---
title: "Building a Growth Model"
type: doc
evidence_type: method
category: "Growth Modeling"
publisher: "LeanScale"
date_modified: 2023-11-06
word_count: 549
topics: ["forecasting", "gtm-strategy"]
canonical_url: https://knowledge.leanscale.team/docs/growth-modeling-building-a-growth-model/
source: "LeanScale Knowledge Hub — https://knowledge.leanscale.team"
license: "Free to quote and cite with attribution to LeanScale."
---

# Building a Growth Model

**Evidence type:** method (what we prescribe)

A growth model works backward from a revenue target through bookings, pipeline, leads, and awareness, so each layer states what the one above it requires. Building one means fixing the key inputs, deriving the outputs, and then splitting the result into three bottom-up plans: sales capacity, created pipeline, and customer success carry.

#### Key Inputs

The input section of the model requires the following general data about the company and the growth plan:

* **Current ARR:** The current annual recurring revenue (ARR) of the company.
* **Growth Goal:** The desired growth goal for the company.
* **SQL to Close:** The sales qualified lead (SQL) to close conversion rate.
* **Sales Cycle:** The average length of the sales cycle in days.

In addition to the general data, the input section also requires the following assumptions:

* **SQL to MQL Conversion Rate:** The marketing qualified lead (MQL) to SQL conversion rate.
* **Created Pipeline to SQL Conversion Rate:** The created pipeline to SQL conversion rate.
* **Customer Success Carry Ratio:** The number of customers booked per customer success manager (CSM).

#### Key Outputs

The output section of the model provides the following high-level top-down initial goals and quarterly results:

* **Total Bookings:** The total bookings for the year.
* **Marketing Qualified Leads (MQLs):** The number of MQLs needed to generate the desired bookings.
* **Created Pipeline:** The amount of created pipeline needed to generate the desired MQLs.
* **Customers Booked:** The number of customers booked for the year.
* **Logo Growth:** The number of new logos acquired for the year.
* **Customer Success Managers (CSMs):** The number of CSMs needed to support the growth plan.

#### Bottom-Up Sales Capacity Plan

The bottom-up sales capacity plan calculates the rep by rep productivity and the number of reps needed to hit the bookings goal. The following formula is used to calculate the number of reps needed:

```
Number of Reps = Total Bookings / (Rep Productivity * Sales Cycle)
```

Where:

* **Total Bookings:** The total bookings for the year.
* **Rep Productivity:** The average number of bookings per rep per year.
* **Sales Cycle:** The average length of the sales cycle in days.

#### Bottom-Up Created Pipeline Plan

The bottom-up created pipeline plan calculates the created pipeline by channel and source, as well as the funding to production ratio. The following formula is used to calculate the created pipeline:

```
Created Pipeline = MQLs * Created Pipeline to SQL Conversion Rate
```

Where:

* **MQLs:** The number of MQLs needed to generate the desired bookings.
* **Created Pipeline to SQL Conversion Rate:** The created pipeline to SQL conversion rate.

The following formula is used to calculate the funding to production ratio:

```
Funding to Production Ratio = Created Pipeline / Funding
```

Where:

* **Created Pipeline:** The amount of created pipeline needed to generate the desired MQLs.
* **Funding:** The amount of funding available for the growth plan.

#### Customer Success Carry Plan

The customer success carry plan calculates the number of customers booked, logos brought in, and CSMs needed to support the growth plan. The following formula is used to calculate the number of customers booked:

```
Customers Booked = SQLs * SQL to Close Conversion Rate
```

Where:

* **SQLs:** The number of SQLs needed to generate the desired bookings.
* **SQL to Close Conversion Rate:** The SQL to close conversion rate.

The following formula is used to calculate the number of logos brought in:

```
Logos Brought In = Customers Booked / Customer Success Carry Ratio
```

Where:

* **Customers Booked:** The number of customers booked for the year.
* **Customer Success Carry Ratio:** The number of customers booked per CSM.

The following formula is used to calculate the number of CSMs needed:

```
CSMs Needed = Logos Brought In / Customer Success Carry Ratio
```

Where:

* **Logos Brought In:** The number of new logos acquired for the year.
* **Customer Success Carry Ratio:** The number of customers booked per CSM.

## Canonical

https://knowledge.leanscale.team/docs/growth-modeling-building-a-growth-model/