As the CEO or the Sales VP of a startup, there is only one thing at the top of your mind at all times – growth. More specifically, are you growing fast enough?
Startup growth, defined
This is a question your board of directors or investors will ask frequently – that is the nature of the startup beast. As Paul Graham distinguished in a great essay, not every newly founded company, small business or tech shop is a startup – a startup is a company designed specifically to grow fast. Such companies, in the simplest terms, make something lots of people want and have the means to reach and serve (read: sell to) all those people.
There are typically three phases of growth a startup goes through. In the beginning, there is 1) an initial period of slow or no growth as the company struggles to find its footing. Then, there is 2) a period of rapid growth, when the company has hit its stride and found veins of gold to pursue growth with. Finally, there will be a 3) plateau as the startup grows into a big company, bumping up against either internal limits or the limits of the markets it serves.
These three phases, when ideally executed, produce an S-curve. The slope of the S-curve represents the company’s growth rate. Typically (and at its simplest), growth rate is measured in one or two ways, or a combination of both: revenue or the number of active users.
How can I measure my startup’s growth?
There are various quantitative measures that contribute to growth – having an increasing win rate (closing a higher % of your opportunities), a larger average deal size (each sale is worth more), a shorter sales cycle (it takes you less time to close deals) and a larger sales team (more reps) are all great indicators of growth.
Performing well in the aforementioned sales metrics is a good indicator that your overall bookings is also growing. A bookings sales report that is up and to the right is what every startup CEO or Sales VP wants to look at. Be forewarned though: there could be a wide gulf between the bookings number that your Salesforce reports suggest and the actual accounts receivable that your CFO receives. This is why CEOs need multi-data source reporting, to reconcile the potential differences.
Beyond bookings and revenue, a good sign of impending or ongoing startup growth is usage – quite simply, are people using your product? Or are they buying it…and then forgetting all about it – or worse, disliking it – before eventually churning?
A usage report like the one below is what every startup strives for. This example of a startup has slowly seen both its product opens (number of times the product is used in each month) and its base number of users slowly inching up over the past year. A usage report with an opposite trajectory would suggest that many users are churning or unsubscribing after a period of dissatisfaction with your product – this is a very scary sight for a startup CEO, indicating that the very opposite of growth is happening.
Growing a startup can be a stressful responsibility. Constantly monitoring the right sales metrics and reports will help you stay on top of your company’s growth rate, ensuring that you are in fact growing fast enough for your investors, your board of directors and yourself.
Do the metrics suggest you’re not growing fast enough? Stay tuned – in an upcoming blog post we’ll touch on some possible reasons why this is happening.