The growth model

A growth model is a simple map of how your business grows, written as numbers. It starts from the result you want, such as a revenue target, and works back through the steps that produce it: how many leads, what share become customers and what each is worth. Compound Growth OS is one tool in the library that lists this feature. For example, a software business can test what a higher trial conversion rate would do to next year's revenue.

Targets set without a model are guesses. A model shows which lever matters most, which assumption is weakest and how far reality is from plan. It also makes it easier to explain priorities to a team or an investor. You need it when you set growth targets, plan budgets or choose between several ideas. You can skip it when the business is too new to have any real numbers, in which case a rough estimate is enough to start.

• Ask whether the model uses your actual figures or only example numbers.
• Test whether changing one assumption updates the whole model at once.
• Check whether actual results are compared with the plan on a regular basis.
• Find out whether you can keep several scenarios side by side.