High Growth in High Tides: Startup Metrics for Pirates

In 2007, entrepreneur and angel investor Dave McClure created what he called Startup Metrics for Pirates, a useful 5-step customer lifecycle model for startups.

Also known as the “AARRR” framework, McClure’s goal while creating these metrics was to assist startups in determining their weak points. When you’re analyzing your business as a whole and things aren’t going the way you’d like, it’s easy to fall into the trap of believing that your entire model is broken. However, if you examine your startup using these metrics, you’ll have a much better idea of where your company is succeeding and where it needs work.

Take a look at the graphic to the left for a brief overview of the framework – we’ll continue with an in-depth analysis of each metric below.

Next to each metric you’ll find example goals you can set to measure your performance.

Acquisition

Acquisition is the first transaction you have with a potential customer or client.

They’ve been exposed to content you’ve created or paid for, and are interested enough to check out your website and learn more about what you have to offer. This content could be advertisements, partnerships, blogs, videos – anything that gets your name out there.

Record how many users visit your site and what they do on it. Do people interact with your site for a short time, exploring multiple pages, or do they bounce off your home page immediately? If your bounce rate is high (70%+), your site is repelling visitors for one reason or another. Whether it’s the site’s design, functionality, or lack of useful content, a high bounce rate is something you should work to decrease if you want to increase your number of potential customers.

You can gain this useful acquisition data by using programs like Google Analytics and HotJar to analyze how users interact with your website. To the left, you’ll find some examples of metrics you can use to gauge your performance.

Activation

Activation describes your users first experience on your site or with your product.

The goal here is to get the user to realize the value in your product quickly so they’ll return and use it again, what some marketers call the “A-ha moment”. As we all know, attention is in short supply right now, so you’ll have to find a way to remind these users to come back.

Have your users create an account or sign up with their email – nudging them every so often will keep your name fresh in their mind.

However, make sure your signup process is low friction. Defined as “the psychological resistance your visitors experience when trying to complete an action“, a high friction process will result in droves of your users leaving before you get their contact information.

These visitors are interested in your product, but that doesn’t mean they’re comfortable sending you all of their personal information before seeing what your company is all about – you’re still a stranger to them, so make signing up quick and painless to get the highest conversion rates.

Retention

You may have heard that acquiring new customers can cost five times more than satisfying and retaining current customers, which is precisely why customer retention rates should be one of your key performance indicators.

If you’re retaining less customers as time goes on, take a closer look at your product and quality of service. If this is your case, think of your business model as a leaky bucket – just because you put more water in (acquire more customers) doesn’t mean you’re going to hold on to them.

Customer retention is important for a few reasons – consider the fact that returning customers spend 67% more than new customers. 

Since they’ve bought from you before, you don’t have to spend more money to acquire them again, and they’re more likely to recommend your products and services to their friends – but we’ll save that for the next metric.

Referral

An effective way to increase your bottom line is to decrease you customer acquisition cost (CAC) and increase your customer lifetime value (CLV). What better way to do that than to have your current customers recommend your services to their friends?

Aim to make as many of your customers promoters of your business – they’re loyal buyers, likely to recommend your services to others, and as a result they fuel your company’s growth immensely. Offering great customer service is only the beginning.

While not necessary, many companies have had success offering referral incentives. Dropbox pulled off one of the most effective referral programs ever when they first started – for every person a user referred, both the user and their friend gained 500mb of free cloud storage. Read more about Dropbox’s incredible success story here.

Revenue/Conclusion

If you optimize the previously-mentioned metrics, you’ll have fewer roadblocks in place that keep your company from bringing in revenue. As with any business, the goal is to maximize revenue, and you’ll find more than a few marketers and entrepreneurs stressing the importance of optimizing the retention and referral metrics to accomplish that objective. Turning your customers into promoters who’ll freely spread word of your products and services is key to achieving optimization in every other metric.

Consider this example – you’ve provided excellent customer service to a customer who then shares their experience with three friends, so they try your product as well. Your cost to acquire these new users was nothing, and they’ll be easier to activate as customers because a trusted source has referred them. Now multiply that example 10, 50, or 100 times. Focusing on increasing rates of retention and referrals are necessary to accomplish cost-effective, explosive growth.

Use the framework and data gained to diagnose shortcomings in your startup as a doctor would diagnose a patient; make some changes to your model, test your customers’ acceptance of said changes, then re-calibrate your approach, improving your service along the way. Regardless of industry, any company can use Startup Metrics for Pirates to learn more about their customers and how they can best sell to them.

