February 7, 2022
As CFO, I have realized how impactful a carefully designed growth model can be. If you want to grow consistently and have detailed data to make accurate projections, your growth model should be your guiding light. But let’s start from the very beginning and a change in perspective of what we think is growth:
A common misconception is that growth is just marketing. It’s not. Growth involves every area of your business, and they all should fit in and work together if you want to turn your company into a well-oiled machine that grows sustainably.
An easy example of what is included within growth is sales. Marketing is extremely important, but if you hire a growth partner like Ladder to generate MQLs and SQLs for you but you don’t close them, you won’t see much growth.
But growth includes non-revenue generating areas as well. If you don’t have great operations, things will break as you scale. If you don't have a great finance team, you might have cash flow problems. If you don’t have a great HR team, you might be under-resourced. If you don’t have great talent, your clients might churn.
Growth isn’t “let’s run a PPC campaign and get some leads.” A good growth model involves everyone in your team, cross-functionally – and brings them together to scale sustainably, in control, and predictably. Here’s how we built our own growth model at Ladder:
Before you go too deep into building a growth model, you’ll want to make sure that is feasible over the long term and that it will help you reach the ultimate goal, green number in your bottom line.
To do that, one thing I believe is key is defining your team’s billable time. Your employees are contracted to 40 hours per week, but you can’t expect them to do client work all the time. You need to segment their time for other activities like personal development, company meetings, etc.
To give you a benchmark, we expect them to do billable work around 70% of the time, which is very generous for the industry standards. This is something you need to define first or, otherwise, everything else in the model won’t work.
For the growth model to work, you also need to understand what will contribute to lead generation and client acquisition. We did a thorough analysis of what helps bring new clients to Ladder and what doesn’t. The data from our regression analysis told us that most leads came from traffic we brought to our website – mainly our blog, our Growth Playbook, and our other resources.
After understanding that our main KPI was traffic, we needed to identify what inputs led to that output. Whatever KPI you see drives the most impact for your company, continue to reverse-engineer it until you find what it is driven by.
We determined there were three leading indicators: our content and our written blog articles (with a lag, more on this later), our email subscribers, and our paid campaigns (search and social).
We included and automated all these parameters into our growth model.
Once we understood our main KPIs and our leading indicators, then we could see what our conversions are and predict how they will be in the future.
Let’s say we drove 120 leads per month. From those 120, we know that, in average, only 20-25% of them will be qualified after we score them. We have MQLs and SQLs and we look at many different factors to grade them: budget, where they’re located, their objectives, etc.
You also see how other areas besides marketing start getting involved and are also part of the growth model.
From those MQLs and SQLs, a percentage of that will move to our next step – meetings booked. From there, a percentage will move to proposal and conversion decision-making, and a percentage will move to closed won. Because we have historical data, we can have an accurate estimation of our conversion rates,
From closed won, we have a specific onboarding team that will integrate the new client and a success team that focuses on delivering our strategy, executing it, etc. These teams are also part of the growth model.
As we said before, a good growth model should prevent things from breaking as you scale. If we backtrack, we can estimate how many leads we will generate based on our traffic and our leading indicators. Then we can leverage our data and scoring system to know how many of those leads will turn into closed clients.
What we also can estimate is what packages and retainers our clients will be in based on our lead scoring. There are, of course, outliers – but, in general, we can then estimate how many hours our team will need to deliver for them.
This also gives us information on where we need to hire if we’re under-resourced. Because we can “see things before they happen,” we have enough time to make hiring decisions and fill in the gaps before they are urgent. If we need new creative strategists, designers, copywriters… we can recruit, hire, and train them in advance.
At the end of the day, a good growth model works like a domino effect. When you identify the one unknown, everything else drops with it and you get the full picture. Everything is automated so you can build projections and anticipate all your variables in advance so the machine continues to run smoothly and your company grows sustainably and profitably.
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