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According to Brian Balfour, startups go through three stages: Traction, Transition, and Growth. The startup’s goals, metrics, channels, focus, team structure etc. evolve and change as a business passes through these three phases.

There’s a lot of talk across industries regarding “growth” vs. “traction” and the different tactics that support each.

While the term “growth” refers to a positive rate of change, this could be short-term in nature. Traction, on the other hand, refers to sustained growth over time and presents a far greater challenge.

Knowing where you are on this track helps you understand what you should be spending your time on.

1. Understanding Traction

Almighty traction. Nothing trumps it.

Nothing!

Not strategy, not beautifully developed growth plans, not Nigerian Jollof rice.

Nothing!

Traction is king to all.

So, what is it exactly?

Almost every new business founder who has asked investors for funding has heard the harmless rejection “I love your idea, but come back when you have more traction.”

Simply put, traction proves that somebody wants your product. It is substantial growth in sales, revenue, customers (those who actually buy) and market penetration.

To measure traction, a company needs to know what metrics it will use to define success. Depending on the industry and market factors, traction may be measured through sales, customer response or market research.

Traction is a key point in a company’s growth. So, how can you go about gaining traction?

  • Build a great product: To build a great product, you need to keep one thing in mind; build something that people want.
  • Have a clearly defined mission and goal that includes specific metrics and time bounds.
  • The hustle has to be real. For a new company, the biggest constraint isn’t really money, it’s you and your time.
  • Measure everything. Even early on when your volume is low, you have to start keeping track of the effectiveness of your efforts.
  • Have an awesome customer experience. Keep in touch with your customers. Ask them for feedback. Understand why they chose you over your competition. You can gain a good competitive advantage with these insights.
  • Keep innovating. Continue to develop your product and improve your customer experience.

Investors want evidence that the “dogs are eating the dog food”. They want proof your financial projections are not like Alice chasing the ever-elusive rabbit. Are your financial projections concrete? Investors want to know!

Breaking Down Traction

  • Goal: Your one and only goal at this stage should be to find the product-market fit among your target market.
  • Metrics: You should be all about retention.  If your product does not keep its users, there is no point in growing the top of the funnel.
  • Volume: Your resources are very limited at this stage.  So, resources spent increasing sales volume might work against you especially if you are still struggling with your product-market fit. These resources could be spent on understanding retention. It’s a waste.
  • Channels: Try out a few to find the one that works best for your business. Once you find it, focus on it.  Avoid dabbling in a bunch of channels at once.
  • Optimization: Focus on large macro optimizations.  Try big changes in messaging, target audience, etc.  Try not to focus solely on micro-optimizations such as word tweaks.
  • Team: You should have one-person leading growth who is thinking about sustainably growing your numbers every time.

2.  Understanding The Transition Phase

During the transition stage, the business will go through some growing pains; making mistakes and learning from different experiments.

This is the stage where the foundation is laid for the team, tools and process needed for growth.  The process makes the growth machine. Every business needs a process that will help build a scalable, predictable and repeatable

Breaking Down The Transition Phase

Here 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 identify and understand different growth levers that are catered toward your particular business.
  • Metrics: During this phase, you should watch and understand your Cost Per Acquisition and Life-Time Value.
  • Volume: Your small inflow of people should now get larger at this stage.
  • Channels: It’s time to focus and choose the most effective channel(s). Build on it and the growth rate will continue to increase.
  • Optimization: Switch your attention from macro-optimization to micro-optimization.
  • Team: Switch from just 1 person and start building a team with specific job descriptions to help with growth.

3. Understanding The Growth Phase

During the Growth phase, you’ll want to increase staff and support as well as make small changes based on the activities carried out during the previous phases.

  • Goal: Start altering the growth levers you identified in the transitioning phase. Make them fit your specific needs.
  • Metric: The growth rate is still very important, but it shouldn’t be your only focus anymore. Since growth is now occurring, you’ll want a shorter payback period in order to have a better investment.
  • Volume: With volume in mind, you’ll want to get as many people as you can to create buzz about your company or product.
  • Channels: Do everything you can with the channel you have to fulfil its full potential.
  • Optimization: It’s now time to focus solely on small changes that can also gain large results.
  • Team: You’ll want to create more positions on your team so continued growth and success is possible.

Many new businesses often fall flat on their faces and find it difficult to get off the ground.

It’s not enough to have a eureka idea. You have to have paying customers in order to stay in business. The most well-meaning organization with a clear business plan may still struggle with traction.

In most cases, business owners invest time and resources in gaining a ton of traction. However, they may not have a sound strategy for morphing the product.

The reality is unless you give users a great experience, they will abandon you.

You have to get feedback from the customer and find out the customer’s needs. This will help you correctly transform into the business that will succeed. Most businesses pivot once or twice before real traction starts to occur.

Growth is the only essential thing you need to be a startup. Startups are created to grow fast. Everything else that happens within a startup is a derivative of growth.

Everything – ideation, product validation, product management, team building, fundraising – follows from growth. Without growth, early stage startup is just a small business losing money.

That is why founders are encouraged to focus on one metric – the one that matters. This is because, as a startup, your limited resources are a deterrent to wasting your time trying different things.

Depending on your type of business, growth will mean different things to different startups. And your one metric that matter changes over time. Getting rid of distractions enables you to focus your already limited resources – people, time, and money – on the one thing that moves the needle.

What is the one thing that signifies that your business is growing at a particular point in time?

In the beginning, growth for a lot of startups has more to do with user acquisition and engagement than revenue. The advantage of defining your growth metric is it tells you the most important thing about your startup and how should drive it.

You need to consider the followings when choosing your growth parameter.

1. Your business model

The way you monetize your product is an indication of the value that will be created by your business. It’s not always about the money, but revenue metrics provides a standard benchmark for growth metrics.

2. How you acquire your customers

The rate at which your products gets into the hands of users is a substantial measure of how scalable and successful your product can be. Inherent in the DNA of startups is the ability to build products that have the potential of being ubiquitous and viral within a short time frame.

That is why most startups are tech-enabled companies because technology enables innovation not just in the way products are made, but how they are distributed. You can measure your growth based on metrics such as unique web visits, page views, app downloads, partner signups, user signups, conversion rate, churn rate, etc.

3. The stage of your business

The stage of your company will determine what to focus on. Early stage business should be obsessed about metrics that validates their product-market fit more than mid or late stage companies.

In the beginning, your growth metric is based on time-based milestones you need to reach such as partnerships, signup at a particular time, user signup rate, number of feature releases, etc. It is important that you wrap this with specific numbers as much as possible to measure progress.

4. How you measure growth

Answering this question will help you make right decisions. Let’s assume you decide to measure your growth by the number of subscribers to your email list. First, you’ll have to optimise your product, website, app, content and every potential user interactions to grow this list.

You then measure the results of all your actions on a regular basis against this metric. You hold yourself and your team accountable with data and see whether you are making progress or not. You deep dive into all your acquisition channels to identify where you are getting the most number of subscribers. You look at the numbers every day and experiment with various tactics and tools to see how you can grow the subscription rate.

As you focus on a particular growth metric and optimise your products accordingly, magic happens. You identify particular big hairy destinations to drive your startup towards and you can measure the how and the rate at which you are getting there. And as you grow, your goal may change, and you redefine your growth metric.

You build, you measure, you learn.  And you continue the cycle until you reach your true north.