 

What metric in the AARRR Framework do you believe is most critical to focus on? Leave a comment on our LinkedIn or Facebook pages and let us know what you think! 

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If you’re in search of talent consulting or recruiting services and could use help determining your business needs, contact our team of experienced talent acquisition consultants now. 

Growth-Hacking Startups: Targeting the 16% of the Market That Dictates Your Success

While your startup business grows, the costs to operate it grow as well – equipment, office space, marketing, licensing, payroll, taxes… after paying for all of these costs, it’s unavoidable, money will be tight. Because most startups are cash-strapped, it can be difficult to decide where remaining funds should be directed in order to support the rapid growth of your company.

Allow me to introduce you to the concept of growth hacking – the strategy of acquiring as many customers as possible while spending as little as possible. Sounds ideal, right? Growth hackers use cheap, innovative methods and tests to determine why their startup is growing, then purposely aim to make that growth happen faster.

The essence of growth hacking is testing, tweaking, and monitoring changes you make in your business model to see what brings people to your product and keeps them returning. To become an effective growth hacker, you’ll first have to determine and closely study your target audience.

Targeting your Audience

The product you’re selling and the market need for your product are critical to keeping your doors open, but you shouldn’t try to market to every demographic at once. Begin by analyzing the makeup of your current customer base, and the makeup of customers you eventually plan to have.

Are they younger or older? Do they have children or are they child-free? Are they professionals, college students, or teenagers? The more specific you are with your analysis, the better prepared you’ll be to grow your startup.

The chart to the right describes a theory known as the diffusion of innovation.

When you’re targeting your audience, it’s necessary that you focus on marketing your product to the innovators and early adopters – this small 16% of consumers are trendsetters and opinion leaders, and without their approval of your product, it won’t break through to reach the majority of the market.

Once you captivate these segments, their praise and recommendations will be heard by the following majority, and your product will be exposed to a much greater share of the market.

Let’s move on to learn how you can identify the innovators and early adopters while examining the differences between the groups. 

Innovators

“Their desire for novelty and something new exceeds any caution, they’re willing to try new experiences, and new products with little to no market history.” 

If you’re wondering why innovators make up such a small segment of the market, consider how often you purchase products without checking the reviews first. Few are willing to take the risk of paying for a product or service without first hearing other’s opinions, but not innovators. They’re influencers – they take pride in knowing all about the next big thing, and are quick to support any company that sounds unique or game-changing.

As you can imagine, this group is extremely wealthy – they’re also the youngest in age, incredibly social, educated, risk tolerant, and surrounded by other innovators.

Their willingness to give feedback makes them an invaluable population to study, and they’re much more accepting of bugs and shortcomings with your service than other segments. However, their fondness for quick adoption has a downside – quick abandonment. If your product isn’t keeping their interest, something else will.

Early Adopters

This market segment is defined by their willingness to adopt a new product or service after conducting their own detailed research. They’re cautious – they won’t buy in without gathering information from multiple sources, but once they’re convinced, they’ll support you quickly.

This segment is composed of opinion leaders – the people other consumers “check in with” before buying a new product themselves, due to their ability to reduce uncertainty surrounding new technologies.

Similar to innovators, they’re a very wealthy, educated, and socially-connected group, but with two key differences – their risk tolerance and loyalty as customers.

Early adopters are much more selective about which products they choose to adopt relative to innovators, but this selectivity is what makes them even more valuable and loyal as customers. They’ve done their research, and they believe in the future of your company and product. If you continue providing your promised service, they’ll continue giving you feedback, which is exactly what you’ll need to continue growing your startup.

 

In the next article we’ll take a closer look at how you can use that feedback to fine-tune your business model using Pirate Metrics. If you’re looking to learn more about startups, recruiting, and talent consulting, look no further than our blog – it’s updated weekly!

 

 Leave a comment on our LinkedIn or Facebook pages and let us know what you think!

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If you’re in search of talent consulting or recruiting services and could use help determining your business needs, contact our team of experienced talent acquisition consultants now. 

Skyscraper

Scaling Startups: Staying Alive, Staying Ahead

In the startup world, staying alive is just as important as staying ahead. We discussed how you can strengthen your startup’s strategy in our last post, so now we’ll explore why some startups succeed and how they begin scaling their ventures.

Let’s begin by examining the terms growing and scaling in context of expanding a business; the words are sometimes used interchangeably, but they describe completely different situations.

