Step 1: Measure Your Velocity
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In this step we will implement a metrics tracking system to help you understand the current state of your business. We’ve built a template for you to use that will help you spot trends and lessons.
Metrics are the bits that clue us in to the current state of our business. We’ve got to get clear on where we are so we can be smart about getting where we want to go.
A Growth Glossary
There are several terms about growth marketing that you’ll need to understand. Refer back to this glossary of terms whenever you find something that doesn’t make sense:
- Annual Recurring Revenue — in recurring revenue businesses, the amount of recurring charges billed to all customers in the latest month multiplied by 12.
- Burn Rate — the amount of money being spent each month in a business.
- Churn Rate — the percentage of paying customers who choose to quit your product or service; churn rate applies to businesses that bill on a recurring basis (monthly, annually, etc).
- Cohort — any grouping of customers that produces meaningful data to help you make business decisions; i.e. a group of customers who join during the same month or year or a group of customers who come from the same marketing channel.
- Conversion Rate — the percentage of people who take an action you want them to take; this could be the number of unique visitors who convert to email subscribers or the number of email subscribers who convert to customers (and many other possibilities apply as well).
- Cost to Acquire a Customer (CAC) — the amount of money it costs you to get a single person to buy your product or service
- Email Subscriber — someone who has chosen to give you permission to get in touch via email by “opting in” through an email subscription form
- Growth Channel — a method used to attract customers; examples include email marketing, content marketing, SEO, sales, and partnerships, amongst others
- Lifetime Value of a Customer (LTV) — the amount of money an individual customer will pay you from the time they make their first purchase from your business to the time they make their last purchase with your business
- Monthly Recurring Revenue — in recurring revenue businesses, the amount of recurring charges billed to all customers in the latest month
- Payback period — the amount of time it takes to earn back the cost to acquire a customer, from that customer; i.e. if your product costs $25 per month and your CAC is $100, your payback period is 4 months.
- Repeat Customers — customers who buy a product or service from you more than once; i.e. a customer who buys a hat from you today and a sweatshirt from you 6 months from now.
- Runway — the number of months a business will continue to operate given a combination of their burn rate and monthly revenue.
- Website Traffic (Unique Visitors) — the number of visitors to your website; we will standardize the term traffic by referring to the number of unique visitors to visit your site.
If there is another term related to growth, which you don’t understand, just drop us a line at email@example.com and we’ll happily add it to the list.
Systematic Metric Tracking
We want to create a metrics system that you can use on a regular basis to understand the current state of your business.
We recommend you track your metrics in monthly increments, that’s what we do. Checking your metrics every hour can be a huge distraction and time waster. We’re not going to be one of those entrepreneurs distracted by every possible metric under the sun. We’ll focus on metrics that matter.
The Metrics template spreadsheet
To help you, we’ve created a Metrics Template Spreadsheet. It breaks up your metrics into four major buckets:
For each bucket there are some key numbers to keep an eye on; that’s where the Metrics Template comes in. Download the template:
As you do, take note of a few things:
- There are tabs for three years. If you have data that goes back in time further than 2014, feel free to add that data and make any necessary formula adjustments as a result.
- The rows in white are rows where you’ll have to manually enter data.
- The rows in gray contain formulas that will update automatically.
- When you add a new tab for a new year and copy/paste the formulas over, you may need to make some manual adjustments.
- I’ve entered some basic fake data to help you see how the sheets work before you dive in. You’ll want to delete all numbers in the white rows before using this for your own business.
- If you have 3 or more products, you’ll want to add rows in the product metrics section to account for those extra products. Just copy and paste the rows from Product #2 and then rename to “Product #3…”
- Feel free to add other marketing metrics if you feel they are a crucial part of your customer acquisition funnel. IE only track Twitter followers if gaining Twitter followers is a key step on the path to gaining new customers.
- If you do not have customers who make recurring payments, then you should leave the churn numbers blank in the customer metrics section.
Now, let’s talk about why this data matters and how to use it…
Look for Insights & Trends
If possible, we want you to go back and fill in the Metrics Template for the previous year. This will help you spot any lessons or trends. Then, each month you should compile your metrics and do another review to see what changed and how that correlates to the actions you’ve taken in your business.
As you review your metrics each month, here are some powerful questions to ask yourself:
- Did my
insert_metricgrow this month? How does the growth rate this month compare to months past?
- Did I have an abnormally high or low amount of
insert_metricthis month? If so, what did I do differently this month?
- How could I sustain the same growth rates going forward? How can I replicate an abnormally great month going forward?
- Did I make any mistakes or run any experiments that didn’t work out? How can I avoid making those same mistakes next month?
- Which blog posts, podcast episodes, videos, and emails performed particularly well this month? How did they contribute to these higher level metrics?
- Which products/services contributed to the majority of my revenue this month? What did I do to produce sales of those products or services?
- Are any products or services under-performing? What are the possible reasons for this? How could I start producing more sales of under-performing products or services on a consistent basis?
- Do I feel confident about the results from this month? If not, what will I do differently next month to fix this? If so, what are the threats to my business that I need to be aware of so that I can continue to produce similar results?
Conclusion: Pitfalls and what comes next
The most common pitfall in this stage is to feel overwhelmed. The data can feel like a lot. Similarly, it can be easy to get lost in vanity metrics when taking stock of where you are in your business.
The most basic question you can ask yourself here is this: will this data help me understand the actual growth of my business? If not, don’t worry about that metric. Similarly, to avoid overwhelm, stick to gathering data for the key metrics already in the metrics template.
In the growth stage, metrics are the fuel for understanding the current state of your business, and forming hypotheses for new growth experiments. While the metrics we’ve covered here are important for getting started, you may want to get more advanced with how you use data over time. We’ll talk more about how data can impact your growth efforts in upcoming steps.
Now that we have the picture of where things stand today, let’s move on to talk about your growth plan to get where you want to go tomorrow.
Stage 8: Growth
- Growth Stage Overview
- Step 1: Measure Your Velocity
- Step 2: Define Your Growth Milestone
- Step 3: Make Meaningful Product Updates?
- Step 4: Grow Sales of Existing Product(s) or Build New Ones?
- Step 5: Grow Existing Channels or Build New Ones?
- Step 6: Create Your Growth Strategy Plan
- Step 7: Implement & Evaluate
- The Growth Cycle