Cancel that capital raise and hold that hackathon, because according to Freelancer founder Matt Barrie, the only thing that matters in a startup is growing revenue.
Speaking at the 2017 StartCon conference in Sydney last Friday, Barrie addressed attendees and discussed the “growth mindset”, providing a number of tips for startups on how they can consolidate growth — all for the love of revenue.
“Revenue is your lifeblood. Revenue will atone you for your sins. With revenue you can grow your business, hire people, get inventory, and acquire companies,” Barrie said.
“Without revenue, you can’t pay your staff or pay your rent. The rate you grow and your revenue dictates the value of your business.”
But to achieve this idyllic revenue growth, Barrie says founders and their teams need to be switched into the right mindset; they need a mentality of wanting to “grind it out”, coupled with plenty of discipline and focus.
“If you can think about a certain mindset where every month you grow revenue by 1-3%, and then with that revenue use it to hire people to focus on growing revenue, this is like compound interest, and compound interest is one of the greatest forces on earth,” he said.
“The only thing that matters in a startup is to grow revenue, but you’ve got to have the right growth mindset.”
Barrie then continued to outline a number of ways founders can put themselves in the right mindset for revenue-focused growth. Here are four of them.
In the early days of a startup, doing “non-scaleable” things like handing out flyers, putting up billboards, or speaking at an event can really give you a “bump” in growth early on, said Barrie.
But as your company gets larger, so should your growth efforts. Startups should always be thinking about conversion optimisation: how to increase the number of users hearing about your company and then convert them into customers.
“As you get larger and larger, those non-scaleable efforts become irrelevant. You have to grow relative to the size of your company, and to the size of your user base,” he said.
“And that’s why the process around conversion optimisation is very important.”
But before startups can work on conversion optimisation strategies themselves, Barrie believes they need to figure out their “north star” metrics.
“Think about the key parameter everyone in the company is working to try and optimise. For somewhere like AirBnb, this would be the number of nights booked, or for Facebook the number of daily active users,” he said.
“Once you’ve got that in your head and you know what you want in the long term, it’s time to think about funnel optimisation.”
Funnel optimisation is a strategy for conversion optimisation often used in companies. It analyses the ‘funnel’ of users coming to a website or otherwise finding a product, and determines what part of the user’s interaction can be improved or otherwise tweaked to increase the likelihood of them becoming a customer, even just incrementally.
Barrie said this can involve small things like cleaning up a menu bar to make it easier to read, or making a ‘sign up’ button more obvious.
“Get lots of ideas — get your entire team contributing to it, and field ideas from your customers,” he said.
“Then prioritise them to an ‘ICE’ score, where each idea is ranked out of 10 for impact, out of 10 for how confident you are this idea is going to work, and out of 10 for ease of implementation.”
For ASX-listed Freelancer, Barrie claims the company has more than 40,000 graphs in operation, tracking any and every metric for the website, over various time periods.
“If someone asks ‘do we know the answer to this?’, the response is, if we don’t put a graph in the dashboard,” he says.
The company also regularly tests various parts of the ‘funnel’ all across the website, using A/B testing techniques, where users who land on the site will randomly be served a different version of the site depending on what’s being tested.
“We do 30-40 A/B tests at any point in time across all our products. This can be anything, like changing a bit of website copy,” he said.
“Most will fail, but if you’re lucky one or two might add an additional 1-2% to your core funnel. And that’s another 1-2% to your revenue.”
StartupSmart attended StartCon as a guest of Freelancer.
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