Thread by @eriktorenberg

Very high-level thoughts on growth:

- PM-fit
- Product Channel fit
- Metrics that matter
- Payback over LTV/CAC
- What investors mean when they want to know LTV/CAC
- Why to avoid paid acq initially if you can
- SEO

Product Market Fit is the idea that is your product good enough where you can start investing more acquisition channels.

NPS & PM-fit scores can be powerful as they measure intent:

https://twitter.com/eriktorenberg/status/1243469928507658240

Retention might be best way to measure (actions speak louder than words)

What you want to figure out is: "Is it working"?

Taking word of mouth & retention into account, is it growing on its own?

Usually, it isn't, so make sure you get to take enough shots on goal (pivot the solution, but less so the problem & not the mission—the reason ppl joined)

Product Channel fit:

Do you have a repeatable & scalable channel?

Two most common consumer ones are SEO & referrals.

SEO: Generate unique user generated content

Referrals: Offer an incentive that people actually want & will actually invite their friends in order to get

SEO takes time to set up, you won't reap the benefits day one

It's more like "If this company is huge in 5 yrs, SEO needs to be huge"

Thus you shouldn't spend 100% time on it. More like 10% on it setting up the basics ("set it & forget it")

Whereas referrals can work day one

Usually don't like relying on paid acquisition initially, if you can avoid it. Most big & durable companies didn't rely on it

Avoiding it builds the discipline of figuring out viral growth mechanics

Unless you prove that if you spend $1, you get $5, & you don't have high churn.

B2B:

Are you selling into an individual decision maker who then is going to scale the product out inside the organization?

Or is it a bottoms up type product where one part of the org adopts it organically (often free) & then seeds usage inside of the rest of the org.

Metrics that matter:

Early on, quality over quantity metrics. (e.g. retention)

50% or 10% long term retention matters more in the beginning than user growth rate.

DAU matters if you require specific use cases

It's less "can this get users" & more "can it keep them...+ paying"

Cohort analysis:

Isolate users by cohort so you can analyze how behaviors change as time goes on and as you change the product.

You can identify if there are natural attrition points ("graduation rates") and if your changes unlock new behavior.

Calculating LTV w/ only a few months of data isn't very constructive.

What people are getting at is "How will this product grow over time"

So you want to say "Here's what it'll look like at scale, here's what our flywheel looks like, etc

https://twitter.com/eriktorenberg/status/1242510927544463362?s=20

Payback periods sometimes better than LTV/CAC

Meaning how if I spend $1, how quickly do I get it back in not just revenue but contribution margin

& the reason for that is it's hard to build compounding growth on a paid channel w/o a ton of $ unless you have fast payback periods

What you're really trying to ask yourself is "can I reinvest these dollars into more growth?"

And if it takes you a year or two to get those dollars back then you're counting on another source of capital to fund your growth.

Companies over-focus too much on month-over-month growth before nailing the product (e.g retention)

Plus, in the beginning, the #s are so small you convince yourself it's working. But if retention isn't there it won't continue.

Focusing exclusively on 10% MOM growth might force you to over index on acquisition when you should be focusing on nailing the product

It might make it hard to tell the difference between real growth & fake growth

/FIN.

Thx to @far33d @JeffChang30 for convos that led to this