Growing vs. Scaling

Growing – adding revenue at the same rate you’re adding resources. Consider the example of a gym that hires one personal trainer for every 3 customers – no matter how many new customers join, they’ll always be hiring new personal trainers to service their growing customer base. The amount of resources required increases as their customer base increases – this company is growing, but it’s not scaling.

Scaling – adding revenue at at a rapid rate while adding resources incrementally. Consider the example of a software company that’s just finished developing a new product – the costly work is done, and distributing the product to their customers costs next to nothing. The amount of of resources required doesn’t change as their customer base increases, driving consistent growth and improving profit margins.

“The Single Biggest Reason Why Start-ups Succeed”

Bill Gross is the brain behind Idealab, a startup factory founded in 1996. The “technology incubator” has created over 150 companies with more than 45 IPOs since its inception. Gross’s familiarity with the startup world led him to question and research why some ventures are successful while others fail, so he analyzed 200 different companies and rated the quality of what he considered the five most critical attributes of any business on a scale of 1-10. The five attributes were:

  • The idea – is there a market for the services/product you’re selling?
  • The team – is your team intelligent, determined, and capable enough?
  • The business model – is there a clear path to generate customer revenue?
  • The funding – did your company receive private funding? 
  • The timing – too early and the world isn’t ready, or too late and there’s too many competitors?

Gross revealed his findings in a 2015 Ted Talk – this is a smaller study so it’d be wise to take the results with a grain of salt, but Gross’s analysis showed that timing was the most critical factor as to whether or not a company succeeded; specifically, timing accounted for 42% of the difference between failure and success

After months and years of exhausting work, the last thing you want to find is that the market requesting your services is much smaller than anticipated, or that you’ve arrived to the party too late. Of course, the idea and the team behind it will make or break a startup – but the market has to be ready for your company before anything but breaking can occur.

When you’re sure the market is ready for your company, it’s time to consider how you plan to scale it.

Tips for Scaling Your Startup

Building an in-house talent management function may seem like a poor use of resources when you’re getting your business off the ground, but you’ll struggle to scale without a detailed hiring and onboarding process in place – the last thing you want is to end up a “$50 million dollar company in the body of a $5 million dollar organization“. In one of his recent articles, Ron Carucci outlined a few startup talent strategy tips entrepreneurs can use to keep candidates flowing in as their companies grow.

Don’t just hire for right now. Think about the talent your startup will need 6 months from now, a year from now, and 18 months from now. If you only ever hire for your immediate needs, within a year you’ll be left with employees without the skillsets you need to continue growing.

Identify the skills you need to grow to find the right people. Careful consideration should be given when considering candidates – the skills that will most benefit your startup won’t always be found on a resume. Carucci recommends looking into three areas when considering a new hire: their leadership and people skills, their experience in their given discipline, and whether or not they have the emotional maturity to continue learning.

Develop scalable roles for talented employees/future candidates. Carucci explains, “The common mayhem of the startup world isn’t permanent, and moving from jacks-of-all-trades generalists to more specialized roles is inevitable.” Consider today how you want your startup to look a few years from now – what types of positions will you need to fill? Creating a succession plan early on will save you time and money you’d otherwise spend hiring and training new employees.

Consult this exhaustive list of tools and resources for more startup tips – from upfront operation costs, to social media marketing, to helpful legal information, you can find it all here.

 

Do you agree that timing is the most critical factor when it comes to creating a successful startup? Leave a comment on our LinkedIn or Facebook pages and let us know what you think!

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If you’re in search of talent consulting or recruiting services and could use help determining your business needs, contact our team of experienced talent acquisition consultants now. 

Breaking Down Bersin: 5 Ways to Solidify Your Startup Strategy

In 2010, Josh Bersin and his team released what they call “The New Talent Management Framework”. For those unfamiliar with his work, Josh Bersin is a renowned talent management analyst and founder of Bersin by Deloitte, a company that has been conducting rigorous research in the field of HR and offering evidence-based management tools and information to organizations for nearly 20 years.

The New Talent Management Framework is widely-used by entrepreneurs, talent acquisition specialists, and business managers alike – it concisely describes an integrated approach to recruiting, business development, performance management, and development planning for companies of any size in any industry.

There are multiple components in Bersin’s framework, each of which are vital to examine when creating a scalable startup. We’ll begin by delving into the first and arguably most important area, Talent Strategy and Business Alignment. Make no mistake about the importance of your chosen strategy – it’s the foundation of your startup, and if it’s not airtight your company won’t be competing in the market for long.

Talent Strategy

strategy (noun): a plan of action designed to achieve an overall aim. Seems simple – what’s there to analyze?

