Growth Accounting

Use it when you need to break down your net growth into acquisition, retention, reactivation, and monetization levers.

What is it?

Growth Accounting is a systematic framework introduced by Brian Balfour to break down net growth into discrete, measurable components, acquisition, activation, retention, reactivation, and monetization.

It solves the common problem of fuzzy growth metrics that leave teams guessing where to focus versus optimize. By categorizing every user and dollar that enters or leaves your system, Growth Accounting gives you a clear dashboard of which levers drive actual growth. At its core, it relies on cohort-based tracking, churn calculation, revenue attribution, and reactivation analysis to show how each element contributes to your net-growth rate. Whether you're a startup founder, product manager, or growth marketer, this framework exposes hidden drag points and high-leverage opportunities so you can prioritize experiments with surgical precision.

It's built on the principle that net user growth is the sum of five key drivers, which you can track over time to spot trends, compare cohorts, and allocate resources. This level of granularity helps eliminate guesswork and aligns cross-functional teams around objective growth targets.

Why it matters?

Growth Accounting turns vague KPIs into a precise growth roadmap by quantifying how acquisition, retention, reactivation, and monetization each add or subtract from your net growth. That clarity lets you target the experiments that will actually move the needle, slashing churn, ramping revenue, and accelerating your overall growth trajectory.

How it works

Growth co-pilot turns your toughest product questions into clear, data-backed recommendations you can act on immediately.

Define Time Frame & Cohorts

Pick a measurement interval, week, month, or quarter, and create user cohorts by signup date. Pro tip: Use a consistent start date across cohorts to avoid seasonality skew.

Calculate Acquisition & Activation

Count new users acquired and track their activation events (first purchase, feature use). This reveals where your top-of-funnel is strongest.

Measure Churn & Reactivation

Identify users who churned within the period and those reactivated after inactivity. Use these numbers to gauge retention health and recovery potential.

Attribute Revenue & Monetization

Sum revenue from new users, existing subscribers, and upsells. Break down changes in MRR/ARR to see which segment drives your monetization growth.

Compute Net Growth

Add gains (new + reactivated users + upsells) and subtract losses (churned users + downgrades) to calculate your net growth rate. Visualize cohort-wise trends for clarity.

Identify & Prioritize Levers

Compare component performance to spot bottlenecks, high churn or weak acquisition, and prioritize growth experiments that move the biggest needle.

Frequently asked questions

Growth co-pilot turns your toughest product questions into clear, data-backed recommendations you can act on immediately.

How is Growth Accounting different from traditional funnel analysis?

Traditional funnel analysis tracks drop-off rates, but Growth Accounting quantifies how each component, acquisition, retention, reactivation, and monetization, actually contributes to your net growth, so you see the real business impact, not just conversion percentages.

How is Growth Accounting different from traditional funnel analysis?

Can I use Growth Accounting without an advanced analytics stack?

Absolutely, you can start with a simple spreadsheet. Track your sign-ups, churns, reactivations, and revenue changes manually for one period, then automate as your data volume grows.

Can I use Growth Accounting without an advanced analytics stack?

Absolutely, you can start with a simple spreadsheet. Track your sign-ups, churns, reactivations, and revenue changes manually for one period, then automate as your data volume grows.

How often should I run Growth Accounting?

Monthly is the sweet spot for balancing signal and noise, you'll catch meaningful trends without drowning in daily fluctuations. If you move at high velocity, you can drop to weekly; slower businesses can go quarterly.

How often should I run Growth Accounting?

Which metrics are essential for Growth Accounting?

At minimum, track new users, churned users, reactivated users, and revenue deltas (upsells/downgrades). If you have referral or activation channels, fold those in as sub-levers for more granularity.

Which metrics are essential for Growth Accounting?

At minimum, track new users, churned users, reactivated users, and revenue deltas (upsells/downgrades). If you have referral or activation channels, fold those in as sub-levers for more granularity.

How do I action the insights from Growth Accounting?

Use the ranked lever breakdown to prioritize experiments, if churn is your biggest drag, launch retention-focused tests; if acquisition lags, optimize your top-of-funnel. Then measure impact through the same Growth Accounting process.

How do I action the insights from Growth Accounting?

You've mapped your growth levers with Growth Accounting, now plug that roadmap into CrackGrowth's diagnostic to reveal hidden bottlenecks and spin up high-impact experiments that accelerate your next growth sprint.

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