It's a simple hack used in business to quickly figure out how many years it would take you to double your money, given the annual rate of return.
But since we’re not venture capitalists (not yet at least!) we’re instead going to use the rule to figure out how much time it would take to double the growth or revenue of a business.
How to Apply the Rule of 72 for SaaS Growth Hacking
72 ÷ interest rate = Years required to double investment
So, if you divide 72 by an interest rate of 12%, the rule shows that you need 6 years to double your money. Quite a bit of time, eh? I guess it depends on the size of the investment. :)
What if you take it a step further and use the rule of 72 to figure out how much it would take to double your SaaS growth?
All you need to know to begin your growth hacking (aside from the magical rule of 72 of course) is how many steps an initial visitor would have to take before they bring in revenue for your business.
If a visitor has to go through a journey of 6 steps before he gets to pay for your app, it means you would have to increase each separate step by 12% in order to double your app’s revenue. (72 divided by the six steps = 12%)
Let’s look at two examples. One of them is a B2B company, and the other one is a B2C. We’ll walk you step by step through the whole growth hacking process, and show you how they can increase each of the following metrics by 12%:
This article is part 1 of 6 from our upcoming ebook, Hacking Growth With the Rule of 72. Sign up to pre-order your free copy.
Presenting FinTechApp, an accounting company for IT startups, and MyStyleApp, a fashion application which offers fashionistas access to exclusive outfit designs. These are their sales funnels:
Doubling revenue can be a difficult task to consider, but if you look at it as optimizing each separate step by just 12% it becomes much more tangible. Also, end result is the same: you get to double the money.
Let’s get to it:
1. Increase amount of visitors by 12%
For FinTechApp, here is how the traffic split looks like:
An increase of 12% over the existing 20 000 visitors per month means that FinTechApp needs to add a total of 2400 new visitors each month, split as it follows:
720 from organic traffic
960 from paid traffic
720 from referrals
Increasing Organic Traffic
Let’s take on our first goal: increasing organic traffic by 720 visits.
There are many ways to do it but in this specific scenario, the easiest way to growth hack the proccess is to identify one or two keywords that:
Your website ranks #3 to #10 for
and deliver more than 100 visits each month
The reason behind this is that the first result in the search engine usually gets more than 30% out of the total traffic.
That’s 3-4 times more than positions 3 to 10 would get.
Here are a couple of case studies you can look at if you want to find out more information on this topic:
At best you’ll probably manage to get the 960 visitors by paying an average of $8 per click, meaning a budget of more than $7500.
According to the numbers FinTechApp already has, out of those 960 visitors, approximately 5 of them will purchase the product, bringing a revenue of $250 per month.
These visitors would need to keep using the product for at least 3 years until the campaign will become profitable. A very long time to count on.
The alternative for FinTechApp is to try other paid channels like Facebook, Twitter or Linkedin. These networks can allow them to stay within budgets of less than $1500 to generate the new 960 visitors required.
Referral Traffic: Still Relevant for SaaS Growth Hacking?
In the past FintechApp had success securing partnerships with different blogs where they posted educational content, also known as guest blogging.
They decide to invest more resources into this tactic in order to get 720 new visitors each month.
Writing guest posts for reputable well-established websites could help you build your own brand. It sounds all good in theory, but how effective is it?
Guest blogging can have multiple benefits for your business: exposure, credibility, referral traffic and quality backlinks that can help you in SEO.
We will concentrate on guest blogging as our focus to increase the referral traffic.
It seems like there's no direct connection between the number of shares and pageviews an article gets. From our experience, having an article shared around more didn't translate into an increased amount of pageviews.
We wanted to see if there's anyone in our niche who had the same experience, so we had a chat with our friend Ty Magnin, the Marketing Director over at Appcues. Here's what he shared with us:
Note from Ty: These are from SumoMe and do not contain Twitter shares, they do include Buffer shares though.
These posts are definitely better than average in terms of traffic, but they are by no means the top 3...in fact only one of them is.
Social seems to help drive traffic, but just because people are sharing it doesn't mean people click.
For example the post with the most shares (15 minute guide to growth marketing) gets shared a TON...mostly because #growthhacking is such a popular topic on twitter.
The other two posts with more traffic saw more shares via LinkedIn than Buffer (Twitter), and I think that is a better indication of true interest (and therefore traffic).
Posts that really crush it have channels they take off on like DesignerNews or HackerNews or Organic that I think lead to more traffic.
Again, social can be a good channel, but its not always correlated with traffic.
Marketing Director, Appcues
We've tried to dig up more numbers to see if other people have experienced the same thing. We were able to find a thread on reddit where the results were mixed.
It seems that some people from the B2B and SaaS industry were able to get some good traffic from Twitter using a well defined promotion strategy. There are others had similar results as the ones we've shared above.
There were others had similar results as the ones we've shared above.
The question was already answered on Quora, where a few users mentioned other mixed experiences. They've noticed the pageviews go up and down depending the audience that shared their articles.
Adjusting the Social Media Strategy of Your App
If MyStyleApp manages around 100 new social shares per article, they would need somewhere between 5 and 10 engaging articles per month.
If they only manage 50 new social shares per article, the number of articles needed could reach 20.
To make sure they fulfill their organic search increase they’ll also need each article to generate between 500 and 1000 visits from organic search, from long tail queries.
All of the above methods are common methods and not out of the ordinary.
Here are some growth hacking case studies outlining strategies that helped companies increase the number of visitors to their website:
As for the paid campaigns, research tells us that the competition of MyStyleApp probably pays around $1 per click.
With a good optimization process they can manage to bid around 0.5$ per click. Therefore, the 2400 new visits needed for our goal will cost around 1200$.
These steps will help our two companies increase the traffic to their website by 12%. This doesn't mean that they should stop here.
You need to double the revenue, remember?
Don't forget to tell us in the comments which of these tactics you're going to use to increase your traffic!
In Part 2 we're going to outline the steps you can take to increase the conversion rate by 12%. Pre-order our free guide: "Hacking Growth With the Rule of 72" to have it delivered automatically when it's launched!
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