While strategy makes for a simple concept and definition, a surprising number of business leaders have difficulty translating a strategic vision into measurable goals, as well as understanding how metrics should be used to evaluate an organization’s performance. 

The results of a Metrus Group survey revealed that while 65% of participating companies have an agreed-upon strategy, 37% of respondents said that strategy was linked to their business functions, and only 24% linked the strategy to individual employees responsibilities and capabilities.

The most shocking findings of this survey? Only 14% of employees responded that they understand their company’s strategy and direction. 

Take notes entrepreneurs – these results suggest that business leaders tend to rely on big-picture, potentially underdeveloped strategies. At the very least, the lack of organizational alignment stems from leaders’ failure to fragment the strategy into achievable and measurable goals for their employees. When you’re creating the outline for your startup’s strategy, no detail is small enough to be insignificant – “maximize profits and minimize losses” is a great start, but you’ve still got a lot of work to do. 

CEO of Strategic Thinking Institute, Rich Horwath, explains why he believes pinning down a strategy everyone understands is a challenging process before providing suggestions to make a proposed strategy more comprehensible for everyone in the business. 

Strategy is abstract, like leadership or love. And anytime we’re dealing with things that feel abstract, there’s too much room for interpretation. Then, when you mix managers with different backgrounds and experiences, you get a hodge-podge of definitions and approaches that make a big mess.” 

How to Make Your Abstract Strategy Concrete

Define the competitive edges your business has over your competitors. What genuinely makes you stand out? In what areas do you outperform other businesses? How is your plan to capture the interest of potential customers unique? What about your services will assist you in retaining customers?

Retain your identity. Horwath explains, “75-80% of the time, when people are struggling with strategy, it’s really the fact that they haven’t clarified, or stayed clear, on their business model. They’ve lost sight of who they are. Once organizations start to mature, people forget about their identity and their business model. Things become diffuse.” Going along with the first point – once you’ve gained a customer base, continue improving the services that brought them in initially. There’s a remarkable difference between adjusting your startup’s identity as time goes on and completely abandoning your business model.

Make time to talk about it. A 2012 study found that 70% of business leaders spend less than one day a month discussing their strategy. There will be a continuous stream of threats to the success of your company, internally and externally – continuously calibrating your approach as you navigate the market is critical. Allot a few days a month for your team to closely examine your strategy and improve it along the way.

Use a simple set of terms to describe strategic work. Ron Carruci, a leadership strategist and contributing writer for Forbes explains the significance of this point succinctly. “I recently watched a set of 30 top executives in their company’s quarterly business review vehemently disagreeing over whether or not they were there to review progress on “goals” or “objectives.” This hijacked about 40 minutes of the meeting.” Using an agreed-upon set of terms to create, deploy, and measure the effectiveness of strategies company-wide will cut out confusion and save time you’d otherwise spend disagreeing over definitions.

Focus on strategic alignment. Aligning the business model of your startup with your strategy is key to surviving the rapidly-changing tides of the market. Consider conducting a communication audit to see how effectively information is sent, received, and shared within your organization. Strategic alignment in your startup ensures that resources won’t go to waste, clarifies your businesses’s competitive edge, and provides clarity for your employees so they better understand the direction the company is heading in. Most importantly, strategic alignment allows for market maneuverability; once you become comfortable maneuvering, you can become comfortable outmaneuvering your competitors.

 

Would you consider your organization to have strong alignment between its strategy and business needs? Are you familiar with, or do you have experience using the Bersin framework to manage talent? Leave a comment on our LinkedIn or Facebook pages and let us know your thoughts!

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If you’re in search of talent consulting or recruiting services and could use help determining your business needs, contact our team of experienced talent acquisition consultants now. 

 

Strategy

6 Simple Recruitment Marketing Tips & Trends: Email and SMS

Recruiting, while simple in theory, can be a difficult process in practice. One of the main challenges recruiters face when contacting candidates is getting their messages noticed, opened, and replied to in a world where nearly everyone’s attention is constantly divided.

Whether you’re posting job listings, sending email campaigns, or relying on SMS messages to engage candidates, you’re hoping that your message stands out. Instead of firing blindly, here are a few recruitment marketing tips and trends you should keep in mind – they might just increase your response rates.  

Email Recruitment Marketing

Email is still the number one channel recruiters and acquisition specialists use to contact talent. Despite the fact that most people now prefer rapid, instantaneous communication, email has solidified its position as a tried and true communication medium.

Things to keep in mind when crafting emails geared towards candidates:

66% of all emails are opened on mobile.

