Growth Model

The ROM Growth Model

The Model

Use this model to develop an understanding of what stage a business is in, and at what point it should move to the next stage to accelerate growth and scale.

Key Elements

The Stages

As growing companies move along the journey from starting up to scaling their growth, they go through a few key stages:

  • Product-Market Fit: In this stage, the company is finding its fit with the market (e.g., determining the right price for the product they have built, for the market they are serving). The company has a high customer acquisition cost, as they learn more about their customers - what they are willing to pay, what impacts they are looking for - and adjust the product based on those learnings. Toward the end of this stage is typically when venture-backed companies raise a series A round of funding, in order to find Go to Market Fit as soon as possible.
  • Go to Market Fit: In this stage, the company is now learning to sell its product in an efficient and effective way. Toward the end of this stage is typically when venture-backed companies raise a series B round of funding, in order to facilitate scaling going forward.
  • Scale Up: In this stage, the company is learning how to grow and scale the business, applying what has been learned in the previous stage in order to accelerate growth.

Fundamental changes occur at all levels and facets of the company as it moves through these three growth stages. In particular, many founders make the mistake of thinking that the team and skillsets used in pre-revenue stages will be the same team and skillsets needed when the company reaches the point of scaling.

This does not imply that a different team is needed at each phase. Team members can evolve and grow with the company, but founders must think about how to plan and recruit for current and future phases in order to supplement that evolution from the existing team.

Generalized at a high level to illustrate this, the following skills and traits will be crucial and typical in each phase: 

  • Product-Market Fit: Self starters and proven superstars with reliable performance. May dislike process and structure. Will help to set the tone of the culture that the fonder is looking to establish.
  • Go to Market Fit: Creators and builders who love to create a process and document what they are building. Able to listen and learn from what goes on around them, enjoying working with and learning from small teams.
  • Scale Up: Dependable team performers who love to execute process. May need guidance and structure for creating new process, preferring structure that is already built.

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The most common problem for Series B companies: 'Scaling failure' happens when not enough consistency in performance has been reached.

Findings

  1. Scaling failure happens when not enough consistency in performance has been reached. A frequent reason that companies fail as they progress through these stages is that they have not achieved enough consistency in the GTM Fit stage before raising more funding and starting to scale; they are scaling inconsistent results, and therefore the company is scaling failure along with success. Essentially, the company delayed reaching their true GTM fit and started scaling before that point was truly reached. This can often result in a 12-18 month delay in reaching the expectations that have been set by investors, as the rate of growth and efficiency needed cannot be sustained. A common outcome during this turn of events is that Revenue leaders are replaced, or that new levels of executives with experience at later stage companies are brought in with the intent of helping set the company back on the right path.
  2. Launching a new GTM requires the company to reenter PMF and GTMF. The launch of a new product, entry into a new region, or selling into a new segment requires that a company, even briefly, reenters the product development cycle to establish product, price positioning, and GTM Fit. Another common failure point is launching a new enterprise product in the Scale Up phase in order to scale and grow revenue, without reentering that product development cycle.
  3. Multiple GTMs deployed too soon will spread resources too thin. Company management will often have a tendency to deploy several GTM models before each one has matured and is scalable, with the goal of growing quickly and capturing as much of the market as possible. This error results in damaging the company's ability to scale, as resources are now spread too thin across multiple GTMs, products, and teams.

The Model in Action

Learn to price, sell, and grow

See where errors in scaling can come into play as companies move through the three key stages of Product-Market Fit, Go-to-Market Fit, and Scale Up.

Visualization of the ROM Growth Model in action

Templates

Template of the ROM Growth Model

Apply the model

Download the template of the model so that you can customize and apply it to your own organization.

NOTE: The template is in Google Slides format; click "USE TEMPLATE" to make a copy for yourself.

Download Google SlidesDownload PowerPointDownload PDF

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Terminology Used

Product-Market Fit. The growth stage in which the company finds its fit with the market (e.g., determining the right price for the product they have built, for the market they are serving).
Go to Market Fit. The stage in which a company learns to sell its product in a sustainable way (efficient and effective).

References

Source 1. Survival to Thrival: Change or Be Changed by Bob Tinker and Tae Hea Nahm.
Source 2. Survival to Thrival: Go-To-Market Fit by Bob Tinker and Tae Hea Nahm. www.GTMfit.com
Source 3. Managing Hypergrowth by Alexander V. Izosimov in Harvard Business Review.
Source 4. The Sales Acceleration Formula Using Data, Technology, and Inbound Selling to Go from $0 to $100 Million by Mark Roberge.
Source 5. How to Design an Enterprise Playbook Aligned With Your GTM. www.winningbydesign.com. Shari Johnston.
Source 6. Product-Led Growth by Wes Bush. 2019.

Footnotes

Note 1. This model should be used closely in conjunction with the Go To Market Model.
Note 2. This model should be considered as a representative guide, rather than as specifically defined phases with start and end points; the exact journey for each company is unique.
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