explained how building a growth engine combined with using Eric Ries’ lean startup principles to acquire customers in the most efficient way possible can build successful companies.
Chris started with Deloitte & Touche’s description of a startup growth engine as a systematic process that requires organizational infrastructure to consistently find, evaluate, and execute on business opportunities.
This is distinct from Sean Ellis’ categorization of growth hacking in that rather than combining marketing, market research, and technical strategies to come up with marketing solutions, building a growth engine focuses on creating a unified strategy to cultivate long term, authentic relationships that create value.
In which startup situations might this strategy have the most impact?
- You have insufficient resources
- Your team lacks experience and training
- Your business has poor margins
- You lack a clear plan for growth
Now that it’s clear what we’re talking about, here are some practical ways to shift your focus from short-term sales tactics to scaling your business for the long haul.
1. Quantify your business goals. Figure out where you’re headed. Make this explicit by quantifying the number of users, customers, downloads, subscriptions, contracts, revenue, or whichever metrics make most sense for your business. Not only does this provide a roadmap (by the way, it’s a must-have in creating your business plan) it’ll also give you a handle on the metrics investors want to see when they evaluate you for funding.
2. Identify your market potential and target customers. With your goals set, focus on who you’re trying to reach and on convincingly answering the following questions:
- What need are you filling?
- What distinguishes you from other providers?
- Who is currently fulfilling that need for your target customers?
Does this sounds a lot like the kind of analysis you would showcase in your pitch deck? It should! Investors will be looking for this information.
3. Identify top acquisition channels for your target customer. Once you’ve identified your target customers at a high level, drill down to the details of:
- What channels do your target customers prefer?
- Who are the top influencers in their buying decisions?
Keep in mind that not every customer is a good one. So don’t rack up customers just for the sake of it. Make sure you understand how valuable your customers are and compare your per customer acquisition cost by channel.
Your goal? To find the ideal channel: the one that yields the most valuable customers for the lowest acquisition costs, and is scalable. To tie it back into your business plan again, drill down on these numbers, then extrapolate them to create your financial forecasts.
4. Build a cross-channel marketing approach. Once you’ve got a core customer base, or the beginnings of one, you can build on it to drive sustainable, customer-centric growth. Do that by implementing an integrated, cross-channel approach across owned, paid, and earned media, but know that owned and earned media tend to deliver a better concentration of high quality customers over time than paid does unless you’re targeting a very specific market niche.
- Owned (your website, blog, SlideShare, Twitter, LinkedIn, Google+ pages) — Create inspiring content, utilize SEO to drive leads
- Paid (display advertising, sponsorship)
- Earned (press, bloggers, reviews, social media referrals). Generate it by showing performance numbers, contributing publications that your customers read; and sharing your unique insights on topics your audience cares about.
5. Understand what your funnel looks like. You need to know your funnel and assess the conversion rates for each stage (from impressions, to clicks, through page views, registrations, and purchases) to help you find the right channel and mix. Just know that the ideal mix and the relative effort you should devote to each is specific to your business and will shift over time.
High customer acquisition costs — fix: sticking to owned and earned media is more cost-effective for early-stage startups than going with paid media.
Under-utilized channels — fix: set goals for each channel and track results with Google Analytics so you know where to fine tune.
Prospects getting stuck in funnel — fix: test new programs to optimize conversion points.
6. Drive continuous improvement. Lastly, you want to regularly tune your engine; driving continuous improvement by measuring your KPIs (see David’s piece on Forbes for a deeper dive on startup metrics to track), putting technology in place (and then using it!) to track where your customers are coming from, measuring their success, and being efficient and consistent.
Creating a growth engine spans the functions of finance (budgeting for marketing spend), business development (mission-critical), and technology (building and maintaining systems and processes to collect, track, and analyze data).
It also involves using GOOD (“goal-oriented and opportunity driven”) customer acquisition tactics and successfully engaging, nurturing, and converting leads into revenue and customers. The more you can deliver this, the better your odds of success with customers and funders.
What were the keys to smart growth for your startup? Share your strategies in the comments section below or contact Early Growth Financial Services for help assessing your financial health and setting milestones.
Deborah Adeyanju is Content Strategist & Social Media Manager at Early Growth Financial Services, an outsourced financial services firm that provides small to mid-sized companies with day-to-day accounting, strategic finance, CFO, tax, and valuation services and support. Deborah is a Chartered Financial Analyst (CFA) charterholder with more than a decade of experience as an investment analyst and portfolio manager in New York, London, and Paris.