With any kind of business in the start-up process, there are three phases it will go through in order to grow:
Traction
Transition
Growth
During each individual phase, the goals, metrics, volume, channels, optimization and team differ. In order to efficiently work through these phases towards success, you have to pay close attention to these differences and plan your actions for your product accordingly. Follow these three phases to ensure success.
1. Create a Grip: The Importance of Traction
"That's one small step for man, one giant leap for mankind." Compare the famous words of Neil Armstrong with your product. The traction phase is Armstrong's first step on the moon - once he made that first step, he found different things to examine. So when you make that first step with your product, there will be a world of opportunities available to you for exploration.
- Goal: You essentially want to put your foot in the door. You want your market segment to find your product attractive. Without this, the last two phases can't occur.
- Metric: The measurement we use here is the retention rate of the product. There's no point in continuing your efforts with the product if you don't have a strong retention rate. You can create a retention curve like the one below in order to get a clearer understanding of your audience and how large it really is.
- Volume: Be cautious and don't go overboard when targeting customers. You want to understand your product/market fit, but ou don't want a large influx of people to bombard your product. A few people will be enough because you're still in the early stages with limited resources
- Channels: Here, you'll want to find 2 or 3 channels that will help with the steady volume of customers. There are several different types of channels that you can experiment with in order to find the perfect one for your goals.
- Optimization: Look at the big picture. Focus on the big changes that could help your product, such as changing your target customers, as opposed to the miniscule things - such as which font you use on the website.
- Team: One isn't the loneliest number, or at least not in this case. At this particular moment, you should only have 1 person thinking about these phases. This person should be thinking about these phases and stages almost non-stop. If needed, find part-time help on the side.
2. Implement a Transition: Move Forward in the Right Direction
The transition phase could be compared to what NASA did after receiving all of the information from the first steps on the moon. Basically, you take the information you receive from the first phase and build on what you have to take it to the next level.
- Goal: This is when you start to pinpoint and interpret different growth levers that are catered toward your particular business. You'll learn what can positively impact your business and what doesn't.
- Metric: During this phase, you should watch and understand your Cost Per Acquisition and Life-Time Value. If you have been receiving the necessary data, this metric should be straightforward.
- Volume: Your small influx of people should now get larger at this stage. Make sure your retention rate is still up to par with the amount of customers visiting your site or store.
- Channels: In the first stage, you chose several channels that are best for your product. Now it's time to focus in and choose the most effective. If it's already effective, build on it and the growth rate will continue increasing.
- Optimization: Instead of placing all of your attention on the big picture (or macro optimization), start switching your focus to the smaller picture (or micro optimization).
- Team: This is the time to switch from just 1 person and start building a team with specific positions and job duties to help with growth.
3. Make Small Changes With Large Impacts: Maintain the Growth of Your Company
Armstrong walked on the moon, NASA received the information, but now what? The answer is fairly simple: they want to continue to expand their goals and success levels after walking on the moon. During the third phase, you'll want to increase staff and support - make small changes that create big effects.
- Goal: The growth levers from the transitioning phase that you started pinpointing? Start tweaking them and make them fit your exact needs.
- Metric: The spotlight is still pointed toward growth rate, but this shouldn't be your only focus anymore. Since growth is now occurring, you'll want to look at your payback period. You'll want a shorter payback period in order to have a better investment.
- Volume: Pretend this is Poker and you have a royal flush - you go all in. With volume in mind, you'll want to get as many people as you can to create noise about your company or product.
- Channels: Do everything you can with the channel you have to fulfill its full potential. This channel will handle most of your growth. See what other channels are out there so you can create diversity among them.
- Optimization: Because you've focused on macro since the beginning, it's now time to focus solely on micro. Small changes can also yield large results.
- Team: With growth comes expansion. You'll want to create more positions on your team so continued growth and success is possible.
Applying the Three Phases
Flippa is a site that allows you to buy and sell websites, domains and mobile apps. When considering the traction, transition and growth phaes, Nick Kenn, the GM, chose SEO as his growth lever.
Since he knew his audience and how SEO would help target them, he managed to create and grow a company that dominates 70% of the marketplace. Kenn has a selective team of only 20 members who he hand picks by a series of different interviews. He has recently added a portion of the site where users (over 500,000 registered) can also buy and sell mobile apps.
By focusing on niche markets and offering unique services to his customers, Kenn has taken the three phases and managed his growth and success accordingly.