growth curves

Growth Curves Used to Measure the Growth of Startups

Mar 06, 2022
4 read

As a startup, your primary goal is to grow and expand your brand. But what if you didn't understand the most important aspects of growing your business?

Even very savvy startups sometimes struggle to understand and nurture their growth. And if you don't understand fundamentals such as growth curves, then you'll have difficulty nurturing and maintaining your own startup growth.

Want to learn more about the growth of startups, including measuring and understanding growth curves? Keep reading to discover the answers you are looking for!

What Is a Growth Curve?

If you want to understand the growth of startups, then we need to start with growth curves. And that means answering an important question: what is a growth curve, exactly?

Simply put, a growth curve measures the growth of something over time. Growth curves are used quite often outside of the corporate world to measure things like national and even global population growth.

While there are different ways that you could potentially measure the growth of your own company, it's best for a new business to measure in terms of revenue. And when you use revenue as your metric, it's fairly easy to calculate your own growth rate.

How to Calculate Growth Rate

If memories of math class make you start sweating, don't worry. There is a very simple formula you can apply to measure your own startup growth.

As we noted before, it's important to use revenue in your measurements. In this case, use this formula: (month two revenue – month one revenue) / month one revenue * 100 = the growth rate of your revenue.

For example, imagine a business that earned $2,000 in revenue in its first month and $3,000 in its second month. Using this formula, we get ($3000 - $2000) / $2000 * 100 =50%. In other words, the growth rate is 50%.

Eventually, you can begin forecasting growth. To do so, you must analyze jumps in revenue and determine what helped cause the jump (such as the introduction of a new product or the implementation of a new marketing campaign).

Remember: the more data you have, the more you can calculate.

What Growth Curves Mean for Businesses

Now, you know the basics of calculating a growth curve. But that brings us to another big question: how does measuring growth like this help your company?

It all goes back to a phrase you've heard your whole life: "timing is everything." Sometimes, you may develop a great product and then it's a flop when you unveil it. However, that may have less to do with the quality of the product than with your own particular timing.

By calculating growth curves over a long enough time frame, you can make some surprising discoveries. For example, maybe the products you unveil ahead of Christmas always sell better than the products you unveil early in the new year. Or maybe your social media campaigns are a consistent hit year-round while the traditional media marketing campaigns only work in certain months.

Just think of these growth calculations as one more bit of analytic data that helps inform how you grow your company. And once you understand the basics of calculating startup growth, you can master the next challenge: nurturing and maintaining that growth.

Your Growth Foundation

Unsurprisingly, the goal for every business, from humble startups to giant corporations, is to continue growing the business. But it is difficult to continue growing if a company doesn't have a proper growth foundation.

The primary cornerstone of a good growth foundation is, of course, a good product. If you create an innovative product with a good value proposition, then you create the perception that this is a "must-have" product. And your most loyal customers will become brand ambassadors that encourage more people to try your product out.

Of course, whenever one company creates a great product, other companies try to copy their success. This is why it's important to stay ahead of your competition and continue introducing innovative new products.

And in terms of product marketing, you should always focus on conversions. The more you can optimise the conversion process, the more you can grow your brand.

How to Nurture the Growth of Startups

If you calculate the growth curve and realise your company is growing at a rapid pace, the next question is simple. What are you going to do to keep the momentum going?

The "rookie mistake" many startups make at this point is to make an external marketing hire. The assumption is simple: if you find the right marketing guru, they can turn this temporary growth spurt into a reliable expansion of your brand.

Why is this a mistake? First of all, if you bring in someone like a VP of marketing, they may be operating with incomplete data. In other words, what has driven growth in the last few months may or may not be driving growth in the next few months.

Second of all, your startup may not be able to afford the salary that a good VP commands. You're actually far better off investing the time, money, and other resources into experimenting with different products, marketing campaigns, and so on. By discovering what your primary growth drivers are, you can nurture that growth well into the future.

Tying Growth to Benchmarks

Once you have a solid understanding of startup growth and the growth curve, we recommend that you begin tying such growth to company benchmarks. This helps everyone from the executive level and downward focus on continuously growing the company.

But you can't really tie growth to benchmarks without studying the growth curve over time. For example, you may be tempted to set a goal of 10% more revenue in the next fiscal quarter. You won't know whether that goal is too ambitious or not ambitious enough until you study the data!

Your Next Move

Now you know how to measure the growth of startups. But do you know who can help you understand this growth and help you continue expanding?

Here at Growthcurve, we specialise in helping companies just like your own to reach their full potential. To see what we can do for your own business, all you have to do is contact us today!