Mastering Growth Economics:
Your startup has customers? Turns out, that’s not enough.
Quantifiable growth, or “growth economics” matter
As a founder, you get swept up in solving a customer’s problem with a fantastic product offering, and so it might seem sacrilegious to reduce your business to numbers. But here’s the truth: after you’ve hit product-market fit, the business of scaling is about quantifiable numbers — what I would call your “growth economics.”
As you scale, your growth economics can make or break your company.
Managing your growth economics becomes your secret weapon because growth economics are the inputs to your growth chart over time. They reveal whether you have identified any ways to scale more efficiently, from levers for exponential growth, viral/product-driven ways to get away from paid acquisition, to plain vanilla, smarter ways to manage paid spend. (Unfortunately, series A and B stage founders learn this lesson too late — when many of these metrics are visible, measurable and hackable from much earlier on.)
Measuring growth economics: three simple equations
Three simple equations can reveal the “quality” of your growth and the strength of your business. Whenever possible, I prefer to use operating metrics because ideally a founding team is monitoring these metrics on a quarterly, monthly, or even weekly basis and this is harder to do if the metrics require you to close your books before you can calculate them.