How to Grow a Long Term Business?

Listen to the Creator Lab: https://www.listennotes.com/podcasts/creator-lab/lenny-rachitsky-lennys-bUBLKO_NIG4/

Growth Loops are the New Funnels: https://www.reforge.com/blog/growth-loops
The Racecar Growth Gramework: https://www.reforge.com/blog/racecar-growth-framework

Transcript

today for the sake of focus we're going to start with this growth framework called the race car growth framework which i thought was really incredible um so let's just kick it off man from what i could see from the outside from reading your work there's four components to this product growth which is 

- the first one was the growth engine
- the second one is called turbo boosts
- third is lubricants 
- the fourth is fuel 

we're going to explain what all of those are in a second um but before we even go into the details could you just share like a bit of context around what who who is this for and who is it not for 

yeah because absolutely this isn't for every single company in the world and um you know you've probably applied this in many different contexts but yeah curious what what stands out to you there so maybe zooming out even further i spent a lot of my time with this newsletter looking into growth stories and how growth strategies and essentially understanding how all the most successful companies grew and i've spent a lot of time on the early days of how they got their first say a thousand users and then i've also spent a lot of time on the longer term down the road strategy of how do they grow long-term what can what needs to work for a company to continue growing and so now there's kind of these two ends of the spectrum that are coming into focus for me of how do i get your early users and then how to long term grow your business so this race car framework is focused on the long term how do you grow eventually and long term and then we can even talk about how to get your first users and then i'm slowly filling in these puzzle pieces through more and more of my research of how companies go from zero to say a million and it turns out it's it's not as mysterious as people think there's not actually that many options it's more of a question of which of the options do you choose and then how do you become the best at that or do something remarkable within that option so so we could start at the end and then we can come back to the beginning days 

so the end is this race car framework and i this is uh based on work that i did with a buddy of mine dan haukenmeyer so this post is something we both put together and what we found is there's a really cool mental model of thinking about how businesses grow long-term and it turns out you can think of your company like a race car which includes these four components that you're talking about there's the engine there's uh turbo boosts lubricants and then fuel and the engine is the most important part because that's what drives your business and 

it turns out there's essentially four engines you can choose from as a company and uh and these engines are self-sustaining loops that keep your business growing and there's kind of like a fuel that goes into it and then the output is growth so should we dive into those yeah yeah so 

i love that so i'll repeat kind of what i heard and understood and then you can clarify if i heard it wrong so the growth the growth engine is the most important part is self-sustaining the turbo boosts from what i understand are more like these one-off events or big hero moments maybe events a super bowl ad and they can maybe make a big splash but they're not self-sustainable the way a growth engine is and we'll go into the details of what that means and then the lubricants are more about running efficiently exactly things that make everything run better exactly and then the fuel is what's actually needed to make the car run so the input that's needed that's that's awesome so maybe yeah we can start off by going into the growth engine itself so i've heard you talk about loops and engines and i have a visual of this thing going around and people talk about flywheels i found like a lot of the jargon sometimes is like overly used but in this case i think it actually is really helpful to see it visually um because i think if you think of like a growth engine in a traditional business you think of a marketing funnel which is not exactly the same thing but a lot of the time when you're getting new users and getting them to convert and become paying users and then spread and share something like in business school you might learn it like a funnel and i think what i like about this is it's not necessarily like a linear thing that just goes from top to bottom it's more something that keeps feeding itself is that accurate before we move on from there yeah that's exactly accurate and there's this uh group called reforge who was one of the first uh i guess um groups that kind of figured out that this is the thing that matters more than funnels so they kind of have this famous blog post that loops for the new funnels and in reality they're both important like funnels are a part of these loops and so they both uh are worth thinking about but when you're starting out it's a lot more important to think about the flywheel slash engine slash loop they're all kind of the same idea and it's just your point there are these things that kind of feed themselves and keep going yeah and so what we're going to do is we're going to be talking about a lot of theory but what we're going to try to do is layer on examples wherever possible so if we're talking about a funnel or a sorry not a funnel a a uh flywheel is there one that we could just explain to people yeah like airbnb's flywheel or a company that people know about

## ENGINES

let me share the four engines first and then we can talk about yeah that sounds great leverage each one 

so essentially the way to think about this is if you think about like all the things you can do to grow your business there's like pr there's events there's paid ads there's seo there's this like whole collection of options and what this concept tries to help you with is which ones should you focus on deeply and which are just kind of these one-off things or just micro-optimizations 

so the engines are the there's only four ways your business is really going to grow long term and the four ways are 

- performance marketing and the way that loop works is you spend money to run an ad the ad drives customers the customers generate revenue and you can feed that into more ads so that's a pretty straightforward one 

- the next is virality which is what we all know and love when we think about viral growth essentially users draw new users and those users join and invite their friends and their friends join and it goes on and on and they'll give examples but maybe an example that one is like yeah snapchat or telegram whatsapp facebook things where you're kind of encouraged in by your friends and we can talk about like how to know which of these your business is most naturally suited for because it's not like choose any it's usually based on the type of product that you have one is going to fit best and there's actually this kind of growing meme of first time founders focus on product and second time founders focus on distribution and a lot of that is that's actually very true i find and knowing these engines is how you think about that is almost working backwards from i have a unique way of being really good at one of these things what product can i build to take advantage of that that's that's in it that's a mental model that i find useful so anyway let me go through the four and then we can ta...