Just because email hasn’t changed much doesn’t mean the way we view it hasn’t.

If you’re not formatting your messages so they look cohesive on mobile devices, you could be turning prospects away due to readability or design issues. Optimizing your email for mobile display could significantly increase your response rates, and at the very least, it displays to candidates your professionalism and attention to detail. 

40.5% of iPhone users spend about 0-3 seconds per email, while Android users on average spend a generous 15+ seconds per email.

Regardless of the significant gap between device owners, the point stands – your lengthy emails are frequently glossed over, so keep the messages short and sweet. Include only relevant information and clearly detail the action you’d like candidates to take, whether that’s reaching out to a hiring manager or scheduling an interview. The clearer the call-to-action is, the more likely your recipient will follow through. 

Emails sent on Saturdays and Sundays have the highest open and reply rates. 

Data has shown that emails sent over the weekend have the highest open and reply rates, often because people receive less mail overall on these days. Sunday evenings specifically can be a great time to send emails, as many people are getting ready for the week ahead.

Your goal should be to contact candidates when there’s less competition for their attention. Data suggests that 8 – 12AM on weekdays is another time that people are highly active on email, but the best time ultimately comes down to your audience. Check out CoSchedule’s article “What 14 Studies Say About The Best Time To Send Email” if you’re interested in learning more about tactical approaches to get your emails noticed over the competition.

Text/SMS Messaging

Your inclination may be to avoid acquiring talent using SMS messages out of respect for people’s privacy, however communicating with candidates through text has been shown to be an effective recruiting method. Of course, you need to ask the candidate’s permission first – it’s still primarily a channel reserved for personal conversations, so use it with care unless the candidate has expressed a preference.

A few reasons you might consider adding SMS to your recruiting toolbox:

It’s simple, cost-effective, and allows for rapid communication.

The majority of the workforce is more than comfortable communicating with employers over text, and data shows that 90% of text messages sent are read within 3 seconds. If you’re looking to get in touch with candidates quickly, there’s no better channel than SMS messaging.

Text messages have a 98% open rate; emails hover around 20 – 30%. 

Messages sent through text aren’t only seen faster, they’re opened far more often. Even more surprisingly, these messages are met with a significant level of engagement. Mobile messaging supplier Dynmark revealed that 29% of marketing SMS recipients click on links they receive through text, while Smart Insights shared that 31% of SMS-based survey recipients began interacting with the message within 5 minutes.

It can be used to support other recruitment marketing channels. 

Smart Insights conducted an experiment in which they sent a short follow-up text asking recipients, “Have you read our email?”. This brief text message resulted in a 20 – 30% increase in email open rates for this particular campaign. Even if you decide against using SMS messaging for acquiring talent, it’s utility in engaging candidates throughout the recruiting process can’t be understated.

Additional Info:

90% of candidates drop off before completing application.

Most people agree that there are few things less entertaining than filling out job applications, which is why 9 out of 10 people who begin filling them out drop off before they’re done.

Offering the opportunity for interested candidates to join your talent network will allow them to get connected with your company and receive updates even if they don’t send in a resume – all it takes is an email address. This allows candidates to form a relationship with your business even if they’re not ready to apply, and in the meantime, you’ve got them on your radar.

The ORS talent network is a great example of how simple it should be to begin a relationship with an employer; all you have to do is sign up to receive updates on new jobs and opportunities.

When contacting candidates, a blend of personal and professional information is most effective. 

Personalizing the messages you send to candidates is critical, however copying their first and last name into an email isn’t cutting it anymore. A study conducted by the Temple University Fox School of Business actually found that 95% of customers respond negatively when receiving messages that greeted them by their names.

Of course you still have to address your candidates by name, but don’t let the personalization stop there – coaching consulting company Talking Talent recommends including questions about the candidate’s interests, what school they went to, and even reasons why you think your company could be a good fit for them to increase the likelihood of an engaged response.

I know what you’re thinking, you don’t have time to personally research every candidate you’re contacting. Consider working with a template and customizing it – Mike Chuidian, a senior sourcer at Sears has enjoyed a 97% response rate for some of his emails by writing extremely personalized messages to his intended recipients while basing the structure off of a template.

 

As a recruiter, what channel (social, email, SMS, phone) do you tend to have the most success contacting candidates with? What are your thoughts on using SMS messaging to contact and engage talent? Leave a comment on our LinkedIn or Facebook pages letting us know what you think! 

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If you’re in search of recruiting services or could use help determining your business needs, contact our team of experienced talent acquisition consultants now.