Building your first growth model

Most people think a growth model is a spreadsheet. It isn’t. A spreadsheet is where the model lives — but the model itself is a set of relationships: how one number turns into the next.

Start with the loops, not the metrics

Before you type a single formula, sketch how a user moves through your product and back into it. The four moves nearly every model shares:

• Acquire — someone new arrives
• Activate — they reach the moment the product clicks
• Retain — they come back on their own
• Refer — they bring someone with them

That last arrow is what makes it a loop instead of a funnel.

Put a number on every arrow

An arrow with no rate is just a drawing. Give each one a real conversion:

If 1,000 people arrive, 40% activate, and 25% of those refer one friend, your model already predicts next month’s arrivals.

This is the whole trick — once every edge has a number, the picture starts doing arithmetic for you.

Simulate before you spend

Now change one input and watch the system respond. Raise activation from 40% to 45% and see what it does to referrals three months out. The lever with the biggest downstream effect is where your next shekel should go — not the one that’s easiest to talk about in a meeting.

That’s a growth model: a map that argues back.