The Profitable Growth Blueprint: 10 takeaways to accelerate your company to profitability
Mutiny Team
In early May 2022, the macro economic landscape shifted dramatically. Startup capital which had been historically very cheap and relatively easy to raise became much more expensive and rare. The result was a tightening of marketing budgets as the "growth at all costs" era of company building came to a screeching halt.
Mutiny's co-founder and CEO Jaleh Rezaei previously led marketing at Gusto and was part of growing the company's revenue 100x between 2013 and 2017 when the market was cold and growth capital was hard to come by.
Knowing that other companies would benefit from her experience, she prepared the profitable growth blueprint and presented it behind closed doors to the portfolio companies of Y Combinator, Sequoia Capital, Insight Partners, Uncork Capital, and Cowboy Ventures.
Here are the top takeaways from her presentation with additional resources to help you achieve profitable growth:
Takeaway 1 : Reign in your spend first, then invest in profitable growth
Takeaway 2: Ensure you have the components of a proper growth engine
Takeaway 3: Set CAC targets for marketing
Takeaway 4: Create scorecards to show total and incremental CAC across every program
Takeaway 5: How to decide what marketing programs to cut
Takeaway 6: Don't starve programs and technology to avoid cutting people
Takeaway 7: If you don't focus on conversion, it's really hard to get big!
Takeaway 8: Design an intentional, tops down operating cadence that aligns your GTM team
Takeaway 9: Create a MECE revenue dashboard
Takeaway 10: Weekly targets increase program-level performance
Takeaway 1: Reign in your spend first, then invest in profitable growth
The future of fundraising and new business is uncertain. Therefore, decreasing unnecessary spend to a rate that you can sustain whether the markets improve or not will need to be the first order of business.
We recommend cutting your spend to a point that you have at least 30 months of runway. This will ensure that your company can weather even the coldest market downturn and still come out the other side alive.
We also suggest aiming for a burn multiple of less than 1.5. To calculate your burn multiple, divide your net burn by your net new ARR (annual recurring revenue). This helps you measure how efficiently your company can turn spend into new revenue.
Takeaway 2: Ensure you have the components of a proper growth engine
Think of your growth engine as having two components: demand and conversion.
Demand
Most marketers spend 90% of their effort building on the demand side of the growth equation. This typically means adding another demand program to the mix to increase the number of leads being handed to sales.
Conversion
Conversion is the secret behind the most resilient companies. By increasing the conversion rates of your existing programs, you're able to grow more efficiently and use less capital.
Takeaway 3: Set CAC targets for marketing
Having a target of growing profitably is important because it allows you to have a clear benchmark of how much you’re able to spend on acquiring a customer.
Takeaway 4: Create scorecards to show total and incremental CAC across every program
This calculation works well because it takes into account all the costs associated with that program so you can compare the efficiency of each side-by-side using a scorecard.
Takeaway 5: How to decide what marketing programs to cut
When you use CAC payback as your primary measure of spend efficiency, you'll begin to find marketing programs that fall into three buckets:
Unprofitable marketing programs
If the program is small and undifferentiated from your competitor, cut it.
Marginally unprofitable marketing programs
If the CAC is good but marginal CAC is bad, cut the budget at the marginal CAC and continue to experiment.
Marketing programs that can never prove profitability
Programs like content and brand are crucial in the success of the overall marketing strategy.
Takeaway 6: Don't starve programs and technology
We recommend as a rule of thumb:
- 40% of budget spent on people
- 40% of budget spent on the program
- 20% of budget spent on technology
Takeaway 7: If you don't focus on conversion, it's really hard to get big!
In the following chart, small increases in the conversion rate led to a doubling of the resulting revenue without spending any more resources on generating more traffic.
Takeaway 8: Design an intentional, tops down operating cadence that aligns your GTM team
At Mutiny, we define an operating rhythm as the process you use to set your strategy and then execute on your strategy.
Takeaway 9: Create a MECE revenue dashboard
Now that you've spent the time and effort to design your profitable growth engine, it's important to measure its effectiveness over time.
Takeaway 10: Weekly targets increase program-level performance
We’ve found that having weekly targets meaningfully impacts program performance.
Next Steps
By following the profitable growth blueprint, you'll now have full visibility and control across the two growth levers: demand and conversion.