Daily Reading Notes

The Lean Startup

Day 8

Posted on 2019-04-03

A startup has three engines of growth to choose from. It’s important to focus on one engine of growth at a time because it let’s you accurately measure and plan out your efforts. Sometimes the type of business dictates which model to follow. Other times you may need to validate and pivot before landing at the correct model. The three methods of growth are:

Sticky growth. This type of growth relies on clients continuing to use the product once they started. Because a big component is customer retention, you don’t have a single metric to measure. Instead, you have to balance between the rate of acquisition and the rate of churn. If they even out and you start loosing customers at the same rate that you gain them, your business will stagnate.

Viral growth. This type of growth became popularized by the rise of social networks. It’s trademark is that customers spread it to other customers. The key to this type of growth is making sure that every customer refers more than one person. Even if they only refer 1.1 customers on average, it will still cause exponential growth.

Paid growth. This is the traditional way to grow your clientele. It requires a sales staff, marketing budget, and support personal. Sustaining this model requires balancing a simple equation of the money spent on customer and the money the customers earn the company through their use of the product. As long as the customers produce more revenue than it costs to acquire them, the company will grow.

The Lean Startup