The growth plan is a loose road map for startups that not only defines KPIs, but also sets some structure for eventual growth. In this case, I created a growth plan for a young startup and therefore decided to begin with defining the value proposition.
1. Business Model Canvas
The Business Model Canvas is designed to reflect on your current business model. I used this template from Canvanizer to create mine. There are 9 main sections to fill in ranging from key activities and resources to revenue stream and cost structure.
2. Value Proposition Design
The Value Proposition Design ties in directly with the Business Model Canvas and helps you tackle the core challenges of your business. When filling this in, you need to define your product or services, your product’s gain creators and pain relievers. On the other hand, you also need to fill in the customer segment side which includes the customer job, their pain points and what they stand to gain. If this matches up with what your product or service is offering, you should have product/market fit.
3. Customer Personas
Once you’ve defined your value proposition, it’s time to define your audience. In this case, we start out with assumptions (i.e. guessing!). It’s important to define your customer personas as much as possible – this means including typical name and age, what their interests are, and where they live and hang out.
Here is an example of a customer persona I created:
They are always on the go – no time to go to the store to buy a magazine but a lot of time spent on public transportation or in an airplane. They are digitally inclined and prefer things to be on their mobile phone/digital. They use their mobile phones for almost everything and already have other “all you can…” type of apps (Netflix, Spotify). They read the news on their phone/online and they don’t buy physical newspapers. They read books on their tablets but occasionally they buy a magazine for when they go on vacation. They don’t have magazine subscriptions because of the long-term commitment and they don’t know ahead of time if they will read the magazine.
They live in the major cities (Amsterdam, Utrecht, Rotterdam, The Hague). They might also live in neighboring villages but go to work in the major cities. They are between 22-40 years old and work in the tech industry, fashion industry, or corporate HQs. They are single, in a relationship/married and may have young children. They have a good work/life balance and use their free time to do something they enjoy or to relax. They travel a lot (either to work or to go on holiday) and when they do they either take trains or planes which means they have to kill time on the way to their destinations. To kill time they either listen to Spotify, read e-books, watch Netflix or read a magazine. When they are at their holiday destination they may read an occasional magazine by the pool or at the beach but most of the time when they are bored and need something to do, they do something on their phone.
They are used to having things curated to their preferences and like to discover new but similar things (ex – Spotify suggesting other artists to listen to).
Magazines they probably read: lifestyle magazines, travel magazines, health & fitness magazines, industry-specific magazines, sports magazines
Michelle, 27 years old
She reads magazines occasionally but only if she goes on holiday and has some time to kill or when she’s on the train on her way to work but most of her time is spent on her phone. She doesn’t like the long-term commitment of a magazine subscription and prefers to try before she buys.
Lives in Amsterdam and works at a corporate HQ
She likes the ‘all you can…’ type of apps and apps that she can be personalized to her taste. She also likes discovering new things.
*Customer personas may change over time and it is important to keep adjusting them until you found one that can scale up.
4. AARRR Model + Metrics
Last and definitely not least, it is key to go through the AARRR Model and define all the steps of the funnel. The AARRR Model (aka Pirate Metrics) is every growth hacker’s bible. It consists of 5 steps: acquisition, activation, retention, referral, and revenue. Each step of the funnel should be defined by One Metric That Matters (OMTM), which is the KPI. Below I’ll go through the funnel, explain the steps and show some examples of how I defined them for Maggy, a magazine app.
Acquisition is the first step of the funnel. In this stage, we need to acquire users. Depending on your product or service, acquisition can be defined differently.
At Maggy, we defined acquisition as someone who downloads the app and creates an account.
OMTM: Number of users who download the app.
Supporting metric: Number of users who create an account.
Once the user has downloaded the app, they will go through the onboarding process in order to understand value proposition. Again, depending on your product or service, this step can vary.
For Maggy, the onboarding steps are as follows:
Choose magazines – choose interests – register – explanation pop up for each of the 4 different screens
OMTM: clicked “got it” on all the explanations.
Retention is the stage in the funnel where you see that users are actually using your product or service. Once you’ve acquired and activated your users, how will you define retention? This is key because this is the step where you can define active users vs non-active users. It’s one thing to get a lot of app downloads, but it’s another if people actually use your app. Below is how we defined retention at Maggy.
After having read their first article, the user is now performing the key activity (reading articles) multiple times per month. Users can either have a free account (5 free articles per month) or a paid account with unlimited reading.
Number of users who read 3 articles per month (free account).
Number of users who read 8 articles per month (paid account).
Once you have active users, they can bring in more users through referral. Word of mouth plays a large part in this, but some companies also set up a referral system where both the referrer and the referee get rewarded (think of Uber for example where the existing user can get a free ride when a new user signs up with their referral code. The new user will also get their first ride for free).
At Maggy there is currently no referral structure in place, however we can still create a hypothetical situation and define the metric as follows.
OMTM: Number of new accounts created from referrals.
At the end of the day, this is probably the most important part of the funnel. How does your product or service earn money?
At Maggy, the current revenue stream is coming from the Premium accounts.
OMTM: Number of users who pay for a subscription after the free trial.
*Essentially all the target numbers for these metrics tie in with your business’ costs and how much revenue you need to break even.