How To Build A Growth Model (Part 1) - Deepstash

## What is A Growth Model?

At its core, a growth model boils down to a way to conceptualize and summarize your business in a simple equation, which allows you to think about growth in a holistic and structured way.

“A growth model is an equation that tells you what are the different variables in your business and how they work together and translate into growth.”

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## What Does A Growth Model Look Like?

When you build a mathematical model, you need the following components:

• Inputs
• Function
• Output

The same applies to a growth model.

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## A Basic Growth Equation

In Andy Johns’ interview, he shared a basic growth equation which he learned from his his former boss, Chamath Palihapitiya, who then ran growth at Facebook.

Growth = A (top of funnel) * B (magic moment) * C (core product value)

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Leave the numbers and equations aside and start with a high level conceptual model that captures the core levers of growth. This alone will provide a valuable framework to help you make good decisions.

Bottom line is this model should explain how your business will grow, in a way that is different from that of other companies.

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## Do You Have To Create A Growth Model?

The answer is no. Why? Simple: your time is limited, it probably makes more sense for you to spend time on improving your product and growing your initial user base, rather than on building a growth model.

Still, there are unique benefits of going over the exercise of creating a growth model and making it part of your day-to-day decision making.

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## Benefits of a Business Growth Model

• The process of uncovering all variables and then synthesizing them into one single equation will deepen your understanding of the business
• Growth model also helps you assemble individual metrics into a big picture, and force you to think about their relationships and the relative importance
• When entire team look at a single equation with a couple key variables, it helps prioritize and focus
• Once you have growth model version 1.0, you will naturally begin to find questions to ask. As you ask more questions, you change how you do business, or adjust your model, or do both, and so on and so forth

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